France: Potential French tax consequences of “Brexit”

France: Potential French tax consequences of “Brexit”

What are some of the practical consequences of the “Brexit” vote as well as the timing of their application for French taxpayers?

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Concerning French direct tax, note that the France-United Kingdom income tax treaty provides for a 0% withholding tax on dividends (to the extent that the beneficiary is a company holding at least 10% of the share capital of the distributing company; otherwise a 15% withholding tax applies), royalties, and interest. 

A tax-free merger could no longer be implemented between French and UK corporations, and disputes between the taxing authorities of the two Contracting States would have to be resolved through the provisions of the treaty and, if need be, through arbitration.

Initial impressions

UK voters decided on 23 June 2016 to leave the EU. The UK government will have to formally notify the European Council its decision to withdraw from the EU (article 50 of the Lisbon Treaty). Treaties signed by a departing country will, still in application of article 50, cease to be applicable as from the date when an agreement between the EU and the departing country for determining the modalities of such withdrawal, becomes effective or at the latest (unless the Council unanimously decides to extend such delay, in agreement with the withdrawing country) two years after the notification of withdrawal by the departing country.

From a tax standpoint, some initial impressions are that the withdrawal of the UK from the EU means that (subject to terms of the agreement) the EU regulations and especially the EU Directives would no longer apply in the relations between the UK and the other EU Member States, presumably as from the date of signature of such agreement (or the end of the two-year period subject to its extension), and not as from the date at when the UK  notifies its decision to leave the EU (this point is yet to be confirmed). Thus, it appears that the following would no longer apply in the relations between the UK and the other EU Member States:

  • VAT directives
  • Parent/subsidiary directive
  • Merger directive
  • Interest and royalties directives
  • EU arbitration convention
  • Custom duties regulations 
  • Social security agreements 


For more information, contact a tax professional with Fidal* in France or with KPMG in the United States:

Patrick Seroin | + 1 (212) 954-2523 |

Gilles Galinier-Warrain | +33 1 55 68 16 54 |

Olivier Ferrari | +33 1 55 68 18 14 |


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

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