(Article 36 of the 2015 Amending Finance Act)

Starting from the fiscal year ending on or after 31 December 2015, parent companies holding 2.5 % of the share capital and 5 % of the voting rights will be able to benefit from the participation exemption regime provided that: 

  • they are controlled by one or more NPOs identified in Article 206, 1 bis of the French tax code;  
  • they hold their shares for at least 5 years (instead of 2 years in the general regime). Obligation to hold the shares should, in principle, be applied in the same manner as the general regime : dividends would benefit from the participation exemption regime from the first holding year but definitive exemption will be acquired after a 5 year holding period ; no holding formal commitment is needed, holding period would be appreciated a posteriori.

The French Tax Authorities should specify if NPOs (associations established under the 1901 French Act, foundations of public benefit, endowment funds…) may remain outside of the corporate income tax scope.

The notion of control is not defined but it appears logical that the French Tax Authorities would refer to Article L. 233-3 of the French commercial code.

It should be noted that Article 36 does not modify the regime applicable to dividends paid by the parent company to NPOs which controls it. Tax treatment of such dividends would depend on the nature and structure of NPOs and on the non-profit or profitmaking character of its activities.