Tax Alert - The 3%’s tax exemption reserved to distributions made inside a tax consolidated group will end January 1st,2017

By Antoine Chalal, Laurence Clot


In its decision n°2016-571, dated September 30, the Constitutional Court declared as unconstitutional the 3%’s tax exemption reserved to distributions made inside a tax consolidated group is not constitutional. Suppressed as of January 1st 2017, the Parliament should now determine its new modalities of taxation. 

Amounts distributed by French companies to their shareholders are subject to a 3% contribution levied on such amount. However, distributions made between companies members of the same consolidated tax group are, for now, exempt from this contribution. 

Following a QPC asked by the State Council, the Constitutional Court repealed the exemption as of January 1st 2017, declaring the exemption unconstitutional as it is violating the principles of equality before the law and the guaranteed public office by Articles 6 and 13 of the Declaration of human rights and citizen of 1789. 

The Parliament has now to modify the legislation to be compliant with the said decision. Accordingly, several options are possible:

  • either it purely and simply abolish the contribution, which seems pretty unlikely, given the current budgetary situation ; 
  • either, if no changes are made to the legislation, all distribution between affiliates will be subject to the contribution of 3% ; or 
  • it maintains the contribution of 3%, but reduce its rate.

In any event and regardless of the chosen legislative change, we can only advise consolidated groups to accelerate their dividends distribution before January 1st 2017.