French Constitutional Court Finds French Three Percent Tax on Dividend Distributions Unconstitutional in Tax Dispute Involving AFEP Consortium

October 6, 2017

The French Constitutional Court found the French three percent tax on dividend distributions to be unconstitutional. This decision was rendered on a tax dispute involving a group led by the Association française des entreprises privées (AFEP), which is the main professional organization representing large French-listed companies, and 42 French-listed corporations, all represented by S&C and a French tax firm. This decision follows a previous decision obtained by S&C before the European Court of Justice (ECJ) in May, which found the three percent tax on dividend distributions to be incompatible with the European Parent Subsidiary Directive. The ECJ decision exempted from the three percent tax the redistributions of dividends received from subsidiaries established in another Member State of the E.U. only. The AFEP group initiated a claim before the French Administrative Supreme Court and the Constitutional Court to expand the exemption to all distributions made by French companies. The Constitutional Court welcomed the argument of the AFEP group and found the three percent tax to be contrary to the French constitution. The three percent tax is automatically repealed and can no longer apply to future distributions. For past distributions, taxpayers are entitled to be fully refunded of the three percent tax paid, increased by a late payment interest of 4.8 percent per annum, subject to applicable statutes of limitation.

The S&C team representing the AFEP Consortium was led by Gauthier Blanluet and Nicolas de Boynes, along with Marie-Aimée Delaisi.