France: Temporary procedure for 12.8% withholding tax rate for non-resident individuals.
Following the adoption of the Finance Bill for 2018, announced in L17128, the reduced withholding tax rate of 12.8% for non-resident individuals1 has been in force since 1 January 2018. However, the French Tax Authorities (FTA) have not issued any procedures and therefore the tax rate could not be applied.
Effective
immediately
Clearstream Banking2 has decided to propose a temporary procedure to its customers holding securities in CBF based on confirmed information obtained from the French Tax Authorities.
Background
Article 28 of the Financial Law for 2018 provides a reduced tax rate of 12.8% applicable on French-sourced dividend payments made to eligible
non-resident individuals. In the absence of procedures from the FTA, the paying agents continued to apply the default rate of 30% at source or the double tax treaty (DTT) rates when valid certification was provided.
After the publication of this new law, the French Banking Association (FBA) proposed a process that follows a similar structure to the FTA’s simplified procedure. The proposed procedure is still unconfirmed despite numerous reminders from the FBA.
Considering the upcoming French-sourced dividend season, Clearstream Banking has decided to implement a temporary relief at source procedure applicable until the FTA publish a definitive one.
Important note
Should FTA’s final official procedure require additional certifications or impose different deadlines compared to the temporary procedure proposed by Clearstream Banking herein, customers will be informed immediately and will be requested to submit any missing certification to comply with the reduced tax rate already applied. If customers do not respond by the imposed deadline, their account will be debited with the corresponding tax amount due.
Impact on customers
The following temporary procedure is applicable to non-resident individuals wishing to obtain the reduced withholding tax rate of 12.8% at source or through a quick refund procedure.
Documentation requirements
The following documentation must be provided prior to the prescribed deadline for relief at source or quick refund:
- A One-Time Certificate for French Securities (OTC), valid until revoked:
To be provided and signed by the Clearstream Banking customer. This OTC makes it possible to apply for a standing instruction as follows:- If the customer holds the securities for themselves or for a single beneficial owner (BO) (first box); or
- If CBF customers segregate their holdings per tax rate in their subaccounts (second box); or
- If CBL customers segregate their holdings per tax rate in a dedicated account (second box).
- Proof of tax residency, valid for one year, that can be either:
- Form 5000: duly completed by the BO or their legal representative under cover of a Power of Attorney (POA) and certified by the local tax authorities; or
- a Certificate of Residence: issued by the BO’s tax authorities
- A corporate action instruction, valid per payment:
Tax breakdown instruction that must be sent only by customers who have no standing instruction in place (OTC Box III) either via Xact Web Portal, CreationOnline (CBL and CBF 6-series account customers only) or via a formatted SWIFT MT565 message. It must include the following details:- Account number of the customer;
- ISIN code;
- Payment date;
- A breakdown of the position with the nominal amounts and respective tax rate to apply
- A per-payment detailed list of beneficial owners (BO list), valid per payment:
Certification with details of the BOs. Required from all customers except those that have a standing instruction in OTC Box I. The BO list must be supplied in the correct format and must be uploaded online via the Upload BO List page on the Clearstream Banking website. Note that rows shaded in grey that contain headers of each column must not be removed nor overwritten.
Deadline to receive the documentation
To benefit from relief at source, the above documentation must be provided to Clearstream by the following deadlines:
One-Time Certificate for French equities | At the latest, on record date minus one business day of the first dividend payment date to which it applies, by 09:00 CET. |
Proof of Residency | |
Per-payment Detailed List of Beneficial Owners | At the latest 45 calendar days following the dividend payment date by 09:00 CET. |
Corporate Action Instruction | At the latest, on the record date of each relevant dividend payment, either via Xact Web Portal, CreationOnline (CBL and CBF 6-series account customers only) or by a formatted SWIFT MT565 message, by 09:00 CET. |
To benefit from the quick refund, documentation deadlines are the same as for relief at source except for the corporate action instruction:
Corporate Action Instruction | At the latest, by the 10th of the month (or if the 10th is not a business day, the first business day before the 10th) following the month when the payment took place. Customers may adjust the initial tax break down before this date. The last tax breakdown provided before the above deadline will be considered as final and will be reported to the FTA |
Failing to provide the above-mentioned documentation by the prescribed deadlines will result in the application of the default 30% withholding tax rate with no possible refund through Clearstream Banking.
Further information
For further information, please refer to our Market Taxation Guide – France (securities held in CBF). Customers may also contact the Clearstream Banking Tax Help Desk.
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1. Residents of countries being part of the EU/EEA and/or having a DTT in place with France.
2. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.