The surtax on dividend distributions and deemed dividend payments has been in effect since September 2012 and applies to companies that are subject to French corporate income tax.
On 6 October, the French Constitutional Court ruled that the tax cannot be justified in its entirety and found it illegal.
Show me the money
Following the decision any claims filed by a French company before 6 October 2017 for tax paid in the past should be automatically refunded.
Additionally, any company that paid the 3% contribution after 1 January 2015 can ask for a rebate until 13 December 2017. However, due to unclear wording in the decision, it is not certain whether such a claim would be successful.
International law firm Sullivan and Cromwell said the amount of the refunds to be received by taxpayers in application of the decision is estimated at €8bn.
Discriminatory tax
Since its introduction the surtax has been challenged several times on the basis that is contravenes EU law. In May 2017, the European Court of Justice found that the surtax was infringing the Parent Subsidiary Directive.
Following the ruling, the French Supreme Court directed the Constitutional Court to determine under what circumstances redistributions of dividends, received from either a French or non-EU subsidiary, would fall within the scope of the surtax.
The court found that treating distributed income differently depending on its source was discriminatory. For this reason, it said the surtax failed on the constitutional principle of equality before the law and of equal discharge of public burdens.
