France: Second Amending Financial Law for 2014 officially published
Note: This Announcement, originally published on 5 January 2015, has been updated to correct the definitions of eligible foreign CIVs.
The second Amending Financial Law has been adopted under Law 2014-1655 of 29 December 2014 and published in the Official Gazette on 30 December 2014.
The main measure introduced in Law 2014-1655 is the extension of the tax exemption on dividends distributed to foreign Collective Investment Vehicles (CIVs) resident of countries outside the European Union (EU) / European Economic Area (EEA), with effective date:
31 December 2014
Background
Previously, only the foreign CIVs as described below were eligible for full or partial exemption at source on certain French-sourced dividends:
- UCITS IV: Undertakings for Collective Investment in Transferable Securities (UCITS) established in an EU or EEA member state and governed by Directive 2009/65/CE of 13 July 2009 (the “UCITS IV” directive);
- Certain alternative investment funds (AIFs) established in an EU member state and governed by Directive 2011/61/UE of 8 June 2011 (the “AIFM” directive).
The Law 2014-1655 now extends this to CIVs resident of countries outside the EU/EEA.
Impact on customers
According to the principles laid down by the ECJ, the French Government states that the exchange of information mechanism provided by a convention concluded between France and the country of establishment of a CIV must effectively allow for the tax administration to ensure the veracity and completeness of the justifications provided by the CIV.
The new Law 2014-1655 clarifies, through article 58 completing the article 119 bis of the French Tax Code, that the existence of a convention on administrative assistance with France is not sufficient to grant tax exemption on certain French-sourced dividends to CIVs established in a country outside the EU/EEA. To benefit from the tax exemption, the convention must also effectively allow for the French tax administration to obtain confirmation, from the administration of the country of residence of the CIV, that the conditions laid down by the French tax legislation are met by the foreign CIV.
In practice, the French Tax Authorities have not yet issued any official guidelines for the application of the exemption to those foreign CIVs and therefore the French paying agents are not yet allowed to grant the full or partial exemption at source to foreign CIVs residing outside the EU/EEA.
We continue to monitor the situation with the local depository and the French Tax Authorities in order to obtain the operational guidelines. We will ensure to inform customers as soon as further details are made available.
Further information
For further information, customers may contact the Clearstream Banking1 Tax Help Desk or Clearstream Banking Client Services or their Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.