New taxation conventions signed by France
Treaty between France and Denmark:
The convention for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion and avoidance signed between France and Denmark on 4 February 2022 entered into force on 29 December 2023.
Its provisions apply:
- as regards income tax levied at source, to amounts taxable on or after 1 January 2024
- in respect of income taxes not levied at source, to income relating, as the case may be, to 2024 or to any financial year beginning on or after 2024
- as regards other taxes, to taxes for which the chargeable event occurs on or after 1 January 2024.
The main change concerns the taxation of retirement pensions, which was the subject of a dispute between the two countries that led Denmark to terminate the previous convention.
A relatively complex mechanism has now been implemented to safeguard the rights of both countries:
- the treaty provides for the principle of exclusive taxation in the State of residence (art. 17, 1);
- but it also provides for taxation in the source State (art. 17, 2), where:
a. contributions paid by the beneficiary to the relevant pension scheme have been deducted in the source State under the laws of that State; or
b. contributions paid by the beneficiary’s employer to the relevant pension scheme did not constitute taxable income for the beneficiary in the source State; or
c. the pensions are paid in application of the social security legislation of the source State. Point 4 of the Protocol specifies which pensions are covered by this last exception.
A specific mechanism for eliminating double taxation (Art. 22, 3) completes this system.
Thus, in the event that the pensions are also taxable in the source State in application of the exceptions referred to above, the source State grants a deduction from the tax it levies on this income, and up to the limit of the latter, of an amount equal to the income tax borne in the State of residence.
Treaty between France and Moldova:
The convention for the avoidance of double taxation with respect to taxes on income and the prevention of fiscal evasion and avoidance signed between France and Moldova on 15 June 2022 entered into force on 23 April 2024.
Its provisions apply:
- as regards income tax levied by withholding tax, to amounts taxable on or after 1 January 2025.
- in respect of income tax not levied by way of deduction at source, to income relating, as the case may be, to 2025 or to any financial year beginning on or after 1 January 2025
- as regards other taxes for which the chargeable event occurs on or after 1 January 2025.
