Dividends distribution tax (3%) held unconstitutional; possible refund opportunities

The French Constitutional Court (Conseil Constitutionnel) issued a decision holding that the 3% tax imposed on distributions of dividends is unconstitutional.

The case identifying information is : N° 2017-660 (6 October 2017)

Implications of this decision

Prior decisions of the French Constitutional Court and of the Court of Justice of the European Union have already limited the scope of the 3% tax on dividend distributions or had declared the tax to be in contradiction to the EU Parent-Subsidiary Directive. Litigation is still pending with respect to this tax before the CJEU.

The impact of the recent decision of the Constitutional Court is much broader than the prior decisions. The Constitutional Court declared the tax to be unconstitutional and therefore completely repealed the tax (and not simply limiting its application) on the basis that the discrimination resulting from the actual scope of the tax was not founded in a reason of general interest (which could have justified the tax) but only by a budgetary objective (which does not justify the tax under French legal standards).

Furthermore, the Constitutional Court concluded its decision would have an immediate effect and would apply to all currently pending litigation.

Hence, the 3% dividends distribution tax no longer has any legal existence in France.

Possible refund opportunities

Taxpayers have until the end of 2017 to file, with the French tax authorities, claims for refund of the 3% tax on dividend distributions for amounts of the 3% tax paid since the beginning of 2015.