France: Finance Bill for 2019


Clearstream Banking informs customers that the French Parliament is currently reviewing the proposed French Finance Bill for 2019 which includes major amendments, already adopted by the Senate, and aiming at fighting against dividend arbitrage transactions and tax treaty abuse.

If approved, these new measures will become effective on 1 January 2019.

The main impacts of this new finance bill, if approved, are:

  1. The taxation of certain cash flows corresponding indirectly to a retrocession of dividend (dividend equivalent, manufactured dividends) to a non-resident shareholders.
    With this measure, any payment made in any form and by any means by a French resident (that is, established or resident in France) to a non-resident person must be subject to French withholding tax rates, under certain conditions.
    The French withholding tax will be applied at source by the paying agents and the eligible beneficiaries will have the possibility to obtain a refund of tax under certain conditions.
    If approved, the impact of this new measure to Clearstream Banking customer’s will have to be deeply analysed and will be communicated at a later stage.
  2. Tax treaty provisions to eligible investors applying for a dividend withholding tax exemption would no longer be granted at source through the simplified procedure.
    This measure mainly concerns residents of countries that have signed a treaty with France allowing no taxation or a full tax exemption, that is, Bahrain, Egypt, Finland, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, United Arab Emirates, etc.
    In order to obtain a full refund of French withholding tax, beneficiaries eligible to the tax treaty provisions will have to provide, in addition to the documentation proving that they qualify as resident within the meaning of the treaty, further details proving that:
  • They are the effective beneficial owners of the French source dividend; and
  • the income distribution in their country of residence has a main purpose or effect other than to avoid the application of the French withholding tax or to obtain a tax advantage.  

We will continue to monitor the situation and will provide further information as it becomes available.

This Taxflash is intended to provide customers with general information gathered from different sources that are generally believed to be reliable. Clearstream Banking S.A. does not guarantee the accuracy or completeness of the information and does not undertake to keep it up to date. Use of the information made available in this Taxflash is at the customer’s own risk and Clearstream Banking S.A., its subsidiaries and affiliates expressly disclaim any liability for any errors or omissions reflected herein. The information in this Taxflash does not constitute legal or tax advice.