France taxation of intragroup dividends, EU entities | KPMG | GLOBAL

France: Legislative change, taxation of intragroup dividends between EU entities

Legislative changes in France

The tax treatment of intragroup dividends paid between EU entities will be modified, pursuant to a legislative amendment made to the “Amended Finance Bill for 2015.” The change reflects a September 2015 judgment of the Court of Justice of the European Union (CJEU).


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The CJEU concluded that different tax treatment of dividends received by parent companies of tax-integrated groups, with such treatment depending on the location where the subsidiaries are established, was contrary to EU law. The case is: Groupe Steria SCA v. Ministère des Finances et des Comptes publics, C-386/14 (2 September 2015)

The CJEU found that the French rules that allowed a French parent company a full exemption in respect of dividends received from domestic subsidiaries under a group taxation regime, but effectively taxed (up to) 5% of dividends received from shareholdings in EU subsidiaries, were in breach of the freedom of establishment. 

Legislative change

Under the legislative amendment (adopted 2 December 2015), the tax rules relating to the 5% taxable share for dividends paid between entities of a French tax consolidated group would be repealed. To address the adverse financial consequences for French tax groups, the taxable share would be reduced to 1% for dividends received by a company that is a member of a French tax group from another company of the tax group or from a company established in an EU or EEA country if this company, had it been French, would have met the conditions to be member of the tax group.

These modifications are to be effective and apply for dividends paid on with respect to fiscal years that are open as from 1 January 2016.

KPMG observation

Tax professionals with Fidal* have observed that it appears that the existence of a French tax consolidated group would be a prerequisite for the benefit of the reduced share / 1% treatment. Consequently, a French company that would not be part of a tax consolidated group (because, for example, it is the only French entity of the group) would not be entitled to the 1% / reduced share treatment—even if its foreign subsidiaries, were they French, opted for the French tax consolidation regime.

With its legislative change, the government could have simply chosen to repeal the 5% share “neutralization” rule for French tax consolidated groups or, alternatively, to extend this rule to EU subsidiaries. Instead, the government chose an intermediary solution—one that is favorable to EU subsidiaries. These modifications basically result in increased taxation of 0.33% (1% x 33⅓%) for dividends paid between members of a French tax group and in decreased tax of 1.32% (4% x 33⅓%) for dividends received from EU or EEA entities that satisfy the conditions (described above).


For more information, contact a tax professional with Fidal* in Paris:

Olivier Ferrari | +33 (0)1 55 68 14 76 |

Olivier Schmitt | +33 (0)1 55 68 15 92 |


* Fidal is a French law firm that is independent from KPMG and its member firms.

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