Withholding Tax and Equity-Linked Financial Contracts: Has France Taken A Step Closer to Section 871(m) of the US Internal Revenue Code?

On 15 February 2023, the French tax authorities adopted an unprecedented interpretation of article 119 bis(2) of the French Tax Code, permitting its application to certain equity-linked financial contracts entered into by French banks in a cross-border context. The French Supreme Administrative Court ruled that the administrative guidelines were unlawful. In the authors’ opinion, that is fortunate given the doubts surrounding the legality and the relevance of these guidelines. The only way forward might be for the legislator to intervene.