Case review: a French founder, a Luxembourg holding and a Luxembourg bank account

The plan, as it is usually presented

A French entrepreneur, resident in France, owns a profitable French company. Someone suggests a structure: a holding in Luxembourg, the French shares contributed to it, dividends flowing to Luxembourg, a minimal salary in France, and the money paid out to a personal account in Luxembourg. On a whiteboard it looks like lower tax, money abroad and more freedom.

This note does not judge the entrepreneur and does not offer a fix. It walks through the plan step by step and shows where it meets French and Luxembourg law. Every point below is one we see in real files.

The founder still lives in France. Every euro that ends up in his pocket is French-resident money, whatever country the bank is in.

Step 1: a Luxembourg holding run from France

• Where is it really managed? Under the France–Luxembourg treaty a company is resident where its effective management is. A holding whose only director lives in France and decides from France can be treated as French-resident, and taxed in France as if Luxembourg did not exist.
• Is it a real company or a letterbox? A domiciliation address, no people and no decisions in Luxembourg are what both tax administrations call an artificial arrangement. That label switches off the EU directives, the treaty benefits and the French exceptions for EU companies.
• Luxembourg asks too. The holding pays a minimum net wealth tax every year, must file accounts and returns, and its own tax office applies the same substance logic to a company that only receives and passes on dividends.

Step 2: contributing the French shares

• The gain is not erased, only deferred. Contributing shares to a holding the founder controls defers the capital gain under article 150-0 B ter. The deferred gain remains attached to him and is reported every year.
• A foreign holding must qualify. The deferral is open to EU holdings only if they meet the conditions of the regime, and the contribution is filed and followed in France.
• Selling later has strings. If the holding sells the French shares within three years, 70% of the proceeds must be reinvested in business activities within three years and kept for five, under the 2026 rules.
• Leaving France later. If the founder ever moves abroad, the deferred gain and the shares of the holding enter the French exit tax calculation.

Step 3: dividends from France to Luxembourg

• The 0% is conditional. France waives withholding tax on dividends to an EU parent only if the conditions are met and the arrangement is not put in place mainly for that benefit. Otherwise French withholding applies.
• Beneficial ownership. A holding that receives dividends and immediately pays them on to its shareholder is the textbook conduit of the CJEU Danish cases: the benefit can be refused because the holding is not the real owner of the income.
• The treaty has a purpose test. The France–Luxembourg treaty of 2018 contains a principal purpose test. A structure whose main purpose is the tax result loses the treaty rate.
• Holding period. The French exemption expects the shares to be held for at least two years; dividends paid earlier rely on a commitment that can be called in.

Step 4: cutting the salary

• Remuneration in disguise. Replacing a salary for work done in France with dividends from a foreign holding can be challenged as disguised remuneration for that work, taxed and charged as salary.
• Social security does not stop at the border. Dividends paid to some French company managers above a threshold are already subject to social contributions; routing them through a holding does not make the question disappear.
• The founder's own cover. A minimal salary means minimal pension rights, sickness and unemployment cover for a person who still works full time in France.

Step 5: dividends to a personal account in Luxembourg

• France taxes the dividend anyway. A French resident pays French tax on dividends from a Luxembourg company: 31.4% flat tax since 2026. Luxembourg withholds 15% first; France gives a credit, so the total is still French tax, with an extra layer of paperwork.
• Article 123 bis. A French resident holding 10% or more of a foreign entity whose assets are mainly financial, in a regime that taxes far less than France, can be taxed each year on its profits as if distributed. EU entities are excluded only if the structure is not artificial.
• The account is visible. A foreign bank account must be declared every year on form 3916. The fine is EUR 1,500 per account, undeclared transfers are presumed taxable income, and the tax office can look back ten years. Luxembourg banks report to France automatically under CRS.
• Abuse of law. If the main purpose of the whole chain is tax, the French tax office can disregard it under the abuse-of-law procedures, with penalties of up to 80% for the most serious cases.

The risk map

Where does your version of the plan break?

Every version of this plan is different. Mark yours and see which points light up.