Wednesday, 26 April 2017

France: Procedure for withholding tax exemption on dividends paid to EU/EEA funds simplified

On 1 March 2017, the French tax authorities published a revised version of the guidelines relating to the procedure for applying the exemption from French withholding tax on dividends up front, which is applicable to dividends paid to qualifying EU/EEA investment funds (regardless of whether the funds are regulated under the EU directive on undertakings for collective investment in transferable securities (UCITS)). Under this procedure, no French tax has to be withheld by the French paying agent on dividends distributed to a qualifying EU/EEA investment fund, instead of the tax having to be withheld at the domestic rate and a subsequent refund claim having to be made.
The previous version of the guidelines allowed the French paying agent to apply the withholding tax exemption up front only if it had received a specific exemption form that had been completed by the fund or its management company before the dividends were paid.
The new guidelines (which apply as from 1 March 2017) allow the French paying agent to apply the exemption up front, provided the foreign custodian of the fund (i) has the exemption form in its possession (it is no longer necessary that the form be provided to the French paying agent in advance); and (ii) informs the paying agent, before the dividends are paid, of the total amount of dividends that will be allocated to qualifying EU/EEA funds. However, the custodian will have to provide the following information/documentation to the French paying agent within three months from the date the dividends are paid:
  • Identification of the French distributing company;
  • Name and address of the custodian;
  • Identification of the fund or its management company;
  • Dividend payment date and the number of shares held by the fund in the French distributing company;
  • Amount of the dividend per share;
  • Total amount of the dividends paid to the fund;
  • An exemption form completed by the fund or its management company; and
  • A specific attestation completed by the custodian.

If all of the above information/documentation is not provided to the French paying agent in a timely manner, the new guidelines provide for joint liability of the custodian and the French paying agent for payment of the withholding tax that was not levied at the time of the distribution.
The simplification of the procedure for applying the withholding tax exemption should reduce the number of French reclaims filed each year by EU/EEA funds where the exemption should have been applied at source.

Source: Deloitte