Whether benefits are achieved through a branch or a subsidiary, they are liable to corporation tax as long as the foreign entity is a corporation (or the French subsidiary has this form).

The withholding tax (25% in principle) that affects the distributions to non-residents applies to dividends paid to foreign parent company through its subsidiary and branch profits, which are deemed distribution to non- residents, unless proven otherwise.

International agreements frequently provide for the reduction or abolition of such tax and the law itself precludes the application:

– Firstly, on dividends paid to a parent company in another Member State of the European Community when it owns 10% stake in French subsidiary dividends;

– Secondly, the profits made in France by companies having their headquarters in a Member State of the European Community.

 For its part, in line with the jurisprudence of the ECJ, the tax exempts from withholding tax under certain conditions, the French-source dividends paid to a European parent company cannot charge it in his State.

The French tax system treats roughly equally branches and subsidiaries of foreign companies regarding the taxation of their profits.

This is particularly true of companies based in countries linked to France by a tax treaty providing for equal treatment with French companies in France branches of foreign companies.

Indeed, the following rules apply in this case to the branch in France which assets are made up of shares of French companies:

1.   If the shares representing a stake of at least 5%, the dividends received by the branch are exempt (subject to taxation of a share of fees and charges), the branch is then treated the same way that a parent company with headquarters in France;

2.   If the shares held by the branch does not represent an interest sufficient to entitle him to “parent-subsidiary” exemption, dividends from French companies bear the corporate tax on their full amount.