A French company investing in other EU countries already gets 0% withholding under the EU Directive and a 95% exemption on dividends at home. A Luxembourg or Dutch layer pays off for funds and co-investors, for targets outside the EU and for early exits, and only with a real board abroad. For tax alone, it is usually a cost.
Many French groups do not need a holding abroad
A French company that owns shares in other EU companies already has most of what a Luxembourg or Dutch holding offers. The EU Parent-Subsidiary Directive removes withholding tax on dividends within the EU, and the French régime mère-fille exempts 95% of dividends received from a stake of 5% held for two years. Adding a foreign layer to a simple French group mostly adds cost and questions from the tax office.
The foreign layer earns its place in four situations: when outside investors pool money, when the targets sit outside the EU, when the exit may come early, or when a neutral platform is needed for partners from several countries.
Luxembourg
SCSp, RAIF and an authorised AIFM: the format international LPs expect.
The Netherlands
Participation exemption from 5% with no holding period, against two years for the French regime.
The Netherlands
About 100 treaties and 0% dividend withholding to qualifying treaty-country parents.
Either
A neutral company for French and foreign partners, with one shareholders' agreement.
What the French tax office checks
- Article 209 B (CFC rules). Applies to foreign entities taxed at least 40% less than in France. Luxembourg at 23.87% and the Netherlands at up to 25.8% are above that line, and EU companies are excluded unless the arrangement is artificial.
- Mère-fille and long-term gains. Dividends from the holding are 95% exempt in France (5% stake, two years); gains on qualifying participations are exempt except for a 12% add-back.
- General anti-abuse rules. Article 205 A and the abus de droit procedures (L.64 and L.64 A LPF) target arrangements whose main purpose is tax. A holding with no people, no decisions and no business reason is the classic target.
- Place of effective management. A Luxembourg or Dutch company run in practice from Paris is a French taxpayer. The treaty with Luxembourg decides residence by place of effective management only.
For a French group, a foreign holding is a tool for investors, exits and non-EU targets. For tax alone, it rarely survives the first audit.
France–Luxembourg and France–Netherlands
| France–Luxembourg (2018) | France–Netherlands (1973) | |
|---|---|---|
| In force | From 1 January 2020 | Signed 1973, modified by the MLI |
| Dividend withholding | 0% at 5% held 365 days; 15% otherwise | 5% on substantial holdings; 15% otherwise |
| Within the EU | 0% under the Parent-Subsidiary Directive when its conditions are met | Same |
| Shares in French property companies | France taxes the gain if over 50% of the value came from French real estate in the last 365 days | Older wording; check the case before relying on it |
| Anti-abuse | Principal purpose test in the treaty itself | Principal purpose test through the MLI |
The 2018 treaty closed the old route of holding French real estate through Luxembourg companies. Today a Luxembourg vehicle for French property only makes sense for investor reasons, not tax ones.
Do you need a Luxembourg or Dutch layer?
Four questions. The check is built to say “invest from France” when that is the right answer.
Do you need a Luxembourg or Dutch layer?
An honest check. Sometimes the answer is to invest straight from France.
If you do need one: Luxembourg or the Netherlands
| Luxembourg | Netherlands | |
|---|---|---|
| Corporate tax | 23.87% (Luxembourg City) | 19% / 25.8% |
| Participation exemption | 10% or EUR 1.2m (dividends) / EUR 6m (gains), 12 months | 5%, no holding period |
| Dividend withholding to a French parent | 0% under the Directive or the treaty | 0% under the Directive or domestic exemption |
| Investor vehicles | SCSp, RAIF, SIF, SICAR with an AIFM | Few; corporate groups are the norm |
| Net wealth tax | Yes, with a yearly minimum | None |
A French parent already gets 0% withholding and the mère-fille exemption.
Funds and co-investors expect SCSp and RAIF.
5% stake, no holding period, a wide treaty network.
A holding run from Paris is taxed in Paris.