Current Tax Developments - Withholding Tax On Dividends

Payments from a French company to a Belgian company and to a New Zealand company, that were deemed to be distributed income for the purpose of the French domestic tax law had been subject to the French withholding tax on dividends. The Administrative Court of Appeal of Nancy decided on July 6, 1995, that such payments are not included in the definition of dividends of Article 15 of the Belgium - France Tax Treaty. No withholding tax was therefore due for the payments to the Belgian company and the withholding tax paid had to be reimbursed. Moreover, the Court decided that the 25 % withholding tax rate had to be applied to payments deemed to be income distributed to the New Zealand company (as this payment could not benefit from the France -New Zealand Tax Treaty). The French Tax Authorities had effectively apply a 25/75 withholding tax rate. According to the Court, this rate was not justified since no legal provision prohibits the French distributing company from taking the