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Tax rebates for French tax residents owning shares in UK companies
A recent judgment from the European Court of Justice (ECJ) is good news for French resident taxpayers who own shares in UK companies. This will often be the case of UK expatriates who have kept their UK share portfolios after moving to France. They should be in line for an income tax refund from the French Inland Revenue.
The information in this article is a general guide only. It does not constitute advice. You should not act or refrain from acting in any particular matter without seeking professional advice on the particular facts and circumstances of your transaction.
The case of Petri Mikael Manninen was referred to the ECJ for a preliminary ruling by the Finnish Supreme Administrative Court. Mr Manninen owned 2,000 shares in a Swedish company Telia, following its merger with the Finnish company Sonera. The Finnish tax system allowed him tax credits on dividends received from Finnish companies but Mr Manninen had to pay Finnish income tax on the dividend from Telia at the full rate of 29% and was not allowed to deduct any Swedish tax credit against his Finnish tax liability. Mr Manninen claimed this was discriminatory and contrary to the principles of the European Union Treaty. The European Court decided in September in favour of Mr Manninen. This is a further example of the European Court steadily imposing a uniform tax policy.
A French resident can currently receive tax-free dividends from French companies of up to €1,220 for a single person and €2,440 for a couple. This is not applicable to dividends received from non-French companies (including UK companies). This is discriminatory and, in our view it is caught by the Manninen judgment. The rules in France are to change on 1st January 2005 from when UK dividends can be received in France free of French income tax up to these limits, i.e. UK dividends are treated in the same way as French dividends. But you should still be able to get your tax back for previous years.
At a practical level, if you are a French tax resident in receipt of dividends from UK companies on which you have paid tax you should contact your local French Revenue tax office to claim the tax rebate on such dividends up to the allowances cited above. The relevant part of the letter might read as follows:
« Je fais référence à l’arrêt de la Cour européenne de justice dans l’affaire «Petri Mikael Manninen » rendu en septembre 2004. Je n’ai pas reçu l’abattement de €1.220/€2.440 accordé aux dividendes provenant des sociétés françaises pour l’année 2004 [et l’année/ les années put in relevant year/s when you had UK dividend income on which you paid French income tax] sur des dividendes provenus des sociétés britanniques. En résultat, je réclame un remboursement sur ces dividendes-ci afin de me remettre dans la même position fiscale qu’un bénéficiaire des dividendes d’une société française. »