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Brussels, 19 May 2011

Taxation: Commission refers France to Court over tax discrimination against foreign pension and investment funds

The European Commission has decided to refer France to the EU's Court of Justice for discriminatory taxation of foreign pension and investment funds in breach of EU rules on free movement of capital. In particular, France does not grant a withholding tax exemption on dividends distributed by French companies to pension and investment funds established in the EU and in the European Economic Area (EEA) whereas it grants such an exemption if the pension and investment funds are established in France.

The French legislation (Articles 119bis and 187 of the French Tax Code) provides that dividends paid to foreign persons (including pension and investment funds) are subject to a withholding tax of 25% (or 15% in case of bilateral treaties). By contrast, dividends distributed to domestic pension and investments funds are exempt from a withholding tax.

The Commission considers that this difference in treatment limits the free movement of capital guaranteed by Article 63 of the Treaty on the Functioning of the EU (TFEU) and Article 40 of the EEA Agreement.

As a result of this discrimination, pension and investment funds based in other EU countries and in the EEA are placed at a disadvantage compared to their French-based counterparts and French customers are therefore liable to enjoy less choice of pension and investment funds.

In 2010 France introduced new legislative provisions under which the income from shares distributed to non-profit organisations (including pension funds) established in France or not, are taxed at a flat rate of 15%. However, it seems that these changes have not been applied in practice in the absence of more detailed administrative implementing rules.

The Commission sent a reasoned opinion to France on 18 March 2010 (IP/10/300) requesting France to end such discriminatory tax treatment.

For the press releases issued on infringement proceedings in the area of taxation or customs see :

For more information on EU infringement procedures, see MEMO/11/312

For the most up-to-date general information on the infringement proceedings initiated against Member States, see:

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