European Court rules on French taxation of foreign dividends

20/09/11

Case C-310/09 Ministre du Budget, des Comptes publics et de la Fonction publique v Accor (15 September 2011)

On 15 September 2011, the European Court ruled on the lawfulness of French tax provisions allowing a tax credit in relation to dividends a parent company received from its French subsidiaries, but not in relation to dividends received from subsidiaries in other Member States. The Court also considered the scope of an unjust enrichment defence to reimbursement, and the evidential requirements that could be imposed on a claimant taxpayer.

The Court considered that the different treatment of domestic and foreign dividends restricted the freedom of establishment and free movement of capital, that was not justified by any overriding reasons in the public interest.

The Court then considered whether, in respect of claims for reimbursement, the French government could rely on arguments of unjust enrichment, in circumstances where it was said that the tax burden had been passed on from the taxpayer to its shareholders. While confirming that the principle of unjust enrichment could (in a suitable case) provide a basis to refuse reimbursement, the Court decided that on the facts of this case the tax burden had not passed from the parent company, so reimbursement was required to give effect to EU law. Nevertheless, it considered that it was consistent with the EU principles of equivalence and effectiveness for the French authorities to require, as a condition of reimbursement, evidence of the tax actually paid by the relevant foreign subsidiaries in their Member State of establishment.

The judgment is here.