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Withholding tax on income distributed to non-residents


Until 2006, withholding tax on dividends paid by French companies to nonresidents could only be deducted by the payers and by French paying banks.

The 2007 French Finance Act has provided for the possibility, from 1 January 2007 onwards, for foreign paying banks who pay dividends distributed by French companies listed on a regulated stock market to pay the relevant withholding tax to the French Treasury when the following conditions are met:

  • The paying banks must be established in another EU Member State or a State which is a party to the European Economic Area Agreement and has signed a tax treaty with France aimed at combating tax fraud and tax evasion;
  • The foreign banks must have concluded with the French tax administration an agreement drawn up in accordance with a model issued by the tax administration;
  • The foreign banks must be authorized by the distributing company or the last French paying bank to report and pay over the withholding tax in its name and on its behalf.

A Decree is to be published to set forth the terms and conditions for applying this new system and will notably include a model agreement to be entered into by the foreign paying banks and the French tax administration.

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