Taxation of Dividends Received by Members in France

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Dividends received by company members (shareholders or partners) are subject to taxation. The way they are taxed depends on several factors:

  • Whether the member is an individual or a legal entity (e.g. a business)

  • The tax regime of the distributing company (Income Tax – Impôt sur le revenu, or Corporate Tax – Impôt sur les sociétés)

In some cases, dividends are taxed solely at the member level. In others, they may be taxed both at the company and the member levels.

What Are Dividends?

Dividends represent a portion of a company’s profit distributed to its partners or shareholders. When a company subject to corporate tax makes a profit, its partners may vote in a general meeting to allocate part of that profit as dividends.

However, in businesses taxed under the income tax regime, profits are not distributed as dividends in the traditional sense. Instead, profits are directly taxed at the level of each partner, based on their share in the company. There is no formal dividend distribution.

How Are Dividends Taxed?

1. If the Company Is Taxed Under the Income Tax Regime (IR)

  • The company itself is not taxed on its profits.

  • Each member is taxed individually on their portion of the profit, based on the percentage of ownership.

  • The profit is included in the member’s taxable income and not classified as dividends.

Type of activity determines the tax category:

  • Commercial or industrial activity: Taxed under Bénéfices Industriels et Commerciaux (BIC)

  • Liberal professions: Taxed under Bénéfices Non Commerciaux (BNC)

2. If the Company Is Taxed Under the Corporate Tax Regime (IS)

At the Company Level:

  • Profits (including those distributed as dividends) are subject to corporate tax.

  • These profits are not deductible, whether or not they are distributed.

Corporate tax rates:

  • 15% on the first €42,500 of profit for companies:

    • With turnover under €10 million

    • Whose capital is at least 75% owned by individuals

    • With fully paid-up capital

  • 25% rate for all other companies

At the Member Level:

  • Dividends are subject to personal income tax.

Step 1: Advance Withholding (Non-Final Flat Tax – NTFP):

  • A flat 12.8% tax is withheld by the financial institution at the time of payment.

  • This is a prepayment of the final income tax.

Exemption from Withholding:

  • Individuals can request exemption if their reference tax income (RFR) from two years prior was below:

    • €50,000 (for single individuals)

    • €75,000 (for couples filing jointly)

  • The exemption request, including a sworn statement, must be submitted to the paying institution by 30 November of the year before the dividend payment.

Step 2: Final Taxation – Two Options
Members can choose between two taxation methods:

a. Flat Tax (PFU – Prélèvement Forfaitaire Unique):

  • Total tax rate of 30%, which includes:

    • 12.8% income tax

    • 17.2% social contributions

  • The initial 12.8% withheld is credited toward the final tax liability.

b. Progressive Income Tax Scale:

  • Dividends are added to total taxable income and taxed according to the progressive personal income tax brackets.

  • Social contributions (17.2%) still apply.

Declaring Dividends

For Companies under the Income Tax Regime (IR):

  • The business does not declare dividends.

  • Instead, it declares its total profits.

  • Each partner declares their share of the profits in their personal tax return.

    • For BIC or BNC income, the reporting depends on the business’s accounting method (simplified or normal regime).

For Companies under the Corporate Tax Regime (IS):

  • Dividends received must be declared by members when filing their annual income tax return.

  • The prepayment (NTFP) is reported and reconciled with the final tax liability.