When self-employed professionals practicing in a SELARL subject to corporation tax pay dividends to their holding company set up in the form of a SPFPL, these dividends usually reach their destination just like in any other commercial company, and without any special taxation.
In a very surprising decision, the French Supreme Court (Cour de Cassation) (link here: Decision - Appeal no. 21-20.366 | Cour de Cassation) has ruled that dividends paid by a SELARL (in this case, a sole proprietorship) to a SPFPL must be treated as income from employment, and therefore subject to social security contributions.
This decision, which was not understood by the vast majority of professionals, calls into question LBO arrangements (past and future) based on the fact that, until the Court's ruling, these dividend distributions were not subject to social security contributions.
Litigation on this subject is sure to flourish, and we'll keep you informed of developments.
Published:2024
