Pay less tax on French dividends

Until recently, French dividends were taxed twice. The Minister of Finance recently put an end to the legal saga. Thanks to the so-called ‘Foreign Tax Credit’ (FTC), the French levy is offset against the Belgian tax. And your dividend is taxed less.

Auteur: Bruno Orban, Senior Manager BDO Tax

When a ‘resident of Belgium’ receives dividends from a French company, a withholding tax of 12.8% is deducted in France by the company that pays out the dividends. This income is taxed again in Belgium at 30%. Thus, the same income is taxed twice. However, the double taxation treaty between Belgium and France (10 March 1964) provides for a way to alleviate this double taxation, namely the ‘Foreign Tax Credit’. With this, the French levy is offset against the Belgian tax. The private investor is entitled to a credit of 15% FTC on the dividends received from French sources.

“The total tax burden on French dividends falls from 38.96% to 25.88%”

Private investors using an FTC can significantly reduce the tax they owe in Belgium on French dividends. The total tax burden will fall from 38.96% to 25.88%.

An example

Without FTC With FTC
Gross dividend EUR 100.00 EUR 100.00
– French withholding tax (12.8%) – EUR 12.80 – EUR 12.80
Taxable base in Belgium (foreign net income) EUR 87.20 EUR 87.20
– Belgian tax (30%) – EUR 26.16 – EUR 26.16
+ FTC (15% of foreign net income) EUR 0.00 EUR 13.08
Net dividend EUR 61.04 EUR 74.12

End of legal discord

Until now, the Belgian tax authorities have refused to apply the FTC system to dividends from France, despite the fact that the Court of Cassation had ruled twice against the tax authorities. On 20 January 2021, the Minister of Finance finally announced that the tax authorities will comply with this ruling and that private investors will thus be able to offset an FTC against their Belgian tax.

Anyone wishing to recover the excess tax on French dividends over the past 5 years must lodge an appeal.

In practice, when preparing their tax returns, private investors will be able to benefit directly from an FTC on French dividends received in 2020 or later.

If private investors want to recover the excess tax on the dividends they have received in the course of the past 5 years, they must lodge an appeal with the tax authorities. This can be done by means of a notice of objection or with a request for ex-officio exemption.