Unlike the aforementioned QPC rulings, the Conseil
Constitutionnel did not find the provisions of the FTC
relating to the taxation of dividends received by individual
shareholders fully compliant with the French Constitution.
Under these rules, in force until 2012, French resident
taxpayers who had elected to submit part of their dividends to the
21 percent final withholding tax provided for under Article 117
quater of the FTC (so-called prélèvement
forfaitaire libératoire) could no longer benefit, in
respect of other dividends received by them, from (i) the fixed
annual allowance and (ii) the 40 percent tax basis relief.
The Conseil Constitutionnel noted that the prohibition
of the combination of these regimes was intended to avoid any kind
of tax arbitrage from taxpayers who would only elect for the 21
percent withholding tax for the amount of dividends received not
covered by the fixed annual allowance. As such, this prohibition
was found compliant with the French Constitution since justified by
the objective of combating tax optimization schemes.
However, the Conseil Constitutionnel issued a reserve
of interpretation regarding dividends received during 2012, year
during which taxpayers could no longer benefit from the fixed
annual allowance. Since taxpayers could no longer proceed to any
kind of tax optimization involving the combination of these regimes
during 2012, the Conseil Constitutionnel ruled that the 40
percent tax basis relief should also benefit to French taxpayers
who had elected to submit part of their dividends to the 21 percent
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Cyprus Tax Department recently issued Forms T.D 38, T.D 38Qa and T.D 38Qb applicable to individuals being Cyprus tax residents but non-Cyprus domiciled.
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