OD FLASH | Tax residence and effective taxation: tax liability is sufficient

Conseil d’État, 9th Chamber, September 30, 2025, No. 490793

In this case, a French company paid royalties to a Dutch company for the reproduction rights to photographs without applying the withholding tax provided for in Article 182 B of the French General Tax Code. Following an audit, the tax authorities challenged this failure to withhold tax. The Paris Administrative Court and then the Paris Administrative Court of Appeal upheld this adjustment.

On appeal to the Court of Cassation, the Council of State overturned the Paris Administrative Court of Appeal’s ruling on the grounds of error of law and ruled on the concept of foreign resident for the purposes of applying an international tax treaty.

The Council of State ruled that the Dutch company receiving the royalties fell within the scope of the Franco-Dutch tax treaty of March 16, 1973, since it was considered a tax resident of the Netherlands within the meaning of Article 4 of the treaty.

It specified that the production of a tax residence certificate issued by the Dutch tax authorities was sufficient to establish this status, without it being necessary to demonstrate actual corporate income tax liability in that country.

Consequently, the disputed royalties fall within the scope of Article 12 of the convention and are exempt from withholding tax, thereby precluding the application of Article 182 B of the CGI. This decision confirms that, for the purposes of applying tax treaties, the concept of resident implies liability to tax within the meaning of the law of the State, even in the absence of actual taxation, and reaffirms the probative value of the tax residence certificate issued by a foreign administration..