Brussels, 12/06/2015 (Agence Europe) - French regulations impose a 5% tax rate on dividends received by parent companies on the shares they hold in subsidiaries established in other member states. Yet dividends are not taxed when the subsidiaries are established in France. This represents an unjustified restriction on the freedom of establishment.
That is the opinion delivered by Advocate General Juliane Kokott on Thursday 11 June in case C-386/14 to the Court of Justice of the EU. The Advocate General thus finds in favour of the French group Steria, which argued that the refusal by French authorities to grant it a deduction from total gross profits of the share of expenses and charges on dividends from its subsidiaries established in other member states restricted its freedom of establishment, a freedom enshrined in EU law.
The Advocate General takes the view that French rules effectively restrict freedom of establishment by limiting the deductibility of the portion of costs and expenses to 95% purely on the grounds that the subsidiaries were established in other member states. She states, too, that this restriction cannot be justified by the principle of the sharing of powers of taxation among member states: costs are here borne only by the parent company and the tax sovereignty of other member states is not, therefore, involved.
Similarly, the French state cannot argue the need to maintain the consistency of its tax regimes since the possibility of deducting the share of costs and expenses, as a tax break, is not directly related to a set levy but is the consequence of a failure to take account of the distribution of profits within the “tax group” (parent company and subsidiaries must be established in France), which does not constitute a tax levy but an advantage per se. (Francesco Gariazzo)