How can you avoid double taxation on dividends?

Dividends are a popular source of income for investors, whether they hold French or foreign shares. However, when a company is based abroad, this income may be taxed twice: first in the country of the company paying the dividend, and then again in France.

Fortunately, many mechanisms can avoid or limit this double taxation. International tax treaties, tax credits and the choice of investment wrappers offer several ways to preserve portfolio profitability.

What is double taxation of dividends?

Double taxation occurs when the same income is taxed by two different countries.

For dividends, this commonly happens when a French investor holds shares in a foreign company.

For example:

• a US company pays a dividend;
• the United States deducts withholding tax;
• the dividend is then reported in France, where it is taxed again.

Without a corrective mechanism, the same income would therefore face two tax charges.

Why are foreign dividends taxed twice?

Every country seeks to tax income generated within its territory.

When a company distributes a dividend, its country therefore generally imposes withholding tax before the shareholder even receives the payment.

France, meanwhile, taxes its tax residents' worldwide income. Foreign dividends must therefore be included in their income tax return.

Countries enter into tax treaties precisely to avoid this situation.

Tax treaties help avoid double taxation

France has signed more than 120 tax treaties with other countries.

These agreements define:

• which country is entitled to levy tax;
• the maximum withholding tax rate;
• the mechanism for avoiding double taxation.

Withholding tax is often capped

Without a tax treaty, some countries may apply very high withholding tax.

Tax treaties often reduce this withholding tax.

Some examples:

Country	Standard withholding tax	Withholding tax under the treaty with France
United States	30 %	15 %
Canada	25 %	15 %
Germany	26,375 %	15 %
Belgium	30 %	15 %
Switzerland	35 %	15 % (with a partial refund)

The rate actually applied nevertheless depends on completing certain administrative formalities.

The tax credit offsets part of the tax burden

When withholding tax has been deducted abroad, France generally grants a tax credit.

This reduces the French tax due on the dividends.

The aim is simple: to prevent the taxpayer paying tax twice on the same income.

However, the tax credit is often limited to the amount specified in the tax treaty.

If the foreign country deducted more than the treaty rate, the excess may sometimes need to be reclaimed directly from the foreign tax authority.

A practical example of double taxation

Consider a French investor receiving:

• 1 000 € in dividends from a US company.

Step 1: US withholding tax

The tax treaty provides for withholding tax of 15 %.

The payment is therefore:

• gross dividend: 1 000 €
• US withholding tax: 150 €
• dividend received: 850 €

Step 2: French taxation

The gross dividend remains taxable in France.

However, the tax credit corresponding to the US withholding reduces the French tax.

The result is generally much more favourable than genuine double taxation.

How can withholding tax be reduced from the outset?

In some countries, excessive withholding can be avoided before the dividend is even paid.

Complete the tax forms

Investors holding US shares will be familiar, in particular, with form W-8BEN.

This document allows the reduced rate under the France–US treaty to be applied directly.

Without this form, withholding tax can reach 30 %.

Other countries also have similar procedures.

Check your broker's role

Not all financial intermediaries handle these procedures automatically.

Some brokers:

• submit the forms;
• apply the treaty rate directly;
• help clients with refund applications.

Others leave these procedures entirely to the investor.

Your choice of broker can therefore significantly affect net returns.

Can excessive withholding tax be reclaimed?

Yes.

When a country charges more tax than the rate specified in the treaty, it is often possible to claim a refund of the excess.

The procedure varies between countries.

It generally requires:

• an official form;
• a certificate of French tax residence;
• evidence of the dividends received.

Some procedures can be lengthy, but may represent several hundred or even several thousand euros for investors with substantial portfolios.

Does a PEA avoid double taxation?

The French equity savings plan offers particularly favourable taxation on gains.

However, it does not remove withholding tax imposed by a foreign country.

As a result:

• French dividends benefit fully from the PEA's tax treatment;
• foreign dividends remain subject to foreign withholding tax.

The PEA is therefore not a solution to international double taxation.

An ordinary securities account often remains more suitable for foreign shares

Unlike a PEA, a securities account generally allows full use of the tax credit mechanisms provided by tax treaties.

For investors with substantial exposure to international markets, it is often the most suitable wrapper.

The choice between a PEA and a securities account therefore depends on:

• the countries you invest in;
• your wealth strategy;
• your tax situation.

Mistakes to avoid

Ignoring tax treaties

Many investors do not realise they sometimes pay withholding tax above the agreed rate.

A simple check can help recover part of the tax.

Forgetting administrative forms

Some documents must be submitted before dividends are paid.

An omission can lead to much higher withholding tax.

Choosing a broker solely on fees

Brokerage fees are only one criterion among many.

The quality of the tax handling of international dividends can have a much greater impact on overall performance.

How can you optimise dividend taxation?

Several good practices help limit taxation:

• favour countries with a favourable tax treaty with France;
• check the withholding tax applied;
• complete the necessary forms before investing;
• compare brokers' practices;
• claim refunds of excessive withholding where possible;
• adapt the choice between PEA and securities account to the investments made.

Good advance planning often significantly improves the net return on an international portfolio.

Consulting a wealth management adviser

International taxation can quickly become complex, particularly when a portfolio holds shares from several countries or the amounts invested are substantial. A wealth adviser (CGP) can help optimise how your assets are held, choose the most suitable tax wrappers, make your returns secure and identify opportunities under international tax treaties. To find a qualified professional near you, consult the directory of Experts du Patrimoine, which brings together independent advisers, asset management companies and other wealth strategy specialists.

FAQ on double taxation of dividends

What is double taxation of dividends?

Double taxation of dividends occurs when the same income is taxed first at the level of the company earning the profits and then again when distributed to shareholders. Internationally, it may also result from taxation in two different countries.

How can double taxation of foreign dividends be avoided?

Tax treaties between countries often limit or prevent double taxation. Depending on the situation, a tax credit, capped withholding tax or other mechanisms may apply to prevent the same dividends being taxed twice.

Can a tax credit avoid double taxation?

Yes, where provided for by a tax treaty or the applicable legislation. The tax credit generally takes account of tax already paid abroad to limit the investor's overall tax burden.

Are dividends received within a PEA affected by double taxation?

A PEA benefits from a specific French tax regime. However, dividends paid by foreign companies may remain subject to withholding tax in their country of origin, depending on the applicable tax treaties and each country's own rules.

Why seek professional support to optimise dividend taxation?

Dividend taxation depends on many factors, including the income's country of origin, the applicable tax treaty, the investment wrapper and your personal circumstances. A wealth management adviser or tax professional can help optimise your strategy while complying with the rules.