Dividends paid to French expats: the new withholding tax mechanism on dividends applies to non-residents starting January 1, 2026
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Dividends paid to non-residents: the new tax mechanism applying as of January 1, 2026
The Finance Act for 2025 introduced a major change in the taxation of dividends paid by French companies to non-residents.
This change results from Article 96, which profoundly amends Article 119 bis of the French General Tax Code (the “CGI”).
As of January 1, 2026, the taxation regime for dividends paid abroad will be profoundly different.
What is it about?
Dividends distributed by a French company to a beneficiary who is not a tax resident in France are, in principle, subject to a withholding tax.
This withholding tax depends on two factors:
the internal rate provided by the CGI (12.8% for individuals, 25% in other cases);
international tax treaties, which may provide for a reduced rate or even an exemption.
What did positive law provide for before the reform?
Before the Finance Act for 2025:
If the treaty provided for a reduced rate, the withholding tax was applied directly at the treaty rate.
If the applicable tax treaty provided for 0%, the French company did not apply any withholding tax.
In other words, the exemption (or reduction) was immediate, without any prior deduction.
However, this system left the door open to optimization, particularly in dividend arbitrage schemes.
What Article 96 changes: a total reversal of the mechanism
Article 96 of the Finance Act for 2025 amends Article 119 bis of the CGI by introducing a new rule: withholding tax is mandatory as soon as the beneficial owner does not have their tax residence in France.
The consequence is simple and massive: France deducts first, verifies later.
In concrete terms, a non-resident will receive their dividends after a withholding tax of 12.8% (individual persons) or the rate applicable according to their nature, even if their tax treaty provides for 0% or a lower rate.
The tax treaty no longer applies upstream, but downstream, via a refund claim to be filed after the fact.
This mechanism applies to dividends paid out from January 1, 2026.
Why this change?
The reform pursues an objective of securing tax collection by always collecting the withholding tax, and then performing the reimbursement a posteriori, provided that the conditions are indeed met.
What are the concrete impacts?
–> Immediate cash-flow impact
Even if the foreign taxpayer is entitled to a treaty exemption: 12.8% will be withheld at the time of distribution, and then refunded several months later.
For certain investors or family holding companies, this can represent substantial amounts "blocked" temporarily.
–> A heavier administrative burden
The non-resident will have to: file a refund claim, justify their tax residence, prove that they are the beneficial owner, and comply with precise and strict formalities.
–> A reinforcement of the anti-abuse fight
Dividend arbitrage schemes, which often relied on the immediate application of reduced or zero rates, become much more difficult because every payment is subject to a withholding tax and the burden of proof lies with the actual beneficial owner.
–> A securing of tax collection
The reform pursues an objective of securing tax collection by always collecting the withholding tax, then proceeding with the refund post-audit provided that the conditions are indeed met.
A very simple example
Before the reform: A French company pays €100,000 in dividends to a resident of Luxembourg or the UAE. The France-Luxembourg and France-UAE tax treaty provides for 0%.
-) Withholding tax applied: €0
-) Paid amount: €100,000
After the reform (starting January 1, 2026)
Same situation: Luxembourg resident, treaty at 0%.
-) Withholding tax applied immediately: 12.8% = €12,800
-) Paid amount: €87,200
The beneficiary will then have to file a claim to be refunded €12,800 (and in particular fill out and have their 5000/5001/5002 forms stamped by local tax authorities).
Conclusion
Article 96 of the Finance Act for 2025 marks a major turning point in the taxation of dividends paid to non-residents.
Where the treaty exemption previously allowed for a complete absence of immediate taxation,
France will now apply an automatic withholding tax of 12.8%,
with a potential refund upon request by the taxpayer.
The measure, applicable as of January 1, 2026, will have a concrete impact for international investors, cross-border groups and expatriate taxpayers.
