DT7258 - France: Dividends

Under the EU Parent/Subsidiary Directive dividends must be paid gross to a company resident in the United Kingdom that holds at least 25 per cent of the capital of the French company paying the dividend.

The level of capital required to obtain the 0% rate under the Directive is reduced to 20% from 1 January 2005, 15% from 1 January 2007 and 10% from 1 January 2009.

For other dividends the agreement provides for a maximum rate of 15 per cent or 5 per cent where the recipient of the dividend is a United Kingdom resident company controlling directly or indirectly at least 10 per cent. of the voting power in the French company paying the dividend. This qualifies for credit as a direct tax (seeINTM165010(c). The reduction to the above rates is not given where the dividend is `effectively connected' with (see INTM153110 fifth sub-paragraph) a permanent establishment or fixed base which the United Kingdom resident recipient has in France.

Where the recipient of the dividend is a United Kingdom company controlling directly or indirectly at least 10 per cent of the voting power in the French company paying the dividend, credit may also be given for the underlying tax (see INTM164010(d))