Dividends paid to a foreign parent company: 2026 withholding tax

Quick answer. A French subsidiary distributing dividends to a foreign parent company applies, in principle, a 30% withholding tax (French Tax Code, art. 119 bis 2). This rate drops to 0% for an EU or EEA parent holding at least 10% of the capital for 2 years (parent-subsidiary regime, art. 119 ter), or to a reduced treaty rate (5% to 15% with the United States).

When a French subsidiary moves cash up to its parent company located abroad, the payment does not leave the territory freely. French tax law provides for a withholding tax on dividends paid to a non-resident beneficiary. At Hayot Expertise, we regularly support foreign groups owning a French subsidiary, and this is one of the first points we secure before any distribution.

The stakes are twofold. A poorly calibrated withholding tax ties up cash unnecessarily. Conversely, applying a reduced rate without meeting the conditions exposes the French subsidiary, which is the legal debtor of the tax, to a tax reassessment. Distributing dividends abroad must therefore be prepared upstream, not on the day of the shareholders' meeting.

The domestic rate depends on the nature of the beneficial owner of the dividends and on its location. The table below summarises the rates applicable before the effect of tax treaties and the European parent-subsidiary regime.

The 30% rate is therefore the starting point for a foreign parent in corporate form. Reductions then come from two distinct levers: the European parent-subsidiary regime and bilateral tax treaties.

The most powerful lever for a parent company established in the European Union or the European Economic Area (Iceland, Norway, Liechtenstein) is the exemption set out in article 119 ter of the French Tax Code. It brings the withholding tax down to 0%, provided several criteria are met at the same time.

The exemption is based on European directive 2011/96/EU (a recast of directive 90/435/EEC, known as the "parent-subsidiary" directive). It aims to eliminate the double taxation of profits distributed within a European group.

The conditions of article 119 ter#

The holding threshold drops to 5% (art. 119 ter, 2-c) in one specific case: where the parent company cannot credit the withholding tax in its own State of residence. This nuance is often overlooked and deserves a case-by-case review.

To understand how the holding company and its subsidiaries fit together, our article on the French holding company owning an EU subsidiary details the legal and tax structuring of a European group.

The 2025 Finance Act (Act no. 2025-127 of 14 February 2025), in its article 96, strengthened the regime. Two developments deserve the attention of leaders of international groups.

First, the concept of beneficial owner is now built into paragraph 2 of article 119 bis of the French Tax Code. This provision applies to dividends paid as from 1 January 2026. In practice, claiming a reduced rate requires that the recipient of the dividends be the genuine economic beneficiary, and not a company interposed to capture an advantage.

Second, an anti-arbitrage mechanism (article 119 bis A, targeting so-called "CumCum" arrangements) applies to transactions entered into as from 16 February 2025. It does not apply where a domestic exemption, such as the parent-subsidiary regime, already applies.

Our reading of the 2026 doctrine#

The tax authorities published the practical procedures for obtaining treaty benefits (BOFiP, the French tax doctrine database, BOI-INT-DG-20-20-20-30, updated on 16 March 2026). The granting of the treaty benefit is now framed: the subsidiary must be able to document the beneficial owner and the chain of ownership.

One point that causes confusion needs to be made precise. An exempting tax treaty is not purely and simply neutralised upstream. The doctrine frames how the benefit is granted, and a withholding tax may be levied and then refunded upon supporting evidence. This mechanism of a levy followed by a refund can be described as a "protective withholding". The treaty rate remains due in the end, but access to the benefit is now more closely controlled.

The tax treaty between France and the United States, signed on 31 August 1994 and published by decree no. 96-222 of 15 March 1996, caps the withholding tax depending on the level of participation of the US parent company.

The 0% rate therefore assumes a strong and continuous holding over the 12 months preceding the meeting deciding the distribution. This is a timing point we check systematically. For US groups, our French CPA service for foreign companies covers this interplay between French accounting and group compliance, and our article on the US LLC with a French subsidiary revisits the accounting, VAT and corporate tax chain.

Where a protective withholding has been levied even though the parent could claim a reduced rate or the exemption, recovery goes through a refund claim filed afterwards. Here is the approach we apply in our files.

1. Gather proof of the parent company's tax residence (a certificate from the foreign authority).
2. Document the level and duration of the holding in the French subsidiary's capital.
3. Establish that the parent company is indeed the beneficial owner of the dividends.
4. Reconstruct the full chain of ownership, with no screen company capturing the benefit.
5. Build the treaty file according to the procedures described in the BOFiP (BOI-INT-DG-20-20-20-30).
6. File the refund claim with the French authorities and follow up on the review.

This procedure is not an automatic formality. It requires solid documentation, which argues for preparing these items before the distribution rather than after the levy.

• Up-to-date articles of association of the French subsidiary and minutes of the meeting deciding the distribution.
• Tax residence certificate of the parent company in its State.
• Evidence of the holding percentage and the acquisition date of the shares.
• Commitment to or proof of holding the shares for at least 2 years (parent-subsidiary regime).
• Items establishing beneficial owner status (economic substance, no interposition).
• Determination of the applicable basis: 119 ter exemption, treaty rate, or domestic rate.

Parent company in the EU/EEA. The article 119 ter exemption applies if the holding reaches 10% for 2 years and the parent is the beneficial owner. The threshold drops to 5% if the parent cannot credit the withholding tax at home. This is the most favourable route when it is available.

US parent company. No parent-subsidiary directive, but the 1994 treaty caps the withholding at 15%, 5% or 0% depending on the level of participation. The 0% rate assumes 80% of the voting rights over the 12 months preceding the meeting.

Beneficiary in an NCST. The rate climbs to 75%. No treaty optimisation applies freely, and documentary vigilance is at its highest.

Non-resident individual. The domestic rate is 12.8%, subject to the treaties applicable to the individual's country of residence.

Many business leaders confuse two regimes that share the same name but follow opposite logics.

The domestic parent-subsidiary regime (French Tax Code, art. 145 and 216) concerns a French holding company that receives dividends: a holding of at least 5% of the capital, kept for at least 2 years, and an exemption except for a 5% share of costs and expenses added back to the result. It is an inbound mechanism, which avoids double taxation within France.

Outbound withholding tax, the subject of this article, concerns on the contrary dividends leaving France for a foreign parent. Confusing the two leads to applying the wrong rate. For the group's domestic taxation, see our holding company taxation page and our article on the taxation of dividends.

In files involving foreign groups, the most frequent sticking point is not the rate itself: it is the documentation. Recently, a parent company established in the EU nearly suffered a domestic-rate withholding because it had not formalised its commitment to hold the shares in time. The article 119 ter exemption was perfectly applicable on the merits, but the file was not ready on the day of the meeting.

Our reading. The rewarding reflex is to treat documentary compliance as a condition of the distribution, not as a document to provide afterwards. A residence certificate obtained three months later does not repair a withholding already levied without supporting evidence.

2026 points of vigilance. The beneficial owner provision applicable since 1 January 2026 changes the picture for multi-tier structures. A parent that is merely a conduit towards a shareholder located outside the EU should expect closer scrutiny of the chain of ownership. This is precisely what the authorities look at when reviewing a treaty claim.

Hayot Expertise advice. Before any distribution to a foreign parent, qualify the basis (119 ter, treaty, domestic law), gather the beneficial owner documentation and check the holding timeline. For an analysis tailored to your chain of ownership, let us discuss your situation.

For groups under construction, our article on the international subsidiary and the roadmap for a foreign manager setting up in France round out this overview, as do our tax support for businesses in Paris and our international accounting desk.