This article was first published on Tax@Hand, and is reproduced on this blog with the authorization of its authors.
On 17 July 2024, the French tax authorities (FTA) published guidelines on the consequences of the denunciation by Burkina Faso of the tax treaty with France.
As a reminder, Burkina Faso formally denounced the treaty on 7 August 2023, with effect as from 8 November 2023. The FTA guidelines clarify when the treaty provisions ceased to apply for French tax purposes.
In principle, pursuant to article 44 of the treaty, it will be terminated with effect as from 1 January 2025. However, the FTA guidelines state that France has opted to suspend the application of the treaty as from 8 November 2023 (pursuant to the reciprocity principle).
The guidelines indicate that the treaty will cease to apply to income earned as from 8 November 2023 but will remain applicable to income earned through 7 November, even if it is paid after this date.
The FTA guidance also states that, as a tolerance, business profits will qualify for treaty benefits if they relate to fiscal years beginning before 8 November 2023. The treaty provisions also will apply to income from employment, income from non-dependent activities, and pensions earned throughout 2023.
French domestic rules will then be applicable without restriction.
As a result, dividends, interest, and royalties earned on or after 8 November 2023 no longer will benefit from reduced withholding tax rates or exemptions granted by the treaty and instead will be subject to full taxation in France according to French law.
Taxes paid in Burkina Faso no longer will give rise to a tax credit in France. However, they may be deductible in France.
