The parent/subsidiary regime is a fiscal device that aims to avoid double taxation of dividends within groups of companies, promoting tax neutrality and fairness in the tax system.
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[...] Conclusion The parent-subsidiary regime embodies an essential tool for avoiding double taxation and promoting the structuring of corporate groups. However, its benefits must be balanced with increased vigilance against abuses. While legal and fiscal mechanisms partly ensure this balance, artificial arrangements and aggressive optimization persist. Strengthening controls, international cooperation, and adjusting legislation are all levers for preserving fiscal equity while supporting business competitiveness. This regime, at the heart of French and European taxation, must continue to evolve to address economic challenges while remaining faithful to its founding principles. [...]
[...] The practical modalities for implementation The parent/subsidiary regime, in addition to its objectives of fiscal neutrality, is based on precise modalities to avoid deviations. These modalities are framed by national texts, international conventions, and European rules. In accordance with Article 216 of the General Tax Code dividends received by a parent company from its subsidiaries are exempt from corporate tax. However, this exemption is partial, as a share for expenses and charges, set at of the dividends received, must be reintegrated into the taxable result of the parent company. [...]
[...] How can the parent/subsidiary regime reconcile its tax neutrality objectives while limiting the abuses that undermine the fairness of the tax system? Draft Functioning and Abuse of the Parent/Subsidiary Regime Introduction The parent/subsidiary regime, established to avoid double taxation of dividends within groups of companies, is a key mechanism of French taxation. By exempting dividends paid by a subsidiary to its parent company, it promotes tax neutrality and encourages the structuring of groups, particularly internationally. Encapsulated by articles 145 and 216 of the General Tax Code, this device responds to an economic competitiveness and tax attractiveness objective. [...]
[...] These practices undermine the initial objective of the regime, which is to promote the structuring of economic groups in a transparent and consistent manner with the principles of international taxation. These abuses are regularly countered by legislative adjustments and judicial decisions, such as in the case of Cadbury Schweppes (CJUE, 2006) B. The tools to fight against abuses In order to counter the abuses associated with the parent/subsidiary regime, several regulatory and control mechanisms have been established at both national and international levels. These tools aim to ensure that this regime is not diverted for aggressive tax optimization purposes. [...]
[...] Another important tool is the abuse of law. In accordance with Article 64 of the CGI, arrangements whose sole objective is to evade tax, without real economic justification, can be requalified. This allows the tax administration to exclude abusive practices and eliminate the tax benefits obtained. This approach has been confirmed in several judicial decisions, including the Cadbury Schweppes case (CJUE, 2006), where the Court ruled that a purely fiscal arrangement intended to circumvent tax rules was incompatible with European law. [...]
