France: Increase of standard tax rate on SCR distributions
Effective
immediately
the standard rate of withholding tax applicable to distributions from a Société de Capital Risque (SCR - a French venture capital company) has been increased from 19% to 30%.
Background
According to point 133 of the Statement of Practice 4 H-5-02 dated 24 October 2002, income distributions from an SCR to non-resident investors, when derived from capital gains realised by the SCR from securities (listed or not listed) held for at least two years, were subject to a 19% withholding tax rate.
The simplified procedure was not available for such distributions but a standard refund of withholding tax could be applied for by or on behalf of eligible beneficial owners through Clearstream Banking1.
Our local depository has pointed out that this administrative tolerance has not been incorporated by the French Tax Authorities (FTA) in their new database (“Bulletin officiel des Finances Publiques-Impôts”) and has obtained confirmation from the FTA that the favourable rate of 19% is no longer applicable.
Impact on customers
The standard withholding tax rate of 30% is applicable to income distributions from SCRs to foreign investors.
The simplified procedure is now available and customers eligible for a reduced rate under an applicable Double Taxation Treaty (DTT) may, upon submission of the required documentation within the prescribed deadlines, obtain relief at source.
Relief at source is also available to customers that are eligible for exemption under the provisions of domestic law.
The standard refund procedure remains applicable.
Note: There has been no SCR distribution since 1 January 2014.
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1. Clearstream Banking refers to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).