The Constitutional Court of France delivered its decision (No. 2016-598 QPC, Eurofrance) on 25 November 2016 about the compatibility with the constitution of the 75% withholding tax rate applicable to dividends paid to a resident of a non-cooperative state or territory (NCST), which is provided for by article 187(2) of the General Tax Code (CGI).
According to the ruling of the Court, the 75% withholding tax rate applicable to outbound dividends paid to a resident of an NCST is not contrary to the constitution insofar as it is aimed at combating tax fraud, which is a constitutional objective and the taxpayer must have the possibility to prove that distributions of dividends to residents of NCSTs neither seek nor allow the abusive shifting of profits within the NCST concerned.
