Tax Treaty Case Law around the Globe 2025

1. Introduction

When the states involved in a bilateral tax treaty decide not to grant exclusive taxing rights to one of them, they share it according to the imputation technique contained in Art. 23 B of the OECD Model Convention. In this case, neither of the two contracting states renounces the right to tax, and the tax levied in the source state is deductible from that calculated in the residence state. This deduction may be full or limited. France has mainly opted for the limited imputation technique with the “stop rule”. This rule is contained in Art. 220 of the French tax code and only applicable to income from movable capital and allows foreign tax to be imputed only up to the amount of the French tax corresponding to the income in question. It means that the tax credit is capped at the amount of French tax relating to the income effectuating it. In practice and in accordance with the provisions of Art. 23 B of the OECD Model Convention, tax treaties concluded by France generally provide that the amount of the tax credit may not exceed the French tax corresponding to this income.

S. 346More specifically, France has chosen to encourage foreign investment by introducing “fictitious” t...