In France, companies subject to Corporate Income Tax (CIT) are required to pay an additional CIT contribution of 3% on the distributed profits according to article 235 ter ZCA of the French general tax law.
But, the Court of Justice of the European Union (CJEU) issued a judgment on 17 May 2017, ruling that the 3% contribution on distributed profits is not compatible with article 4-1 of the European Union (EU) Parent-Subsidiary Directive (PSD) when the parent company makes the redistribution of the dividends received from its subsidiaries.
These decisions provide an additional opportunity to claim refunds of the 3% tax paid before December 31, 2016, by French companies at least 95%-owned by MNEs that are subject to CIT or by French companies on redistribution of dividends received from their EU subsidiaries subject to CIT.
The ECJ’s decision (an anticipated development) is important in disputes relating to the 3% contribution, but is only one step. The litigation likely will continue on the basis of constitutional law issues.
