Taxation of dividends between French and British companies
In the context of mergers,acquisitions , and more broadly,corporate transactions between France and the United Kingdom, France-UK dividend taxation is a key strategic issue for businesses operating across multiple markets.
In practice, dividend distributions often occur following an acquisition, a merger , or a group reorganization. They are therefore an integral part of corporate finance, closely monitored by investors and analysts.
This guide provides a clear and accessible overview of the rules governing dividends between French and British companies, as well as the main trends in taxation since Brexit.
Taxation of France-UK dividends and cross-border transactions
When a company pays dividends to a firm located in another state, particularly in the context ofmerger and acquisition mergers & acquisitions, two questions immediately arise.
First, it must be determined whether the source state applies a withholding tax.
It is also necessary to identify the tax regime in the beneficiary's state of residence.
This is precisely the role of the France–UK tax treaty, which aims to avoid double taxation while securing financial flows.
Official reference:
- France–UK tax treaty – BOFiP
- https://www.impots.gouv.fr
French-source dividends paid to a UK company
France-UK dividend taxation: withholding tax
Under French law, the rule is clear.
France generally applies a 25% withholding tax on dividends paid to a UK company.
This situation affects many investment offerings, particularly following acquisitions cross-border.
Reducing withholding tax on corporate transactions
However, the tax treaty helps to mitigate this tax burden.
As a result, the withholding tax is reduced:
- to 0% when the UK company holds at least 10% of theFrench company's capital for two years,
- to 15% in other cases provided for by the treaty.
These mechanisms are frequently used in mergers and acquisitions, particularly when structuring holding companies.
UK-sourced dividends paid to a French company
No withholding tax in the UK
Since 2016, the United Kingdom no longer levies withholding tax on dividends.
Consequently, dividends paid to a French company are received gross, including after a merger or an acquisition.
Official source:
- HM Revenue & Customs (HMRC)
- https://www.gov.uk/government/organisations/hm-revenue-customs
Taxation in France and corporate tax
However, France subsequently taxes these dividends according to its own internal rules.
However, companies may, under certain conditions, benefit from the parent-subsidiary regime, which is often used in corporate transactions.
This regime is part of a group finance strategy and aims to limit economic double taxation.
France–UK tax treaty and transaction security
The taxation of France-UK dividends relies heavily on the bilateral tax treaty.
This treaty governs financial flows and secures cross-border transactions.
However, to benefit from these advantages, companies must provide:
- a certificate of tax residence,
- compliant forms,
- evidence of the economic reality of the transactions.
Failure to do so may result in the tax authorities denying the favorable tax treatment.
Holdings, M&A, and tax compliance
France-UK dividend taxation and holding companies
In the context of mergers, creating a holding company often allows for:
- optimized dividend repatriation,
- greater financial clarity for analysts,
- a structure tailored to markets international.
However, the holding company must carry out genuine business activities.
Anti-abuse clauses and emerging trends
Since Brexit, tax authorities have been stepping up their audits.
They are specifically examining:
- economic substance,
- the actual role in corporate operations,
- the impact onemployment and local activity.
These audits reflect a major trend in international taxation.
Taxation of dividends between France and the UK post-Brexit
Brexit has brought an end to the application of certain European directives.
From now on, only the France-UK tax treaty applies.
This change directly impacts:
- the buyout offers,
- the acquisitions,
- and corporate finance strategies in European and British markets.
Conclusion
The taxation of dividends between France and the UK is now at the heart of mergers, acquisitions, and corporate restructuring operations.
In an environment shaped by evolving markets and new tax trends, rigorous structuring remains essential to secure financial flows and mitigate risks.
FAQ
Are dividends between France and the UK still subject to withholding tax?
No. The withholding tax can be reduced or eliminated under the tax treaty, provided certain conditions are met.
Does the United Kingdom levy a withholding tax on dividends?
No, the United Kingdom no longer imposes a withholding tax on dividends.
Does the parent-subsidiary regime apply to UK subsidiaries?
Yes, provided that the conditions set out under French law are met.
Did Brexit eliminate existing tax benefits?
He ended the European directives, but the tax treaty remains in effect.
