Reuters: Regulatory News: EU's top court finds against French fund tax rule

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EU's top court finds against French fund tax rule May 10th 2012, 10:24 BRUSSELS | Thu May 10, 2012 6:24am EDT BRUSSELS May 10 (Reuters) - The European Union's top court found against French regulations imposing tax on earnings from investments in France for foreign funds but not on domestic rivals, in a ruling which will have implications for how funds are treated across the continent. Under current French tax rules, dividends paid to certain funds which are not resident in France are taxed at a rate of 25 percent. But a similar fund based in France, however, is exempt from the levy on its investments within the country. A group of special investment companies known as UCITS (undertakings for collective investments in transferable securities) from Belgium, Germany, Spain and the United States challenged this at a French tribunal, arguing that the law broke European Union rules on the free movement of capital. The tribunal asked the European Court of Justice to clarify the matter, and the ECJ said it had found the French law breached EU rules. "EU law precludes the French legislation which taxes... nationally sourced dividends when received by UCITS resident in another state but exempts such dividends... when received by UCITS resident in France," the Luxembourg-based court said. Kit Dickson, a tax partner at accountants Deloitte, said: "It's bad news for France and other countries in Europe that have similar rules. Countries will now have to treat foreign funds in the same way as domestic funds." Dickson said the ruling may result in domestic funds also being subjected to such taxes alongside foreign funds, as was the case in the Netherlands when it changed similar rules in 2008. Link this Share this Digg this Email Reprints

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