PARIS: The 3 percent tax on the distribution of profits introduced in 2012, is repealed for the distribution of amounts paid since 1 January 2018.
The conformity of this tax to the Constitution and to the EU law has been challenged for the last couple of years which eventually led to two decisions in which, first, the ECJ declared the tax was not compatible with the Parent subsidiary directive and then the French Constitutional court struck down the tax for not being compatible with the French Constitution.
If the French government did not wait for the Constitutional court decision to propose the repeal of the tax (in the budget bill), the decision of the Constitutional court had a much broader impact as it entitled taxpayers to claim approximatively € 9 billion for the recovery of the unduly paid tax.
To finance half of those reimbursements, two new additional taxes to the corporate income tax (CIT) were introduced:Until 31 December 2017, under French tax law the deduction of financial expenses related to the acquisition of qualifying participations was denied when the company acquiring the participations could not demonstrate that the authority to make decisions or to control the acquired participations was exercised from France (this rules is referred to as “the amendement Carrez”). Since 1 January 2018, the restriction no longer applies if the French acquiring company is in a position to demonstrate that the decisions related to the acquired participations are made and that the effective control is exercised over the acquired entities either: (i) by the French acquiring company itself, or (ii) by a company established in France, or having its headquarters in the EU or in a country of the European Economic Area having concluded with France a treaty for the purpose of combating tax fraud and evasion, that controls or is directly controlled by the French acquiring company.
