French General Tax Code
In force1. The withholding tax provided for in 1 of article 119 bis as well as the levy provided for in III of Article 125 A is not applicable to interest understood, for the application of this article, as income from debts of any kind, excluding penalties for late payment, paid by a société anonyme, a société par actions simplifiée, a société en commandite par actions, a société à responsabilité limitée, a public establishment of an industrial or commercial nature or a public undertaking which is liable to corporation tax without being exempt from it, or a permanent establishment meeting the same conditions for taxation and dependent on a legal entity which meets the conditions listed in a to c of 2, to a legal entity which is its associate or to a permanent establishment dependent on a legal entity which is its associate.
For the purposes of this article, the status of associated legal entity of another legal entity is recognised for any legal entity where it has a direct holding of at least 25% in the capital of the other legal entity or where the other legal entity has a direct holding of at least 25% in its capital or where a third legal entity has a direct holding of at least 25% in its capital and in the capital of the other legal entity, provided in all cases that this holding has been held continuously for at least two years or is subject to an undertaking that it will be held continuously for at least two years. If this undertaking is given by a legal entity which does not have its effective place of management in France, it gives rise to the appointment of a representative who is responsible for payment of the withholding tax referred to in the first paragraph in the event of failure to comply with this undertaking.
In the event that the interest is paid by a permanent establishment, the beneficiary legal entity or the legal entity on which the beneficiary permanent establishment depends is considered to be an associate of the paying establishment if it is an associate of the legal entity on which it depends.
2. In order to benefit from the exemption provided for in the first paragraph of 1, the beneficiary legal entity must justify to the debtor or the person who ensures the payment of this income that it is the beneficial owner and that it meets the following conditions:
a. Have its place of effective management in a Member State of the European Community;
b. Take one of the forms set out in a list drawn up by order of the Minister responsible for the economy in accordance with the annex to Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States;
c. Be liable, including in respect of such income, in the Member State in which it has its effective centre of management, to that State's corporation tax without being exempt therefrom;
d. Where recognition of its status as an associated company of the debtor of such income depends thereon, to hold the shareholding referred to in the second paragraph of 1.
If the recipient of the income is a permanent establishment, it must prove to the debtor or the person who ensures payment of the income that it is the beneficial owner of such income, that such income is subject in the Member State in which it is situated to corporation tax or an equivalent tax of that State and that the legal person to which it belongs fulfils the conditions set out in a to d.
3. The provisions of 1 shall not apply where the income paid benefits a legal person or a permanent establishment of a legal person controlled directly or indirectly by one or more residents of States which are not members of the European Community and if the chain of holdings has as its principal object or as one of its principal objects to take advantage of the provisions of 1.
Where, as a result of the special relationship existing between the payer and the beneficial owner of the interest or of the relationship which both of them have with a third party, the amount of the interest exceeds the amount which would have been agreed between the payer and the beneficial owner in the absence of such relationship, the provisions of 1 shall apply only to the latter amount.
4. Where necessary, a decree shall specify the procedures for applying these provisions.
