France: Finance bill 2025 adopted by the Parliament and officially published
LuxCSD1 informs clients that on 15 February 2025, the Finance Bill 2025 was published in the Official Journal further to its approval by the Senate on 6 February 2025, through Law N° 2025-127 dated 14 February 2025.
The main tax measures effective
immediately
are listed below:
Increase of the rate of the French financial tax from 0.3% to 0.4%:
Please refer to Announcement C25007.
Reference to the notion of Beneficial Owner (“beneficiaire effectif”) to determine the liability to withholding tax of dividend distributed to foreign residents:
The concept of Beneficial Owner was introduced in the wording of Article 119 bis 2 with reference to the application of withholding tax on dividends distributed to non-residents:
- A Beneficial Owner is the person who has the right to freely dispose of the income (within the meaning of this article).
- A recipient, such as an agent or another representative interposed between the creditor and the debtor of the income, is an intermediary and is not the Beneficial Owner of the income. His right to use and enjoy the dividend received is limited by a contractual or legal obligation to transfer the payment received to another person.
Following the introduction of this concept, it is now established that withholding tax applies to French-source dividends if the Beneficial Owner of the income is a non-resident even when the recipient of the income is a French resident.
Based on the above, in order to be granted an exemption from withholding tax on dividend payments made to French residents, French paying agents have to ensure that they are the Beneficial Owners of the income.
Strengthening of the anti-dividend arbitrage provisions set forth in Article 119 bis A of the French Tax code:
The anti-abuse mechanism which reclassifies payments made to a person not domiciled in France as deemed distributed income subject to French withholding tax on dividends, now applies:
- not only in the case of a “payment” but also in the case of a “transfer of value”, which is understood to mean “the portion of the proceeds of shares or equivalent income actually received by the person who is not established in France or does not have his tax domicile there, in any form whatsoever and directly or indirectly, in particular by means of a combination of transactions”;
- regardless of the duration of the transaction in question, when the payment or transfer of value is related directly or indirectly to an economic effect similar to the possession of shares.
Clarification of the conditions required for an individual to be considered as a French resident under French Tax law:
As per that amendment, even if individuals fulfill one or more of the French domestic criteria to qualify as French residents, they are not considered to have their tax domicile in France if they do not qualify as French residents under a double taxation treaty (DTT).
This clarification legalises the administrative doctrine according to which the conventional tax residence must prevail over the tax domicile within the meaning of the domestic law for the application of the French tax law.
In addition to the above, effective as of 1 January 2026, the Beneficial Owners resident in a country having signed a double taxation treaty with France that provides for an exemption or no withholding tax, will not be able to obtain the treaty exemption by the simplified procedure:
- It will be up to the beneficiary, or the paying institution acting on his behalf, to request a refund of the withholding tax by providing proof that he meets all the conditions set out in the applicable tax treaty for withholding tax exemption.
- At the request of the tax authorities, the paying institution will have to provide the following information in dematerialised form: the amount and date of the transactions, the identity of the issuer of the shares or stocks of the related transactions as well as the identity of the Beneficial Owner of the said income. If the paying institution is not in the position to determine the identity of the Beneficial Owner, it must provide, instead of the identity of the beneficiary, the information necessary to identify the beneficiary's tax residence.
Impact on clients
We are currently assessing the potential impact that these new measures could have on clients.
We will inform clients as soon as our analysis is complete.
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1. LuxCSD refers to LuxCSD S.A., registered office at 42, Avenue J.F. Kennedy, L-1855 Luxembourg, registered with the Luxembourg Trade and Companies Register under number B-154.449.