The Amending Finance Bill for 2016 (projet de loi de finances rectificative pour 2016, PLFR) (the Bill) was presented by the government and submitted to the National Assembly on 18 November 2016.

The Ministry of Finance of France announced to introduce a provision which would expand the benefit of an exemption from the 3% tax which is applied on dividend distributions to foreign parent companies (both the French parent companies and the foreign parent companies that satisfy apart from their nationality, the conditions to be the head of a French tax group). According to the proposed amendments  this benefit will be  extended to distributions made to any resident or non-resident parent company with direct or indirect holding of at least 95% of the capital of the distributing subsidiary. To get this benefit the non-resident parent companies must be subject to corporate income tax and must be located in a state which concluded a convention on administrative assistance with France, excluding non-cooperative states or jurisdictions (NCSTs).

According to article 30 of the new Finance Bill the participation exemption for dividends is no longer conditioned upon the parent company holding 5% of the voting rights of the subsidiary. Therefore, dividends from shares with no voting rights may benefit from the participation exemption. However, a requirement relating to the 5% voting rights threshold is introduced with regard to the long-term capital gains regime applicable to certain shares.

Also, a safe harbour clause has been  introduced to allow, in certain situations, the application of the long-term capital gains regime to shares in companies located in a non-cooperative state or territory (NCST). However, the French parent company will have to prove that the participation in the company located in a NCST corresponds to genuine transactions that neither seek nor allow the abusive shifting of profits in such a NCST.

This measure will apply to distributions made on or after 1 January 2017 .