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    1. French Tax Court Curtails Attempts to Broaden WHT

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      French Tax Court Curtails Attempts to Broaden WHT – Introduction

      In a landmark decision, the Conseil d’Etat, France’s highest tax court, has reined in attempts by the French tax administration to broaden the application of withholding tax on transactions involving French banks and foreign shareholders.

      The ruling came after the French Banking Association (Fédération Bancaire Française, FBF) successfully contested the tax administration’s position, which sought to expand the beneficial ownership requirements under certain conditions.

      Attempt to Broaden Withholding Tax Scope

      The controversy centered around the French tax administration’s interpretation of Article 119 bis-2 of the French General Tax Code.

      The administration issued guidance suggesting that withholding tax applies even if the recipient is based in France, as long as the income’s beneficial owner, or the entity with the right to freely dispose of the income, is domiciled or has a registered office outside France.

      This interpretation, targeting specific banking activities like temporary share acquisitions and certain derivatives transactions, was seen as an overreach by the banking sector.

      Banking Association’s Challenge and Court’s Ruling

      The FBF took legal action against this interpretation and two related rulings from 15 February 2023.

      The association argued that the tax administration’s comments and the rulings were ultra vires, meaning they went beyond the administration’s legal authority.

      On 8 December 2023, the Conseil d’Etat delivered its judgment, making two critical clarifications:

      Limitation on Withholding Tax Scope:

      The court specified that Article 119 bis-2 should not be construed to impose a withholding tax on distributions to a rights holder based in France, even if the funds are eventually remitted to someone considered the beneficial owner based outside France.

      Restrictions on Administrative Overreach:

      The court affirmed that unless the anti-abuse of rights procedure under Article L. 64 of the Tax Procedure Code is implemented, the tax administration cannot disregard the involvement of a French resident intermediary between the payer and a non-resident beneficial owner.

      Implications of the Ruling

      This decision is pivotal for the French banking industry and foreign investors involved in the French market.

      It clarifies the application of withholding tax and provides a more predictable framework for financial transactions involving foreign shareholders.

      The court’s ruling emphasizes the need for the tax administration to adhere strictly to the legislative framework without overstepping its bounds.

      It also underlines the importance of clearly defined rules in fostering a stable and transparent tax environment, crucial for international investment and financial operations.


      The Conseil d’Etat’s ruling marks a significant turn in the ongoing discourse about the scope of withholding tax in France, particularly concerning transactions involving French banks and foreign entities.

      It underscores the judiciary’s role in maintaining the balance between tax collection efforts and the need for a clear, predictable legal environment for domestic and international economic activities.

      Final thoughts

      For further insights or queries on this development or broader French tax matters, feel free to reach out and engage in the discussion.