France: Exemption from dividend withholding tax for foreign CIVs - Amended guidelines published - Update
Note: This announcement, originally published on 2 January 2017, has been updated to include further details regarding the validity of documentation. Changes have been highlighted.
On 7 December 2016, the French Tax Authorities (FTA) published amended eligibility criteria and guidelines on the withholding tax exemption of French sourced dividends paid to certain foreign Collective Investment Vehicles (CIVs). This is further to several announcements published since 2012, the most recent one being A15001, dated 6 January 2015.
Clearstream Banking1 wishes to inform customers that these new amended eligibility criteria and guidelines are in force effective
immediately
for customers wishing to benefit from the withholding tax exemption applicable to dividends paid to foreign CIVs, as outlined below.
Background
The amendment to the budget law for 2012 published on 17 August 2012 through Law N°2012-958, introduced the possibility for certain foreign CIVs to obtain full exemption on certain French-sourced dividend payments, as long as the foreign CIV was similar to French CIVs.
The guidelines of the FTA for the application of the Law had been released in August 2013 and our procedure published in announcement A13131 on 28 August 2013 and last updated on 6 January 2015.
On 7 December 2016, the FTA updated their guidelines, including among other changes the eligibility criteria of non-European Union (EU) CIVs and the extension of validity of the RPPM (Revenus et profits du patrimoine mobilier) forms provided by AIFs (Alternative Investment Funds), as described hereafter.
Impact on customers
I - Scope and eligibility
The withholding tax exemption applies to dividends paid to foreign CIVs (EU and non-EU) fulfilling all of the following conditions, as amended by the new guidelines:
- The CIV is constituted under a foreign law and is located in a EU Member State or in a State or territory that has concluded a convention on administrative assistance with France for the purpose of combating tax fraud and tax evasion under the conditions and limits provided by the guidelines.
With respect to non-EU CIV, the provisions of the convention on administrative assistance and their implementation must effectively allow the FTA to obtain from the authorities of the State or territory concerned the information proving that the non-EU CIV fulfils conditions 2) and 3) below; - The CIV raises funds from a certain number of investors so as to invest them in accordance with a determined investment policy, in the interest of those investors;
- The CIV presents characteristics similar to the ones of French CIVs referred to in paragraph 2 of article 119 bis of the French General Tax Code
Assessment of comparability by the FTA
In order to benefit from the dividend withholding tax exemption, foreign CIVs must be able to justify that they are constituted, supervised and controlled as well as develop their activities under equivalent conditions to those provided by the French legislation and, by extension, by the legislation resulting from the European regulation.
The simple provision of corresponding documents such as the authorisation delivered to the funds by its regulatory authority are not sufficient and the respect of the comparability conditions must be auditable by the FTA with the authorities of the State where the CIV is established via appropriated means.
In that respect, administrative assistance mechanisms within the EU will be used by the FTA to ensure that CIVs established in an EU member State have activity, functioning and supervision rules comparable to those provided under the French regulation.
The FTA considers that:
Concerning CIVs established in the EU/EEA:
- The UCITS IV Directive constitutes an appropriated means to assess the similarity of European UCITS with French UCITS; the amended guidelines mention that UCITS established in an EEA country (that is, Iceland, Liechtenstein and Norway) are considered as UCITS established in the EU since these three States have transposed the UCITS IV Directive into their domestic legislation.
- The AIFM Directive constitutes an appropriated mean to assess the similarity of AIFs established in the EU.
Concerning CIVs established outside the EU (other than UCITS IV compliant CIVs established in the EEA), the dividend withholding tax exemption is subject to the two following cumulative conditions:
- The CIV proves its comparability with eligible CIVs established in an EU member State, notably with respect to the characteristics mentioned in the table provided in Annex 1;
- The provisions of the administrative assistance convention signed between France and the State or territory where the CIV is established as well as their implementation effectively allow the FTA to obtain from the authorities of the State/territory the information necessary to verify that the CIV fulfils the conditions 2) and 3) above.
Thus, based on the above, the foreign CIVs qualifying for tax exemption are:
- UCITs governed by Directive 2009/65/EC of 13 July 2009 (the “UCITS IV” Directive), established in an EU/EEA member state.
- AIFs governed by governed by Directive 2011/61/EU of 8 June 2011 (the “AIFM” Directive) and established in an EU member state or in a state or territory that has concluded an administrative assistance convention with France in order to fight against fraud and tax evasion, and that are similar to French AIFs.
Please refer to Annex 1 for further details on the type of CIVs and their characteristics required to substantiate similarity to French CIVs.
II - Operational procedure
With the new guidelines, some changes occurred in the documentation and its validity, as described hereafter.
Customers are also reminded of the operational procedure to follow in order to obtain exemption of withholding tax for foreign CIVs.
Tax exemption at source for European CIVs
Documentation requirements
In order to obtain relief at source from dividend withholding tax, European CIVs have to provide the following documentation by the prescribed deadlines:
- A RPPM form at the latest on the 7th business day prior to the payment date;
- A corporate action instruction, at the latest one business day before payment date, either via CreationOnline or by a formatted SWIFT MT565 message, by 10:00 CET;
- A per-payment detailed list of beneficial owners, at the latest, one business day before record date by 10:00 CET.
Tax exemption at source for non-European CIVs
Provided that
- The non-European CIVs have already filed a request for tax refund directly to the Direction des Résidents à l’étranger et des Services Généraux (DRESG)
- The DRESG has answered positively to the request of refund
- The characteristics of the non-European CIV have not changed
Relief at source can be granted on distributions occurring between the date the FTA decision has been issue and 31 December of the second year following that decision.
Documentation requirements
- A RPPM (Revenus et profits du patrimoine mobilier) form, at the latest on the 7th business day prior to the payment date;
- A copy of the repayment decision issued by the FTA, at the latest on the 7th business day prior to the payment date;
- A corporate action instruction, at the latest one business day before payment date, either via CreationOnline or by a formatted SWIFT MT565 message, by 10:00 CET;
- A per-payment detailed list of beneficial owners, at the latest, one business day before record date by 10:00 CET.
New RPPM forms and validity
The form is a sworn attestation signed by the fund and has to be provided at the level of each sub-fund.
The French version of the form has been amended by the FTA and an official English version has also been published by the FTA. Both can be found through the following links:
Validity of the form
The amended guidelines aligned the validity of the form provided by AIFs to the one of the UCITs IV, that is until revoked. The FTA has further clarified that Eligible European CIVs (UCITs and AIFs) having provided a valid form in 2016 are not required to renew their forms for 2017, unless there is a change in the characteristics of the CIV.
Cut off date
RPPM forms in the old format must be received by Clearstream Prague by Monday 23 January 2017 by 18:00 CET at the latest, at the following address:
Clearstream Operations Prague s.r.o.
Attn: PTR - Tax Services
Futurama Business Park Building B
Sokolovska 662/136b
CZ-18600 Prague 8
Czech Republic
Beyond this deadline, only forms in the new format will be accepted and any old forms received will be automatically rejected.
Validity of the forms provided by EU/EEA CIVs
RPPM forms provided in the old format by AIFs between 1 January 2016 and 23 January 2017 are considered valid until revoked.
As of 24 January 2017, new certification for UCITs and AIFs will have to be provided in the new format. These RPPM forms will be considered valid until revoked for both UCITs and AIFs.
Validity of the forms provided by non-EU/EEA CIVs
Only RPPM forms in the new format will be accepted and will be valid until 31 December of the second year following the decision taken by the FTA to grant the refund. The copy of the decision letter of the FTA has to be provided together with the RPPM form and will have the same validity.
Documents sent separately will be rejected.
Standard refund
No standard refund is available through Clearstream Banking or its local depository to foreign CIVs (European and non-European).
Eligible foreign CIVs may request a refund of tax through the contentious claim procedure directly with the FTA at the following address:
Direction des Résidents à l’étranger et des Services Généraux (DRESG)
Pôle RCM
10, rue du Centre
TSA 30012
93465 NOISY-LE-GRAND
FRANCE
Further information
Customers may contact the Clearstream Banking Tax Help Desk, Clearstream Banking Client Services or their Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking Frankfurt (CBF) customers using CreationOnline), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.