The following types of beneficial owner are recognised for tax purposes in France:

• Residents of Double Taxation Treaty (DTT) countries;
• Foreign individuals;
• Foreign Collective Investment Vehicles (CIVs);
• EU parent companies;
• Not-for-Profit Organisations;
• Foreign tax-exempt entities;
• Particular foreign entities;
• French residents (direct customers of LuxCSD).

The following types of beneficial owner are not eligible for relief:

• Residents of countries that do not have a DTT with France;
• Residents of countries that have a DTT with France but do not fulfil the conditions of eligibility defined by the DTT, including the following:
  • Some pension funds or mutual funds:
    For example, Polish pension funds do not pay tax on income in Poland and so do not satisfy the condition of taxation foreseen by the Direction de la Législation Fiscale (DLF), Article 4, §1, and cannot qualify for the benefit of the reduced rate stipulated in the DTT;
  • Finnish investment funds and investment companies:
    With the abolition of the “avoir fiscal” from 1 January 2005, Finnish investment funds and investment companies are no longer eligible for DTT benefits through either relief at source or reclaim;
  • German entities not subject to tax in their country of residence:
    For example, religious institutions (Kirchen), associations (Vereinigungen), charitable organisations or foundations (Stiftungen), philanthropic foundations, pension funds (Pensionskassen), contingency funds (Versorgungen) and E.V. type entities;
  • Residents of Singapore due to the specific procedure in place:
    The tax exemption or tax reduction should only be applied to the fraction of the French income transferred or received in Singapore. However, This limitation does not apply to the income of The Government of Singapore, The Council of Currency Commissioner, The Monetary Authority or to The establishments which the capital is totally held by the Government of Singapore, when it is agreed between the Governments of the two contracting States. 

Residents of Double Taxation Treaty (DTT) countries

Relief at source eligibility depends on the type of investor and their country of residence. 

Relief at source is available to beneficial owners that:

• Qualify for the benefit of a reduced rate of withholding tax in accordance with a DTT between their country of residence and France; and
• Meet the conditions laid down by the applicable DTT to obtain the benefit of the reduced withholding tax rate. Among these conditions, the distributed income paid by the company resident in France must be liable to income tax in the beneficial owner’s country of residence.

And, in the case of Japanese or Swiss pension funds:

• Article 6A, a) of the protocol to the Double Taxation Treaty (“DTT”) signed between France and Japan, grants a reduced tax rate of 10% to a Japanese pension fund on French sourced dividends (foreseen by article 10, paragraph 2, b) of the said DTT), only if, at the end of the preceding fiscal year, more than 50% of its beneficiaries, members or participants are individuals resident of Japan

• Article V of the protocol to the DTT signed between France and Switzerland grants a reduced tax rate of 15% to Swiss pension institutions (i.e. pension funds, retirement funds/“caisses de retraite” and provident institutions/“institutions de prévoyance”) on French sourced dividends (foreseen by article 11, paragraph 2, a) of the said DTT), only if, at the end of the preceding fiscal year, more than 50% of its beneficiaries, members or participants are individuals resident of Switzerland.

The maximum rate of withholding tax is defined in the relevant DTT.

Partial quick refund of withholding tax on dividends is available to beneficial owners if:

• They qualify for relief at source but the required certification was not provided before the relief at source deadline.

Partial standard refund of withholding tax on dividends is available to beneficial owners if:

• They qualify for relief at source but the required certification was not provided before the relief at source or quick refund deadline.

Customers can apply for a standard refund on behalf of beneficial owners through LuxCSD by submitting the appropriate documentation.

Beneficial owners (of equities) not eligible for relief at source:

The following beneficial owners cannot apply for a reduced rate at source but may reclaim withholding tax through the standard refund procedure:

• Collective investment schemes of which one or more of the underlying shareholders is not resident in the home country of the scheme (percentage of the unit holders < 100%)

Different Statements of Practice have been published by the French Tax Authorities and stipulate that the following beneficial owners, among others, are also not eligible to apply for a reduced rate of withholding tax at source:

• Residents of Singapore, for which there are specific procedures for the application of the tax treaty advantages agreed between Singapore and France;
• Certain Swiss legal entities (including mutual funds and UCITSs), for which specific provisions of the DTT between Switzerland and France apply;
• U.S. partnerships, for which the modalities of application are more complex.

Foreign individuals

Since 1 January 2018 non-resident individuals may benefit from a rate of 12.8% at source. 

Foreign Collective Investment Vehicles (CIVs)

Two categories of foreign CIV are eligible for an exemption or reduced rate of withholding tax at source, quick refund and standard refund:

• UCITS IV: UCITS established in a European Union Member State and governed by Directive 2009/65/CE of 13 July 2009 (the “UCITS IV” directive);
• Certain alternative investment funds (AIFs) established in a European Union or European Economic Area Member State and governed by Directive 2011/61/UE of 8 June 2011 (the “AIFM” directive).
• Non-EU CIVs fulfilling the conditions of Article 119 bis, paragraph 2, of the French Tax Code (FTC) and satisfying all the criteria to prove their comparability with the French CIVs are eligible to relief at source, quick refund and standard refund on certain conditions.

The applicable tax rate varies according to the type of distributing security, as follows:

• Full exemption of withholding tax on French-sourced dividend income; or
• A 15% withholding tax rate on French-sourced dividend income distributed by Sociétés d’Investissement Immobilier Cotées (SIICs) or Sociétés de Placement à Prépondérance Immobilière à Capital Variable (SPPICAVs).

EU parent companies

An EU parent company is a company that holds a substantial participation in the capital of the French company paying the dividend.

Relief at source or standard refund of withholding tax can be obtained for beneficial owners that are EU parent companies as follows:

• Through the Double Taxation Treaty (DTT) procedure according to the provisions stated in the relevant DTT between the country of residence of the parent company and France; or
• Through the European 0% procedure if the EU parent company and the French subsidiary company meet the conditions stated in the European Directive 90/435/EEC of 23 July 1990.

Not-for-Profit Organisations (NFPO)

The main eligibility criteria for foreign not-for-profit organisations to qualify for the 15% statutory withholding tax rate require that the organisation:

• Is established in a European Union (EU) or European Economic Area (EEA) Member State that has concluded a tax treaty with France that contains a clause of administrative assistance to fight against fraud and tax evasion; and
• Would be subject to 15% tax on dividends if their registered office was located in France.

Eligible foreign not-for-profit organisations that want to benefit from this regime must, before requesting the 15% withholding tax to be applied, obtain a Not-for-Profit Organisations Certificate issued by the Direction des Impôts des Non-Résidents (DINR).

Relief at source is available for eligible beneficial owners via LuxCSD, provided that the required documentation is submitted to LuxCSD within the indicated deadlines.

If the required documentation is not provided within the deadlines, the standard rate of 25% will be applicable by default.

Foreign tax-exempt entities

Entities can be recognised as tax-exempt according to:

• A special agreement given by the French tax authorities which could be officially published (Journal Officiel) or not; or
• The Convention of the United Nations (1946) or the Convention of the United Nations specialised organisation (1947); or
• Article 131 sexies (I or II) of the French General Tax Code.

Article 131 sexies I allows beneficiaries that are international organisations, sovereign states or central banks to be totally exempted if the three following conditions are met:

• The investment must not represent a direct investment, as defined by Law No 66-1008 of the 28 December 1966 regarding financial relations with foreign countries. This condition is fulfilled provided that the equity interest in the French Company does not exceed 20%;
• The securities owned must be in the registered form or must be deposited with an established credit institution in France;
• The claimant is the effective beneficiary of the income.

Article 131 sexies II allows beneficiaries that are foreign public institutions to be totally or partially exempted.

• The exemption must be requested before making the investment. In this case, a letter with all required documents must be sent to the Direction de la Législation Fiscale (DLF) in order to obtain their agreement.

Particular foreign entities

The following particular foreign entities are eligible to enjoy the benefits of the Double Taxation Treaties (DTTs) between their countries of residence and France, by means of the relief at source (simplified procedure) or the standard refund procedures, by providing the requested additional documentation.

Note: This information is included to assist customers and should not be considered to be exhaustive.

GBRs (Gesellschaft bürgerlichen Rechts – Partnership Agreement under the German Civil Code)

A GBR is not eligible as such to benefit from a DTT rate as it does not fulfil the condition of residency foreseen by the treaty. However, it is considered as a pass-through entity whose profits are taxed at the level of the partners and not at the level of the entity itself.

The GBR's partners qualify for the DTT rate under the procedure applicable to foreign transparent partnerships as introduced by the Statement of Practice (SoP) 4 H-5-07 dated 29 March 2007.

GmbH & Co. KG, KG and OHG companies

Such companies are considered as limited partnerships (sociétés en commandite simple) and are generally not subject to corporate tax but are subject to income tax.

As such, provided that the required documentation is submitted by each partner of the company, they qualify for the DTT rate.

German Special Funds (Spezial Fonds)

German Special Funds are not entitled as such to benefit from a DTT rate unless they can provide a tax attestation, issued by the German Tax Authorities, specifying that the Special Fund is subject to corporate tax in Germany.

UCITSs (other than eligible foreign CIVs), pension funds, charities, foundations/associations, trusts, partnerships etc.

As a general rule, beneficial owners for whom there is no specific provision in the DTT between their country of residence and France are considered by the FTA as not eligible for the benefits of the DTT, as they are considered as non-taxable in their home country.

If particular entities (such as Undertakings for Collective Investments in Transferable Securities (UCITSs), pension funds, charities, foundations/associations, trusts, partnerships, etc.) are effectively subject to tax in their own country of residence, then they may be eligible to benefit from a DTT, provided that a tax attestation issued by the local tax authorities of the beneficial owner is submitted, confirming that the beneficial owner is indeed subject to corporate tax at a normal rate on its income (including French-sourced income) for the relevant income year.

U.S. residents

U.S. residents are eligible to benefit from a DTT rate via the simplified or standard refund procedures. Depending on the status of the beneficial owners, different documentation or additional information may be required to obtain relief at source or apply for a standard refund.

Particular foreign entities eligible for standard refund only

The following particular foreign entities are eligible to enjoy the benefits of the Double Taxation Treaties (DTTs) between their countries of residence and France, by means of the standard refund procedure only, by providing the requested additional documentation.

Note: This information is included to assist customers and should not be considered to be exhaustive.

Canadian mutual funds

The FTA, in their Statement of Practice (14 B-1-06), provided guidance on the eligibility of Canadian mutual funds for tax treatment under the DTT between Canada and France.

Eligible funds include:

• Mutual Fund Corporations (sociétés de placement à capital variable);
• Mutual Fund Trusts (fiducies de fonds communs de placement);
• Pooled Fund Trusts (fiducies de fonds mis en commun);
• Unit Trusts (fiducies d'investissement à participation unitaire).

Tax reductions and tax exemptions are applicable as follows:

• Only to the portion of French-sourced income that is not subject to tax in Canada and is redistributed by the mutual fund to its final beneficial owners; and
• Only when the percentage of distribution rights held by Canadian residents meets the ownership threshold.

Canadian pension funds

The FTA, in their Statement of Practice (14 B-1-05), provided guidance on the eligibility of Canadian pension funds for tax treatment under the DTT between Canada and France.

Eligible funds include:

• Registered Pension Plan (RPP) (Régime de Pension Agrée (RPA));
• Registered Retirement Income Fund (RRIF) (Fonds Enregistrés de Revenus de Retraite (FERR));
• Registered Savings Plan (RSP) (Régime Enregistré d'Epargne Retraite (REER)).

Spanish pension funds

A Spanish pension fund can enjoy tax treaty benefits provided that it meets the following eligibility criteria:

• The fund is considered as resident in Spain under the DTT between Spain and France; and
• The fund is subject to tax in Spain; and
• The fund is effectively paying tax in Spain on its local and French-sourced income.

Irish mutual funds, South African pension funds and UK charities

There is no specific provision for these entities under the applicable tax treaty and so the Non-Residents Tax Office requires additional supporting documentation as proof that they are subject to tax in their country of residence.

French residents (direct customers of LuxCSD)

Those entities are not exempt from tax but may obtain the payment of French-sourced dividends gross on condition that they are direct customers of LuxCSD being either:

• A legal entity resident in France for tax purposes and holding the securities exclusively for itself and complying with all reporting obligations imposed by the French legislation;
• A bank resident in France for tax purposes and holding the securities for third parties or/and for itself and acting as a French withholding tax agent, applying tax as appropriate to the final beneficial owners and complying with all reporting obligations imposed by the French legislation.

French residents that do not have a direct account with LuxCSD are not eligible.