New French circular
Withholding tax applied on outbound dividend payments to EU resident investment funds
Further to the adoption of the second amended finance act (“AFA”) on 16 August 2012, the French tax administration released in July 2013 comments concerning the rules applicable for withholding tax on dividends distributed to undertakings for collective investments that are located in EU Member States, and concerning the transposition into French law of the AIFM directive.
The adoption of the AFA on 16 August 2012 (see e-alert 2012-11), repealed the withholding tax provided for in Article 119 bis (2) of the French tax law concerning dividends distributed to an undertaking for collective investment (UCI or “OPC” in French) when located either in EU Member States or in a country or territory having concluded an agreement for administrative assistance to combat tax fraud and evasion, provided that the undertaking for collective investment satisfies both of the following conditions:
- The undertaking for collective investment raises capital from a certain number of investors with a goal of investing the capital, under a defined investment policy, in the interest of those investors.
- The undertaking has characteristics similar to the French undertaking for collective investment (OPCs) as expressly described in Article 119 bis (2) (notably OPCVMs, SICAFs, OPCIs
A withholding tax (limited to 15%) is also provided for distributions that are drawn from the exempt income realized by certain entities - SIICs, SPPICAVs or subsidiaries of SIICs, or SPPICAVs - in favor of French and foreign undertakings for collective investment that also satisfy the same conditions.
The benefit of the withholding tax exemption will be granted to OPCs that are able to evidence, at the time the dividends are distributed, that they fulfill the characteristics indicated above.
In order to do so, the OPC or its management company must complete and file a withholding tax exemption request form with the paying agent in charge of filing the WHT tax return and paying the WHT to the French Treasury, in which it formally certifies that it fulfills the characteristics.
This form has to be provided only once for UCITS funds and their sub-funds receiving French source dividends and on a yearly basis for AIF and their sub-funds receiving French source dividends.
In the event that the OPC or its management company is unable to provide the form before the dividend is distributed, the 30% withholding tax will continue to be applied.
In such cases, claims will have to be filed with appropriate documentation in order to obtain a reimbursement.
Tax administration’s comments
Further to the transposition of the AIFM directive (Directive 2011/61/EU of 8 June 2011) into French law, the French tax administration on 25 July 2013 published its comments on these provisions, thereby setting the state for the method to be used in conducting the comparability test.
The French comments indicate that:
- Undertakings for collective investment (or OPCs) located in EU Member States would fairly easily realize the immediate benefit of the 0% or 15% withholding tax from their French paying agent (i.e., the financial institution paying the dividends on the OPC’s account) through some filings.
- Undertakings for collective investment located outside the EU would apparently not be allowed the same benefit from the paying agent but would need to file a claim and provide the tax authorities with appropriate documentation evidencing that they are comparable to French OPCs
For further information, please view the August 2013 report (PDF, 630 KB) issued by our French colleagues of Fidal or contact us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.