Landmark ECJ Decision Concerning the French 3% Tax on Dividend Distributions: The Court of Justice of the European Union Holds That the French 3% Tax on Dividend Distributions Infringes the European Union Parent-Subsidiary DirectiveSullivan & Cromwell LLP - May 17, 2017
On May 17, the European Court of Justice (ECJ) ruled in favor of a group composed of several CAC 40 corporations and the AFEP (Association française des entreprises privées), which is the main professional organization representing large French listed companies, finding the French 3% tax on dividend distributions to be incompatible with the European Union’s Parent-Subsidiary Directive. The ECJ decision applies to redistributions of dividends received from subsidiaries within the scope of the Parent-Subsidiary Directive, i.e., dividends received from subsidiaries established in another Member State of the EU. Further steps are about to be taken by the same litigation group before the French Constitutional Court to expand the scope of the invalidity of the 3% tax. Sullivan & Cromwell LLP and another French tax firm represented the French corporate plaintiffs and the AFEP in the ECJ proceedings.