In four decisions rendered on June 27, the French supreme tax court has raised some questions to both the Constitutional Court and the CJEU about the compatibility of the 3% surtax on dividends.

It is reminded that this surtax applies in particular on dividends paid by French companies to their foreign parent and that only few exemptions are available. This is thus often leading these French companies to postpone their dividend distribution.

The decisions held by the Conseil d’Etat could lead to know fairly quickly whether this surtax (i) is compatible with articles 4 and 5 of the parent-subsidiary directive (questions raised with the CJEU) and (ii) is compatible with the constitutional principle of equality of the taxpayers where the French company is more than 95% held by a foreign parent (questions raised with the Constitutional court).

We may regret that the compatibility of the surtax with the freedom of establishment was not referred to the CJEU since such compatibility is in our view highly questionable where the EU parent holds (directly or indirectly) more than 95% of the subsidiary. Nevertheless, other procedures are ongoing with the EU Commission and with the CJEU (regarding the Belgian fairness tax which is fairly similar to the 3% surtax) where this compatibility is addressed.

We remind that in order to challenge the 3% surtax on dividends, it is mandatory to file an administrative claim with the French tax authorities before December 31st of the second year following the year where the surtax was paid.

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CJEU Air France-KLM & HOP!-Brit Air SAS cases : VAT treatment of “no-show” in the airline company sector