France-UAE Double Tax Treaty: What Changed in 2025 and What It Means for Structuring

Background: The France-UAE Tax Treaty and Why It Matters

The double tax treaty between France and the United Arab Emirates has long been a cornerstone for cross-border structuring between the two jurisdictions. Originally signed to eliminate double taxation on income and capital, the treaty has historically offered significant benefits to French nationals and companies with interests in the UAE. However, 2025 brought meaningful changes that any adviser or entrepreneur operating across both countries must understand before proceeding with new or existing structures.

What Changed in 2025

The most significant development in 2025 relates to the tightening of beneficial ownership and anti-abuse provisions within the treaty framework. French tax authorities, operating in alignment with OECD BEPS Action Plans, have introduced stricter requirements for treaty benefits to be accessed. The principal purpose test is now more actively applied, meaning that structures where one of the main purposes is obtaining treaty benefits are at heightened risk of challenge. Holding companies incorporated in the UAE must now demonstrate genuine economic substance and decision-making capacity to successfully rely on the treaty.

Additionally, the French Finance Act introduced updates affecting the treatment of passive income flows between the two countries. Dividend distributions from French subsidiaries to UAE parent companies face enhanced scrutiny. The withholding tax exemption or reduction available under the treaty is contingent on the UAE entity meeting substance criteria that go beyond mere registration. A UAE holding company that acts as a pure conduit, with no local management, no staff, and no operational function, will likely see its treaty benefits denied.

Impact on Holdings and Group Structures

For entrepreneurs and corporate groups using a UAE holding company to hold French operating subsidiaries or real estate assets, the implications are direct. The treaty article on dividends provides reduced withholding rates, but accessing those rates now requires documented proof that the UAE entity is not an artificial arrangement. Boards must meet in the UAE, decisions must be taken locally, and management accounts must reflect genuine activity in the emirate.

Capital gains are another area of focus. The treaty contains provisions on gains from the alienation of shares in companies whose value is primarily derived from French real estate. France has consistently sought to tax such gains at source, and the 2025 clarifications reinforce this position. Structures that were built around the assumption of full capital gains exemption at the UAE level need to be reviewed against the updated treaty interpretation guidance issued by the French tax administration.

Practical Implications for Dividends

For operating groups distributing profits upward from France to a UAE holding, the mechanics have become more demanding. The withholding tax rate under the treaty can be zero or significantly reduced, but only where the beneficial owner of the dividend is a UAE-resident entity that meets the new substance thresholds. Documentation packages presented to French paying agents must now include evidence of UAE tax residency, economic substance certificates from the relevant UAE authority, and board minutes confirming decision-making in the UAE.

French tax advisers are increasingly requesting pre-clearance from the Direction Generale des Finances Publiques before large dividend remittances, especially where the UAE holding company is a recently formed entity or where there is a French shareholder behind the structure. This is not a legal requirement, but it reflects a shift in practice toward proactive compliance.

Restructuring Considerations

Groups that built their franco-emirati architecture before 2024 should conduct a treaty fitness review before the end of 2026. The key questions are: Does the UAE entity have sufficient substance? Is the purpose of the structure defensible beyond tax efficiency? Are dividend and royalty flows documented correctly? Does the capital gains treatment still hold under the updated guidance?

In some cases, adding a layer of genuine operational activity to the UAE holding company is the most effective solution. In other cases, restructuring toward a different holding jurisdiction with a more robust treaty network and less scrutiny may be advisable. The decision depends on the overall group footprint, the nature of the underlying assets, and the shareholder profile.

What This Means Going Forward

The France-UAE treaty remains one of the most valuable bilateral agreements for structuring cross-border wealth and corporate activity. However, the era of relying on the treaty without investing in genuine substance is over. Tax authorities on both sides have signaled a clear direction: substance, purpose, and transparency are non-negotiable. Advisers and business owners who build structures with that framework in mind will continue to benefit from the treaty's provisions. Those who do not will face increasing exposure.

How Bolster Group Can Support You

Bolster Group advises entrepreneurs, corporate groups, and family offices on cross-border structuring between France and the UAE. Our team reviews existing structures against the updated treaty framework, prepares substance documentation packages, and advises on restructuring where necessary. If you are operating across both jurisdictions and want to ensure your structure remains compliant and tax-efficient, contact us at contact@bolster-group.com.