Holding company scheme
DIVIDENDS ELIGIBLE UNDER THE PARENT-SUBSIDIARY SCHEME: ALMOST TOTALLY
EXEMPT (TAX RATE ≤ 1%)
A holding company established in Saint-Martin for at least one year (or which has made a commitment to retain shares in this sense),
holds a stake in its Saint-Martin, French or foreign subsidiaries. Each of these stakes is at least 5% of the capital of the issuer or represents
a cost of at least €1 M.
During the year ended 31 December N, the company achieves a gross profit of €4,400,000 from, for up to €4,000,000 (gross), dividends
eligible under the parent-subsidiary scheme. These dividends are assumed to have been subject to a withholding tax of 15% in the country
where the subsidiaries are established, amounting to €600,000.
Expenses of any nature incurred during the year amount to €100,000, resulting in an accounting profit of €4,300,000.
Calculation of taxable income
Non-accounting deduction of dividends:
Non-accounting reinstatement of a proportionate share for fees and expenses:
Theoretical amount: (4,000,000 – 600,000) x 5% = €170,000. This sum being greater than the amount of expenses of any nature
incurred by the company (€100,000), the proportionate share for fees and expenses is limited to €100,000.
including €100,000 for the proportionate share for fees and expenses on dividends
Amount of corporate income tax (400,000 x 20%):
of which corporate tax on dividends: €20,000
NB: withholding tax levied abroad cannot be offset on this tax.
DIVIDENDS NOT ELIGIBLE UNDER THE PARENT-SUBSIDIARY SCHEME: POSSIBILITY OF
OFFSETTING WITHHOLDING TAX LEVIED ABROAD EVEN IN THE ABSENCE OF A TAX TREATY
A holding company that receives during the year ended 31 December N dividends that are not eligible under the parent-subsidiary scheme
according to the following table:
Tax levied in the
country of origin
tax on income
Tax credit applied to corporate tax due in Saint-Martin
On corporate tax
due for the year N
On corporate tax
for the following years
Country A €400 000
(€400k x 20%)
Country B €600 000
(€600k – €100k) x 20%
Country C €200 000
(€200k - €50k) x 20%
the amount of tax credit is in any event capped at the amount of Saint-Martin tax levied on the taxable income in question (difference between,
on the one hand, the gross amount mentioned in column 1 and, on the other hand, expenses deductible from income under Saint-Martin domestic legislation
such as for example management expenses). For Country A such charges are negligible.
Tax deducted at the source in the foreign country, capped if appropriate (see Col 4), is offset for up to 70% of the amount of
corporate tax due under the year N; the balance (30%) increased, if appropriate, by the fraction that could not be offset under the year N, is carried over to
following years indefinitely and for an unlimited amount.
JUNE 2014 EDITION
VERY FAVORABLE CORPORATE TAX