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Article 15 of France-UK DTA – Dependent personal services – published on 11 April 2025
Facts: The years in dispute are 2017 and 2018. An individual taxpayer was employed by a company resident in France and performed duties as the managing director of that company. There is no dispute that the taxpayer was a tax resident in France and physically stayed for more than 183 days in the UK during both years. The taxpayer performed his duties in the UK during his stay there. Accordingly, the taxpayer claimed a tax credit for taxes paid in the UK in the tax return filed in France, which was rejected by the French tax authorities.
Issue: Whether the taxpayer is entitled to claim a tax credit under Article 24 read with Article 15 of the DTA.
Decision: The court ruled that the taxpayer is not allowed to claim the tax credit in France due to the following reasons:
- The taxpayer held a corporate officer position as chief executive officer and performed his duties as managing director of a French company whose place of effective management was in Paris. Moreover, he habitually resided and performed his duties in Paris during the taxation years at issue.
- It is also undisputed that the registered office of the company (i.e., Paris) was mentioned as the professional address of the taxpayer, whose payslips referred to the exercise of his professional activity in Paris and who was attached to the French Social Security system by virtue of his activity.
- Even when staying in London, the taxpayer was in daily contact with the teams of the company located in Paris, who kept him constantly informed and whom he managed remotely.
Based on the above, the court decided that the taxpayer cannot be regarded as having carried out his employment as a corporate officer elsewhere than in France.
Key takeaways: The OECD commentary clarifies that employment is exercised in the place where the employee is physically present when performing the activities for which the employment income is paid. If this is the treaty interpretation, then the taxpayer would be entitled to claim the tax credit in France for the tax paid in the UK, which is in accordance with the Treaty.
However, based on the above decision, this does not seem to be the treaty interpretation by the French tax authorities and courts. If France always intended to interpret the Treaty in the manner ruled in this court decision, then the only remedy would be to pursue the mutual agreement procedure under the treaty.
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