Withholding tax: a somewhat responsible government

The Paris Administrative Court of Appeal recently ruled on an appeal seeking to hold the State liable in the withholding tax case, which led to France being found in breach of its obligations by the CJEU.

Liability arising from the decision of Conseil d'Etat July 3, 2009

In particular, the company argued that there had been gross negligence in light of the decision of Conseil d'Etat July 3, 2009 (CE, 8th and 3rd Sub-Sections, July 3, 2009, No. 317075, Lebon). This fault allegedly resulted from a clear violation of European Union law, as the Conseil d'Etat then ruled that the withholding tax did not fall within the scope of Article 4 of the Parent-Subsidiary Directive.

The Court, after reviewing the case law of the CJEU, will nevertheless dismiss the argument, holding that at the time the Conseil d'Etat its decision, the issue of the application of the Parent-Subsidiary Directive to withholding tax had not yet been resolved.

Liability arising from the incompatibility of provisions with EU law

The Court also rejects the company’s argument seeking compensation for the loss corresponding to the withholding tax paid. It finds that the company’s claim has the same subject matter as the claim seeking reimbursement of the withholding tax and is therefore inadmissible.

Liability for Breach of EU Law

The Court holds that the CJEU’s decision finding France in breach of its obligations—in particular due to the Conseil d'Etat refusal Conseil d'Etat refer the matter to it—necessarily entails compensation for the company’s damages resulting from the failure to refund the withholding tax.

The Court will then hold that the loss suffered by the company in this case results solely from the payment of the portion of the withholding tax attributable to the failure to take into account the tax paid by the Belgian subsidiary. This loss cannot exceed the amount of tax paid by the subsidiary in Belgium.

In addition to these amounts, the company was also required to pay interest following the Conseil d'Etat overturning Conseil d'Etat Administrative Court’s judgment, as well as interest at the statutory rate.

CAA Paris, June 16, 2025, No. 23PA01023

This monitoring service is provided by Mispelon Avocat, a law firm specializing in tax audits and tax litigation. You can stay updated by subscribing to the newsletter via this link.