France to charge 0% dividend taxes for investment funds, but adds a 3% tax on French companies issuing dividends to any investor

France lost its battle in May with the Court of Justice of the European Union to keep preferential tax treatment for French investors in SICAV and similar funds. Facing the choice of charging all investment funds no taxes on dividends or a rate in the 25% range, France has elected to charge 0%. At the same time, France will institute a new tax of 3% on French companies issuing dividends to any investor regardless of domicile or tax status. While we initially expected France to keep its dividend tax rate for investment funds at 25%, the 0% rate plus the new 3% tax on companies plugs the hole in France’s Treasury.

For more information on France’s decision, see this English-language write up released Friday, Sept 14 by law firm Ashurst, “Exemption from French withholding tax (Briefing, September 2012).

Finadium reported on the implications of the Court of Justice of the European Union decision for Dividend Arbitrage in our September 2012 report, “Regulation, Taxation and the Outlook for Lending in European Securities.

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