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Tax treaty

The tax treaty between the State and Saint-Martin: a 2010 text on income taxes

Saint-Martin (French part) is an overseas collectivity with tax jurisdiction. Its agreement with the French State, signed on December 21, 2010, entered into force on May 1, 2011, and covers income tax, excluding social security contributions. It caps withholding tax at 15% on dividends and 10% on interest, reserves royalties for the beneficiary's State, and provides for a tax credit for both parties.

A 2010 text approved by an organic law

According to the French Official Tax Bulletin (BOFiP), Saint-Martin is an overseas collectivity governed by Article 74 of the Constitution, whose tax authority derives from the Organic Law of February 21, 2007. The agreement was signed in Saint-Martin on December 21, 2010, between the French State and the collectivity. Organic Law No. 2011-416 of April 19, 2011, approved it on the metropolitan side (Official Journal of April 20, 2011), and the agreement entered into force on May 1, 2011.

The administrative list classifies the convention under "IR" and mentions separately a specific agreement of December 23, 2009 for the exchange of information.

According to Article 22, the convention applies, for income taxes collected by withholding at source, to amounts taxable from 1 January 2010 and, for others, to income relating to any calendar year or financial year beginning from that date.

Maximum deductions and key rules

SubjectArticleWhat the text says
Dividends10 § 2Withholding tax is capped at 15 % of gross income; dividends received by a company that directly holds at least 10 % of the capital are taxable only in its state of residence.
Interests11 § 210 % of the gross; certain interest (bank loans, credit sales between companies, among others) is taxable only in the State of the beneficiary (§ 3)
Royalties12 § 1Taxable only in the State of the beneficial owner
Capital gains, companies with real estate assets13 § 1 b)Shares in companies where more than 50% of the value is attributable to real estate: capital gains taxable by the party where they are located
Capital gains, substantial participation13 § 3Natural person, shares or units entitling the holder to 25 % or more of the company's profits: taxable gain by the party of which the company is resident
Salaries, exception14 § 2Three conditions: a maximum of 183 days in total during any twelve-month period beginning or ending during the fiscal year; the employer is not a resident of the other party; and the expense is not borne by a permanent establishment of the employer in the other party.
Pensions from previous employment17 § 1Taxable only by the party of which the beneficiary is resident
Other income19Taxable only in the State of residence, subject to § 2

Resident: a rule dated July 15, 2007

Article 4 defines a resident as someone liable for tax due to their domicile, residence, or place of management. For an individual with dual residence, paragraph 2 lists, in order, their permanent home, center of vital interests, habitual residence, and then the agreement of the competent authorities. According to Article 4, paragraph 1(d), subparagraph (c) and the second sentence of subparagraph (a) do not apply to individuals who can demonstrate that their tax domicile or place of effective management was located in Saint-Martin on July 15, 2007, the date on which the collectivity began exercising its tax jurisdiction.

Elimination of double taxation: tax credit and protocol

Article 20 grants, in each party, a tax credit deductible from local or state tax, capped at the tax corresponding to the income concerned. The protocol specifies two points specific to Saint-Martin:

  • point 5: the tax of persons established in Saint-Martin and resident in the State is calculated according to the rules applicable to persons domiciled or having a business in Guadeloupe; ;
  • Point 7: Profits attributable to a permanent establishment located in Saint-Martin of a person resident in the State are exempt from the State's corporate tax, unless they are subject in Saint-Martin to taxes that are more than half lower than those to which their beneficiary would have been subject if he had been a resident of Guadeloupe.

Amicable procedure and denunciation

The case must be submitted within three years of the first notification of the measure (Article 21 § 1). According to Article 23, the agreement is concluded without time limit; after five calendar years following its entry into force, each party may notify its wish to terminate it; this termination must be authorized under the same conditions as those provided for entry into force.

Limitations of this sheet

It does not detail Articles 6 to 9, 15, 16, and 18, paragraphs (a) and (c) of Article 4(1), the 2009 agreement, the anti-abuse clauses, or points 1 to 4 of the protocol. Its applicability to real estate wealth tax is not established: Article 2 concerns income taxes. The local authority's rights should be confirmed with a local professional.

Frequently asked questions

What is the withholding tax rate on dividends?

Article 10 § 2 caps the withholding tax at 15 % of the gross amount. For a company directly holding at least 10 % of the capital, dividends are taxable only in its State of residence.

Does the treaty cover estates?

The convention concerns income taxes (article 2), the administrative list classifies it under "IR" and it does not include an article on inheritances.

Can it be stopped?

Yes, according to Article 23, after five calendar years following its entry into force, with termination permitted under the same conditions as its entry into force. For withholding taxes, the convention then ceases to apply to taxable amounts after the calendar year of this authorization (§ 2 a).

Take stock of your situation

Balmont Conseil, a firm based in Lyon for almost 14 years, advises executives and families whose assets span both mainland France and its overseas territories. Schedule an appointment to discuss your situation.

Alexis SagnierFinancial and real estate investment advisor, insurance broker, AMF certified
Founder of Balmont Conseil, Lyon (ORIAS 13003497)