Good news for European entities which sell their substantial shareholdings in French companies: the French High Administrative Court grants them a capital gains reimbursement.
Let’s go back to the facts of the case : in 2011 an Italian company was taxed in France on the capital gains it realized from the sale of more than 25% of the shares it held in a subsidiary established in France (except for real estate companies) pursuant to the Double Tax Treaty between France and Italy, which gives France the right to tax in this situation. Under French tax law, non-resident companies were subject to withholding tax at a rate of 19%, while French companies in the same situation benefited from an exemption from capital gains tax except for the reintegration of a 10% share of costs and expenses in the corporate income tax basis.
Taking into account the difference of treatment between French and European Economic Area (EEA) companies regarding “the (European) principles of freedom of establishment and free movement of capital”, the High Court decided to grant the demand for a full refund of the withholding tax.
What is the opportunity for you?
You are a company which registered office is located in a Member State of the (EEA) whose tax treaty signed with France gives the latter the right to tax (namely Austria, Bulgaria, Cyprus, Denmark, Spain, Italy, Malta, Iceland, Liechtenstein or under certain conditions the Netherlands or Sweden) and you have been subject to withholding tax under French law in the context of a substantial sale of shares (more than 25%) held in a French company, you may request a full refund of this withholding.
How to obtain the refund?
Companies meeting all the conditions can request a full refund of the withholding tax they have paid on capital gains realized since 2018, by sending a claim to the French tax authorities before 31 December 2020.
What about companies outside EEA?
A very recent decision of an administrative Court of appeal paves the way for a possible claim for refund since the principle of free movement of capital also applies to third states of the EEA. In order to keep the deadlines, it is advisable to send a claim for full reimbursement without waiting for the High Court decision.
Rosemont's teams have the expertise and would be happy to assist you in this process. For more information, please contact Jerome Brimaud: j.brimaud@rosemont.mc
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