On March 12, 2014, the Conseil d'Etat ruled in the Société Céline case on the deductibility for corporation tax purposes of foreign tax credits borne by French loss-making companies (i.e., that do not have any taxable base to offset the foreign tax credits).

In essence, the Conseil d'Etat decided that although foreign tax credits are in principle deductible for tax purposes under French domestic law, such deductibility has to be denied in the presence of a double tax treaty that expressly forbids deduction of foreign tax credits.

This decision thus requires loss-making companies to carefully analyze the "Relief from Double Taxation" articles of the double tax treaties that apply to the withholdable payments they receive from foreign source, so that they can determine whether the relevant provision expressly forbids the deduction of the corresponding foreign tax credits (they would not be able to use otherwise as a result of their loss-making position). The situation of the loss-making companies concerned is thus worsened as a result of the application of a double tax treaty.