EU: EC issues formal notice letter to France regarding implementation of parent-subsidiary directive; state of play on implementation of DAC8 and DAC9
EC considers French implementing legislation incompatible with PSD.
The European Commission (EC) announced in its infringement package dated March 10, 2026 that it issued a letter of formal notice (initial phase of an EU infringement procedure) to France to remove a restriction in breach of the parent-subsidiary directive (PSD).
According to the EC, French legislation restricts the withholding tax exemption to situations when the parent entity’s “place of effective management” is located within an EU member state. The EC considers this approach incompatible with the PSD, which defines an eligible parent company solely by reference to its tax residence under the laws of its member state. France has two months to reply, and if the EC concludes that its concerns have not been adequately addressed, it may escalate the process by issuing a reasoned opinion.
Read an April 2026 report prepared by KPMG’s EU Tax Centre
In addition, the EU Tax Centre’s report includes updates on the state of play on implementation in the EU of:
- Council Directive (EU) 2025/872 on administrative cooperation to establish a framework for the exchange of Pillar Two information between member states (DAC9), which member states were required to transpose by December 31, 2025.
- DAC amendments to introduce provisions for the exchange of information on cryptoassets (DAC8), which member states were also required to transpose by December 31, 2025.