Has the French 3% Contribution Become Compatible with EU Law and Tax Treaties?

Abstract:

As a first act of tax legislation under the presidency of François Hollande, the French government introduced an additional contribution to the French corporate income tax (CIT) equaling 3% of profit distributions and profit repatriations made by companies subject to French CIT. The contribution first applied on profit distributions and profit repatriations made on or after 17 August 2012. Given the economic similarity of the contribution to a regular dividend withholding tax, one can question the compatibility of the contribution with primary and secondary European Union (EU) law and French tax treaties. On 10 April 2013, the French Tax Authorities issued official guidelines, limiting the scope of the contribution. But did this limitation sufficiently address all doubts one can have about compatibility of the contribution with EU law and French tax treaties? One year after its introduction, the authors still find reason to shed a critical light on the contribution.