How does the France-UK tax treaty apply to the treatment of dividends?

Do you live in France and receive dividends from a British company? Do you live in the UK and hold French shares? Cross-border distributions can involve the tax rules of both countries.

Which principles of the France-UK tax treaty govern the treatment of dividends?

Determining tax residency and the source of dividends

The first step is to identify the beneficiary's tax residency. Nationality and the country where the bank account is held are not enough to determine this. A British citizen living in France can therefore be a French tax resident.

When an individual is considered a resident of both countries according to their internal rules, Article 4 of the treaty provides for successive criteria: permanent home, center of vital interests, habitual abode, and then nationality. If no solution is found, the competent authorities intervene.

Next, you must identify the residence of the distributing company and classify the income. A dividend is a return on capital investment; it is not the same as a salary, director's remuneration, or a capital gain from a sale.

Understanding the allocation of taxing rights under Article 11

The state where the beneficiary resides may tax the dividends. The state from which they originate may also tax them, but Withholding tax is generally capped at 15% of the gross amount when the recipient is the beneficial owner.

This status requires examining who actually benefits from the income : an intermediary responsible for passing it on cannot automatically be considered the beneficial owner.

The 15% rate is a treaty maximum, not a mandatory rate. If national law provides for a lower withholding tax or no withholding tax at all, the treaty does not impose additional taxation.

How does the France-UK tax treaty apply to French dividends received in the United Kingdom?

Applying withholding tax to dividends paid to an individual

French-source dividends paid to a non-resident individual are, in principle, subject to a French withholding tax of 12.8%, the rate in effect as of January 1, 2026. This is lower than the 15% treaty cap.

Thus, for €10,000 in gross dividends paid to an individual who is a UK tax resident, the French withholding tax is normally €1,280. The amount received after this withholding is €8,720, before any potential UK taxation.

This levy must be distinguished from the tax regime applicable to an individual who is a resident of France. The standard French rate applicable to residents should not be applied to this distribution.

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Calculate the UK tax and credit the French tax

The beneficiary must then review their obligations in the United Kingdom. Under the standard regime, foreign dividends are included in the calculation of UK tax according to the rules applicable to their situation.

Article 24 of the 2008 France-UK Double Taxation Convention provides for a credit for French tax withheld in accordance with the convention, within the UK limits applicable to the same income. This mechanism does not guarantee a full refund of the French withholding tax if the UK tax is lower.

As of April 6, 2025, the Foreign Income and Gains (FIG) regimehas replaced the remittance basis. Upon request, certain new residents may benefit from a UK exemption on eligible foreign income, including dividends from non-UK companies. This provision applies to the first few years of residence, subject to conditions, notably prior non-residence. It does not automatically eliminate the French withholding tax.

How does the France-UK tax treaty apply to UK dividends received in France?

Distinguishing between the absence of UK withholding tax and an exemption in France

For ordinary dividends paid by a UK company to a foreign shareholder, the United Kingdom generally does not apply any withholding tax.

This lack of withholding tax is a result of UK law. It does not mean that the dividend is exempt in the country where the recipient resides. A French tax resident must therefore examine French taxation, even if the full amount of the dividend is paid to them.

Distributions from certain real estate vehicles, such as REITs, require a separate analysis.

Applying French tax rules and verifying potential tax credits

For an individual residing in France, ordinary dividends received in 2026 are, in principle, subject to the flat-rate tax of 31.4%, consisting of:

• 12.8% for income tax ;
• 18.6% for social security contributions.

A global option for the progressive tax scale is available. Eligible dividends then benefit from a 40% deduction for income tax calculation purposes, without a corresponding reduction in the base for social security contributions. This option should be evaluated based on all relevant income and gains.

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This table covers ordinary distributions held directly, excluding specific wrappers and tax regimes.

How does the France-UK tax treaty apply to dividends paid between companies?

Verify the conditions for withholding tax exemption

Article 11 of Decree No. 2010-20 of January 7, 2010 provides for an exemption in the source state when the beneficial owner meets the following conditions:

• Be a company resident in the other state contracting party ;
• Be subject to corporate income tax ;
• Hold, directly or indirectly, at least 10% of the distributing company's capital.

A French subsidiary distributing dividends to a British parent company holding 20% of its capital can therefore benefit from the exemption from French withholding tax, provided the other conditions are met.

Holding at least 10% is not enough on its own to obtain the exemption. Residency, tax liability, beneficial ownership status, and anti-abuse rules must also be verified.

Distinguishing withholding tax exemption from the beneficiary company's tax regime

The treaty-based exemption concerns the tax on dividends in the country of origin. It does not eliminate the tax on the distributing company's profits, nor does it replace the tax analysis required for the beneficiary company.

A French company receiving British dividends must, in particular, verify the conditions for a potential parent-subsidiary regime. National exemption rules, taxable portions, and tax credits are governed by distinct mechanisms.

Brexit has not eliminated the bilateral tax treaty. However, it requires distinguishing treaty benefits from European provisions and national regimes, which may have different territorial conditions.

When does the France-UK tax treaty change the taxation of dividends?

Examine distributions from real estate vehicles separately

Article 11 of the treaty provides an exception for certain vehicles that primarily distribute real estate income exempt at their level.

When the beneficial owner directly or indirectly holds at least 10% of their capital, standard withholding tax protections may be set aside in favor of the national law of the source state.

It is therefore necessary to identify the exact nature of the distribution from a REIT or a comparable real estate vehicle before applying the rules for ordinary dividends.

Identifying permanent establishments and abusive arrangements

If the shareholding generating the dividends is effectively connected to a permanent establishment in the state of the distributing company, the rules regarding business profits may supersede those of Article 11 of the treaty.

Treaty benefits may also be denied in the presence of an arrangement where one of the principal purposes is to obtain them, subject to the exception provided where granting them remains in accordance with the object and purpose of the relevant provisions.

An interposed structure must therefore be examined based on its actual operation, its commitments, and the motives behind the transaction.

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What steps are required to benefit from treaty treatment for dividends?

Providing proof of tax residence before distribution

For French dividends, Form 5000 is used to certify the beneficiary's tax residence. Under the simplified procedure, receipt of the form by the paying institution before payment is made allows for the application of the treaty benefit, subject to certain conditions.

It is advisable to plan ahead with your bank or the distributing company, particularly when an exemption is being requested by a UK company.

Requesting a refund and declaring dividends

When excessive withholding tax has been applied, a refund request may be necessary. For French dividends, this is typically based on form 5000 accompanied by form 5001.

Supporting documents to keep include:

• The certificate of tax residence ;
• The gross amount and date of the dividend;
• The proof of the withholding tax applied;
• For a company, documentation justifying its shareholding and tax status.

Requesting a refund for excessive withholding tax and claiming a tax credit in your country of residence are two separate processes. The tax return must correctly identify the income and the eligible foreign tax.

Are you receiving dividends between France and the UK or preparing a cross-border distribution? Azmy Avocat can assist you in analyzing the applicable tax regime, verifying treaty benefits and the steps required to avoid excessive taxation.