The French Council of State obliged loss-making non-resident companies to pay their withholding tax on dividends

Conseil d’État, 8ème SSJS, 10/02/2016, 361179, Inédit au recueil Lebon

In the present case the Council of State (Conseil d’Etat) examined the French tax procedure rules governing the withholding tax on dividends.

X, a French company, distributed dividends to its parent company Y established in Belgium. The operation gave rise to the withholding tax in France. Y, which incurred losses, challenged the imposition and claimed that the French legislation was discriminatory as it entitled loss-making companies established in France to delay the tax payment until their balance returned to a surplus.

Y lodged a claim seeking the reimbursement of the withholding tax. The French fiscal administration and the administrative courts in Paris dismissed the claim.

Y lodged an appeal in cassation before the Council of State (Conseil d’Etat) which, by the present ruling, upheld the judgment of the lower instance courts.

According to the Council of State, a loss-making company established in France and a loss-making company established in Belgium were not placed in an identical situation. Therefore, the French legislation had lawfully established two different tax methods in order to ensure the tax collection efficiency. The mere fact for the loss-making non-resident company had to pay immediately the withholding tax involved a simple cash-flow disadvantage which could not constitute an infringement of the free movement of capitals guaranteed by Article 63 TFEU.

Moreover, the Council of State upheld the findings of the lower instance courts according to which Y had submitted its claim after the expiry the deadline. In fact, the general obligation to notify the available legal remedies and the relevant time-limits was not applicable to a claim related to a withholding tax on dividends given the fact that the latter was paid instantly in absence of any tax notice.

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