This article was first published on Tax@Hand, and is reproduced on this blog with the authorization of its authors.
The French tax authorities (FTA) recently published a ruling (BOI-RES-RPPM-000203) to clarify the rules established by article 96 of the 2025 finance law, which provide for the application of the domestic withholding tax to dividend distributions made to certain nonresidents.
As a reminder, as from 1 January 2026, when French-source dividends and similar income paid to a beneficiary who is established or resident in a state or territory that has signed with France a tax treaty according to which such income is not subject to withholding tax (or is exempt from it), the paying entity must apply the 25% domestic withholding tax.
The beneficiary will then be able to claim the benefit of the treaty (and obtain a refund of the withholding tax), provided they can prove that they meet all the treaty’s conditions.
The FTA promptly clarified these provisions through a ruling (published on 17 April 2025), which notably indicates that the rules should be understood as applicable to French-source dividends (or similar income) subject to the following two conditions:
- The dividends are paid to a beneficiary resident in a country that has signed with France a tax treaty according to which they are either not subject to withholding tax or totally exempt from it; and
- The beneficiary does not benefit from a withholding tax exemption under French law, either because of their status or due to the amount of their participation in the distributing entity.
In practical terms, the FTA indicates that the new provisions will apply only to the tax treaties signed by France with Bahrain, Egypt, Finland, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
Furthermore, the provisions will not apply where a 0% rate applies to French-source dividends under the participation exemption regime (provided by a tax treaty or EU directive 2011/96 (parent-subsidiary directive)).