French Withholding Tax on Dividends: European Court of Justice Rules That French Withholding Tax on Portfolio Dividends paid to non-French Mutual Investment Funds is Contrary to EU law

Sullivan & Cromwell LLP - May 11, 2012

In a landmark decision rendered on 10 May 2012, the European Court of Justice (the “ECJ”) ruled that EU law must be interpreted as prohibiting French withholding taxes on French-source portfolio dividends paid to non-French investment funds, since such dividends are tax exempt when received by similar French mutual investment funds. This decision is applicable to EU funds as well as non-EU funds (including US investment funds).