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This page is intended to keep our nonresident contacts informed of pertinent legislative developments or new legal precedents concerning international affairs which may impact their operations and require preemptive action.

Published on Wednesday 12/10/2016

In a ruling of 19 May 2016 (no. 14VE01214), the Administrative Court of Appeal of Versailles judged that a trust incorporated under British law could be likened to a French public-interest foundation, thereby exempting it from withholding tax on distributed dividends of French origin in respect of income declared for tax years 2010 and 2011.

A British charity trust was in a dispute with the tax authorities in connection with the trust's characterization in French law. The tax authorities disputed the trust's totally altruistic activity, more particularly with respect to the number of paid directors and the amount of their compensation package.

It was therefore a matter of deciding whether for tax purposes the trust in question should be likened to:

- a non-profit-making organization liable for 15% French corporation tax on dividends received, pursuant to article 119 bis, 2 of the general tax code and article 187, 2nd subsection of the 1st indent of the same code (in the version in force from 1st January 2010);

- or a French public-interest foundation exempted from corporation tax in pursuance of article 206, 5 of the general tax code.

In its ruling the administrative court of appeal firstly accepts the altruistic nature of the trust's management, comparing it to a French non-profit-making organization. It justifies its decision by applying prior legal precedents of the Council of State for the period pre-dating 1st January 2010 (Council of State rulings of 22 May 2015, nos. 369819 and 369820), which considered that the specific activity of the trust and the difficult duties of its directors warranted a higher threshold for receiving their remuneration, which in the end did not seem excessive. However, this characterization did not completely exempt the trust from taxation. Secondly, the appeal court then attempts to liken the trust to a French state-approved foundation. To that end, it again bases its arguments on the aforementioned legal precedents, noting its position with regard to the law of its state of residence (British law) to ascertain whether it met the conditions of domestic law for being characterized as a state-approved organization, namely: the irrevocability of allocation of properties, their vesting in the event of dissolution, accounting obligations and financial accountability and the power of the British supervisory authority (article 18 of the law of 23 July 1987).

After making a comparison in the particular case, in the light of these four criteria, the court of appeal confirms that in this instance the trust can be likened to a French state-approved foundation due to the similarities between the criteria of domestic law and those of British law.


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Tags : International tax law Trust

Published on Monday 25/04/2016

According to Article 4 A paragraph 2 of the General Tax Code (GTC), nonresidents are liable for income tax on their income from French sources, subject to a sliding scale and the household income splitting system.


Article 197 A of GTC specifies that for nonresidents, income tax cannot be less than 20% of the net taxable income from French sources (or less than 14.4% of the net taxable income from French sources in French overseas departments).

However, if the foreign taxpayer can show evidence that an average tax rate in France of less than 20% would be assessed on all of his income from French and foreign sources, it is this average rate that will be applied to calculate the tax on the income from French sources only.


To take advantage of this tax rate of less than 20%, nonresidents must provide justification after receipt of the tax notice; this involves a lengthy and complex process.


Article 120 of the amending finance law for 2016 n°2015-1785 makes two modifications to Article 197 A of GTC:


- on the one hand, nonresidents have the option to make a statement certifying the amount and the nature of their worldwide income, pending production of the corresponding supporting documents. This declaration permits immediate application of the tax rate of less than 20% for income from French sources;


- on the other hand, only nonresidents settled in a European Union member State or in a state having entered into a tax treaty with France benefit from this article.


This measure will take effect for the taxation of 2015 income to be reported in 2016.


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Tags : International tax law

Published on Friday 15/04/2016

Article 164 of the General Tax Code (GTC) stipulated that nonresidents who owned one or more homes in France were subject to income tax on a flat-rate basis of 3 times their real rental value, unless the income they received from French sources was below the amount of this basis, in which case the amount of this income served as a basis for the tax.


Furthermore, this tax could be excluded in the event of :

- the conclusion of a tax convention avoiding double taxation and containing administrative assistance between France and the State of the nonresident ;

-  taxation greater than or equal to two-thirds of the tax that French nationals would have to bear in France, if they had their fiscal residence in France ;

- expatriation of French nationals due to job-related reasons when they had their residence in France for at least 4 years preceding their transfer.


Article 21 of the amending finance law for 2015 n°2015-1786 repeals the provisions of Article 164 C. This reform is in response to the decision of the Court of Justice which had considered that this article violated the principle of free movement of capital in the European Union (case 181/12 date 17/10/2013). This decision has been applied by the French Council of State (CE 26/12/013 n°360488 and CE 11/04/2014 n°332885).

Henceforth, nonresidents are subject to taxation in France exclusively on the basis of their income from French sources according to Article 4 A, paragraph 2 of the GTC.


This repeal will be effective with the taxation of 2015 income.



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Tags : International tax law

Published on Wednesday 16/09/2015

Subject to the provisions of international tax conventions, are liable to the inheritance duty in France (Article 750 ter of the French tax code):


1.   All the movable or immovable property located in France or not, when the deceased had his tax domicile in France as defined by the provisions or Article 4 B of the French Tax Code.          

Under Article 4 B of the French Tax Code, people are deemed to be domiciled in France for tax purposes if: 
-    Their home is in France;        
-    Their main place of abode is in France;        
-    They carry on a professional activity in France, salaried or not, unless they can prove that it is a secondary activity;          
-    They have the center of their economic interests in France.


2.   Movable and immovable property located in France, when the deceased did not have his tax domicile in France as defined by the aforementioned Article and the heir has not had it for at least six years out of the ten years preceding the decease,


3.   Movable and immovable property located in France inherited from someone who did not have his tax domicile in France , by a heir who has his tax domicile in France as defined by the aforementioned Article and has had it for at least six years out of the ten years preceding the decease.


In other words, when neither the deceased nor the heirs have their domicile in France at the time of death, the inheritance of the movable and immovable property the deceased owned directly or indirectly in France is subject to tax in France.


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Tags : International tax law Succession/estate

Published on Wednesday 16/09/2015

When a taxpayer derives income or owns assets in another country than his country of residence, there is a risk of taxation of the estate in both countries involved. Indeed, even when a tax convention exists, each state keeps its right to tax according to its own taxation rules unless the tax convention opposes it.

International juridical double taxation can be avoided two ways: either some categories of goods are chargeable only in the state of location or the state of residence ("principle of exemption" ), or the tax paid in one state is deducted from the tax due in the other state ("principle of credit" ).

Principle of exemption

The principle of exemption may be applied by two main methods:

  1.    The income which may be taxed in State S (i.e. location of the goods) is not taken into account at all by State R (i.e. residence of the deceased or heirs) for the purposes of its tax (“full exemption”)

  2.    The income which may be taxed in State S is not taxed by State R, but State R retains the right to take that income into consideration when determining the tax to be imposed on the rest of the income (“exemption with progression”).

Principle of credit

The principle of credit may be applied by two main methods:

  1.    State R allows the deduction of the total amount of tax paid in the other State on income which may be taxed in that State (“full credit”)

  2.    The deduction given by State R for the tax paid in the other State is restricted to that part of its own tax which is appropriate to the income which may be taxed in the other State (“ordinary credit”).


Thus, in the case of a non resident deriving income from France or owning capital in France, the tax convention must be applied in the following way:

  1.    Are the goods/Is the income chargeable in France according to French international taxation rules

  2.    If so, does the tax convention exclude the imposition in France? (e.g. if the convention states "(...) shall be taxed in the country of residence", France keeps its right to tax ; if the convention states "(...) shall be taxed only in the country of residence", France's right to tax is exluded)

  3.    If France has the right to tax the income or the capital, how is double taxation avoided? If there is a tax credit in the country of residence, all the necessary information and documents have to be transferred to client's counsels in his country of residence.


As a general rule, an international situation is always a complex one and will need the collaboration of the client's counsel in his country of residence.


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Tags : International tax law

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The interdisciplinary expertise of the Selarl Bruno Bedaride, notaire in Paris covers the following areas: corporate law, international contracts law, legal and tax advice, advice for international transmission, real estate law, family office, real estate and company finance law. We offer more particularly our services to non residents or foreign company who wish to invest, move or create a business in France.