French withholding tax confusion to be resolved this year
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French withholding tax confusion to be resolved this year 16 October 2019RMA 2019 Reporter: Drew Nicol
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The French tax and regulatory authority is expected to publish new guidance by the end of the year to dispel market uncertainty around the country’s withholding tax on manufactured payments.
The withholding tax on manufactured payments that came into force in July is causing a headache for non-french market participants with french counterparties due to the lack of official guidance around what entities are in scope, according to an RMA panellist and tax expert.
The speaker explained that payments made by non-French branches of French parents are believed to be in scope but the French authorities are yet to release any new guidance to clarify the issue.
According to the panellist, the French tax authority is expected to publish its advice for the market by the end of the year.
The tax on manufactured payments references French dividends is paid by French borrowers to a non-French lender at a rate of 30 percent if the loan does not meet a minimum holding period of 45 days.
The French borrower is responsible for applicable withholding and reporting.
The tax is targeted at preventing abusive short-dated transactions around dividend record date that are aimed at avoiding French withholding tax.
In was noted by the panellist that the tax can be recovered if the lender can prove to the French tax authority that the principal purpose of the trade was not tax avoidance.
Until then, the speaker stated, non-French lenders looking to avoid being caught up in the issue were told to either not transact with French counterparties or only lend for more than 45 days.
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