Taxation on dividends : amendment to the regime after the steria case

In the Steria case (CJEU, C-386/14), the CJEU ruled that “article 49 TFEU must be interpreted as precluding rules of a Member State that govern a tax integration regime under which a tax-integrated parent company is entitled to neutralisation as regards the add-back of a proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies, when such neutralisation is refused to it under those rules as regards the dividends distributed to it from subsidiaries located in another Member State, which, had they been resident, would have been eligible in practice, if they so elected”.

In order to comply with the European rules, the French Government decided to withdraw the neutralisation of the 5%-proportion of costs and expenses in tax consolidated group.

However, in order to limit the financial impact of such a withdrawal for group, it is provided a neutralisation is limited to a 1%-proportion of costs and expenses that would apply to:

•  French tax consolidation group; and
• dividend distributed by subsidiaries (i) located in an EU member state or in EEE countries having signed a treaty containing an administrative assistance clause and (ii) that fulfil conditions to be part of a French tax consolidation group if they were located in France.

Please note that for non-tax integrated companies (i.e. common regime), the proportion of costs and expenses is still fixed at 5% of net distributed dividend and cannot be neutralised.

The tax team of Delcade is at your disposal should you need any further information on this new measure.