Dividend Tax in France - Cost-Effective Legal Advice for Investors
Dividend Tax in FranceUpdated on Thursday 26th January 2023
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The net profit distributed to shareholders is a dividend. Once reported, it is subject to income tax, as well as to social contributions at a rate of 15.5%. In addition, a withholding tax of 21% applies at the payment date of the dividend, as well as on the income tax paid the following year. As calculated starting from January 1, 2013, the taxation of dividends was revoked, as such, dividends received in 2013 are taxable based on the income tax scale. In regards to the advance payment, the 21% rate applied as tax deducts from the income tax.
When it comes to social security contributions, as dividends represent income from assets, they are subject to five social security deductions at source and the total tax leads to a 15.5% rate in 2012. However, in 2013, the rate of the general social contributions was reduced to 5.1% from 5.8%. One of our French lawyers can tell you more about the France dividend withholding tax.
New tax regimes for dividends in France
Starting with January 1, 2013, dividend income generated in France is subject to personal income tax at progressive rate. As such, the optional flat rate was abolished and it was replaced with a compulsory withholding tax. The tax return now needs to be filled in by the payer with the withholding tax as well as with the social security taxed no later than 15 days of the month following the month in which the income is received. As for the rates, the rate of the compulsory withholding tax is 21% for dividends, but 24% for interest.
Our French lawyers can give more details about the dividend tax and can help foreigners register the company for VAT.
France applies a separate tax regime for taxation of dividends
Since 2013, company directors who pay dividends to themselves are subject to the social security contributions and the company is charged. As such, the company is liable for self-employed social security contributions on dividend payment if company owners receive dividends worth more than 10 percent of the company’s capital. As such, if the capital of the company is 10,000 EUR, then the social security contribution applied at normal rate on dividends paid is worth 1,000 EUR. However, if the 10 percent rate is not exceeded, then the social charges are of 15.5 percent.
When it comes to investors, they are obligated to pay a withholding tax of 21% applied on the gross amount of dividends and the final payable amount is determined by the submission of the annual tax return. If the sum is higher than the tax due, then the investors receive a refund of the overpaid tax. In case it is less, then the marginal amount will be collected as part of the annual tax demand. More about France dividend withholding tax can be discussed with our attorneys.
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Changes to the withholding tax on dividends
Starting with January 2020, new withholding tax rates are applicable to French-sourced dividends paid to foreign beneficiaries. Here are the new rates, mentioning that the old ones remain the same:
- The 12,8% withholding tax rate is the same as the one in 2019. Such a rate can be diminished or even eliminated if stipulated by the double taxation treaty signed by France.
- The 28% withholding tax rate was imposed starting with January 2020. Just like in the case of the previous one, this tax can be decreased or eliminated.
One should note that the withholding tax rate of 28% applies to all French-sourced dividends that are paid to private beneficial owners of companies. All you need to know about the new provisions of the Tax Code in France can be offered by one of our French lawyers.
Dividends mentioned by France – Belgium DTT
The agreement signed by France and Belgium regarding France dividend withholding tax and the avoidance of double taxation mentions the following important aspects:
- According to this treaty, 12.8% is French withholding tax and this rate cannot be exceeded.
- The same agreement mentions that Belgium withholding tax cannot exceed 15%.
- The FFTR or Fixed Foreign Tax Rate credit for taxing French dividends received by Belgian residents has not been applied for more than 30 years.
Regarding the refund of overpayment, this is possible and allowed. For example, in the case of extra payments for dividends received in 2020, a refund of overpayment is made the following year via personal income tax return. There is also the possibility to receive refunds for previous years, but all these aspects can be explained in detail by our French lawyers.
Non-resident companies and French-sourced dividends
In the case of foreign companies and French-sourced dividends, the withholding tax is 28%. If an agreement is signed in this regard, the rate may be lower. According to Finance Law and the newly implemented regulations, a rate of 26.5 applies to dividends distributed for 2021, while a tax rate of 25% will apply to dividends to be received in 2022. There are other reductions in such tax, if the resident company comes from an EU country and if the parent company owns at least 10% of a French subsidiary for at least two years. More details on this subject can be provided by our French lawyers.
Brief description of dividends
In order to better understand the tax system, it is important to know in detail the definition of dividends. These represent a part of a company's profit and are paid to its shareholders each year. It is important to know that dividends can be paid in cash or in shares, depending on the decisions of each shareholder. Regarding the calculation of dividends, this is a fairly simple process, considering that the shareholders are the ones who decide their distribution from a certain part of the company's profit. The respective amount is divided by the total number of shares, resulting in the dividend per share. Then each company shareholder calculates the dividends to be collected by multiplying the dividend per share by the number of shares held. Here are other interesting information about dividends:
- According to French law, dividends are subject to taxation, as we mentioned in this article, based on some special conditions. Both French and foreign citizens with business in this country are subject to dividend distribution.
- One of the great advantages is that the company's shareholders can directly benefit from the company's profits, even if they are subject to taxation.
- Another important aspect of dividends is that they can be kept and reinvested, and a financial specialist can tell you more about the options you may have.
- Although dividends are normally paid at the end of the financial year, their distribution can be made quarterly, but only with the consent of shareholders.
- The proportional increase or decrease of the share price in a listed company depends on the dividend payment announcements.
- The distribution and payment of dividends reflect a positive image of a company and give investors confidence.
Therefore, if you want to find out more information about France dividend withholding tax, do not hesitate to talk to our specialists in the field. We can offer specialized legal advice on dividend taxation.
Taxation in France – What you need to know
The French tax regime needs to be fully understood before a company is established in France. The tax regime might seem complex to foreign entrepreneurs in France. This is where our French lawyers can intervene and can represent your company from a legal point of view. Here are the main taxes in France:
- The corporate income tax is set at 33,33%, yet a tax rate of 30% applies to foreign branches.
- The withholding tax of 30% is imposed on dividends paid by a French company to a non-resident.
- The wealth tax in France is payable only after living at least 5 years in the country. This tax ranges between 0.50% and 1.5%
- The standard VAT rate is set at 20%. Lower rates of 10%, 5.5%, and 2.1% apply to specific categories of products and services.
- The capital gain tax is set at a 19% rate and it is imposed on land, sale of shares, etc.
The taxation system in France is subject to varied modifications, therefore, it is best to have a tax specialist by your side and to comply with the current legislation. Our French lawyers can tell you more about these aspects.
FAQ about taxation in France
1. What is the dividend tax in France?
21% withholding tax applies to the gross amount of dividends paid by investors. The 12,8% withholding tax rate applies to foreign individuals in France, while the 28% tax rate applies to legal entities and private recipients.
2. What is the corporate income tax in France?
The corporate income tax in France is set at 33.33%, but there are exemptions and lower rates, applied under certain circumstances. One of our French lawyers can tell you more.
3. What is the VAT rate in France?
The standard VAT rate in France is 20%. Yet, lower rates apply to utilities and food products. You can discuss with one of our specialists and find out more about taxation in France.
4. How are the French residents levied?
French citizens are levied on the worldwide income, while foreigners living in France must pay taxes only on the incomes generated in the country. It is important to note that married couples in France can file a joint tax return, but legal advice is required.
5. Is there a wealth tax in France?
Yes, the wealth tax in Frances applies to incomes worth more than EUR 1,3 million. This tax ranges between 0.50% and 1.5%.
Making investments in France
France is one of the most appreciated business hubs on an international scale and home to prestigious and large companies that activate in sectors like IT, energy, real estate, tourism, agriculture, food & beverage, manufacturing, research, and development, to give a few examples. The economic standards are highly appreciated by international entrepreneurs who want to establish their operations in France and who want to generate profits in the country’s excellent sectors of business. It is a known fact that France is the second-largest market in the world with powerful financial and banking sectors, plus a wide range of business opportunities for both domestic and international investors. We have gathered a few facts and figures about the economy in France that you might find useful:
- Approximately USD 869 billion was the total FDI stock in France in 2019.
- The 2020 Doing Business report ranks France 32nd out of 190 worldwide economies.
- More than 50% of the total FDI stock comes from countries like the UK, the Netherlands, Luxembourg, and Switzerland.
- According to statistics, France is the 13th FDI recipient in the world.
Why work with our lawyers in France
The experience and professionalism with which we treat each client is the promise that we are able to offer the best solutions. The tax system in France may seem complicated for those who want to open their business in this country, so it is recommended to use full legal services in this case.
We remind you that, in addition to tax advice, tax compliance, and registration, our experts can also deal with the legal aspects of setting up a company in France. We rely on efficiency and transparency when we collaborate with our clients and try to offer the best solutions for problems or ambiguities.
If you need legal assistance, our law firm in France can offer any information that can help you in your business activity. Feel free to contact our French lawyers and you will receive the best legal advice.