A recent judgment from the European Court of Justice (ECJ) is good news for French resident taxpayers who own shares in UK companies. This will often be the case of UK expatriates who have kept their UK share portfolios after moving to France. They should be in line for an income tax refund from the French Inland Revenue.

The case of Petri Mikael Manninen was referred to the ECJ for a preliminary ruling by the Finnish Supreme Administrative Court. Mr Manninen owned 2000 shares in a Swedish company Telia, following its merger with the Finnish company Sonera. The Finnish tax system allowed him tax credits on dividends received from Finnish companies but Mr Manninen had to pay Finnish income tax on the dividend from Telia at the full rate of 29% and was not allowed to deduct any Swedish tax credit against his Finnish tax liability. Mr Manninen claimed this was discriminatory and contrary to the principles of the European Union Treaty. The European Court decided in September in favour of Mr Manninen. This is a further example of the European Court imposing a uniform tax policy.

A French resident currently can receive tax-free dividends from French companies in the sum of €1220 for a single person and €2440 for a couple. This is not applicable to dividends received from non-French companies (including UK companies). This is discriminatory and, in our view is caught by the Manninen judgment. The rules in France are changing from 1st January 2005 and UK dividends can be received in France free of French income tax up to these limits i.e. are treated in the same way as French dividends. But you should still be able to get your tax back for previous years.

At a practical level, if you are a French tax resident in receipt of dividends from UK companies on which you have paid tax you should contact your local French Revenue tax office to claim the tax rebate on dividends received from UK companies within the allowances mentioned above. The letter should read as follows: -

Je fais référence à l'arrête de la Cour européenne "Petri Mikael Manninen " rendu en septembre 2004. Je n'ai pas reçu l'abattement de €1220/€2440 accorde aux actionnaires des sociétés francaises pour l'année 2004 et les années [put in relevant years when you had UK dividend income] des dividendes reçu de mes actions britanniques. Je réclame un remboursement sur les dividendes pur me mettre dans la même position fiscale d'un actionnaire dans une société francaise. >

David Anderson and Susanna Heley
Sykes Anderson LLP
Solicitors and Chartered Tax Advisers.
Bury House, 31 Bury Street London EC3A 5JJ
www.sykesanderson.com
Telephone 020 7398 4700
29 September 2004