French companies in Russia 2026: DTT suspended August 2023. 15% WHT on dividends, 20% on interest. French CFC rules, participation exemption and exit options.
The current situation for French companies
Tax impact: what French companies now pay
French CFC rules and Russian subsidiaries
Operational considerations: running a Russian subsidiary in 2026
Exit options for French companies
For French individuals with Russian assets or income
France and Russia suspended the income-specific provisions of their 1996 double tax treaty in August 2023. France was among the first treaty partners to formally confirm reciprocal suspension — France notified Russia by note dated 12 February 2024 that the DTT provisions suspended by Russia are also suspended from the French side, effective 8 August 2023.
This means neither country is applying the reduced rates from the treaty for income flows in either direction. For French companies with Russian subsidiaries, the practical consequences are significant.
Approximately 25–30 French groups maintain operating subsidiaries in Russia as of mid-2026 — down from over 60 before 2022. The companies that remain are generally in sectors with long-term contracts or strategic relationships: energy, industrial equipment, pharmaceuticals, food production, and logistics.
Under the suspended DTT, French companies benefited from significantly reduced withholding rates on income from Russia:
For French groups that charged management fees or royalties to Russian subsidiaries, the 20% WHT is often the most painful element — because these payments typically had zero cost under the DTT. A group charging €5M in annual management fees to a Russian subsidiary now faces €1M in irrecoverable Russian WHT per year.
France has CFC rules under Article 209B of the French Tax Code (Code Général des Impôts). These rules can attribute the undistributed profits of a foreign subsidiary to the French parent for French corporate tax purposes if:
The French parent controls at least 50% of the subsidiary (directly or indirectly), and
The subsidiary is subject to tax at a rate less than 50% of the French corporate tax rate (currently: 50% × 25% = 12.5% threshold), or is established in a privileged-tax regime territory
Russia's standard corporate income tax rate is 25% (raised from 20% effective 1 January 2025). This exceeds the French CFC threshold of 12.5%, meaning Russian subsidiaries are not subject to French CFC rules on the basis of tax rate alone — provided the Russian subsidiary is genuinely taxed at 25%.
However, French tax authorities may examine whether specific tax incentives or reduced regimes (SEZ regimes, IT company discounts at 5%) bring the effective rate below the threshold for specific entities.
The more immediate issue for French groups is the participation exemption. France's territorial system exempts 95% of qualifying dividends from French corporate tax (Article 216 CGI). The 5% taxable fraction means a French parent pays French CIT of 25% × 5% = 1.25% on gross dividends. Russian WHT at 15% is creditable against this minimal French liability — but only to the extent of French tax actually owed, which may be minimal. The excess Russian WHT becomes a permanent cost.
French companies that remain in Russia face a set of operational challenges beyond the tax dimension:
Banking and payments: Most French banks have curtailed correspondent banking with Russian counterparties. French groups generally use third-country banks (in UAE, Turkey, China or Kazakhstan) for Russia-related payments. Russian subsidiaries typically maintain accounts at Sberbank, VTB or Gazprombank for domestic operations.
Sanctions compliance: EU sanctions prohibit a range of transactions with Russia. French companies must maintain robust sanctions screening — not only for direct transactions but for the supply chains of their Russian subsidiaries. The risk is particularly acute for companies in industrial sectors where dual-use goods may enter the supply chain.
Personnel: Expatriate French managers in Russia face the DTT suspension directly: their employment income is no longer protected by the treaty provisions on dependent personal services. A French national who is a tax resident of France and receives salary from a Russian employer (or secondment allowance paid in Russia) is now subject to Russian НДФЛ at 30% as a non-resident, with limited treaty relief.
Profit repatriation alternatives: Given the 15% dividend WHT, some French groups have shifted to alternative extraction strategies: above-market rental rates for property owned by the French parent, licensing arrangements (subject to 20% WHT but deductible for Russian CIT at 25%), or accumulating profits in the Russian subsidiary for reinvestment.
French companies considering exit from Russia in 2026 face the same structural choice as other "unfriendly" shareholders: sale or liquidation, with Government Commission approval required for either path.
Sale to a Russian buyer: Requires Sub-Commission approval and is subject to a mandatory discount of at least 50% to market value, plus a "voluntary contribution" to the federal budget of at least 35% of the transaction value at market price. For most French companies, this makes sale economically unattractive — the net proceeds after the discount and contribution can be as low as 10–15% of fair market value.
Liquidation: More predictable and generally more economically attractive. The Russian subsidiary settles all liabilities, distributes remaining assets, and is deregistered. The distribution to the French parent is subject to 15% Russian WHT on the amount exceeding the original contribution. In France, the liquidation proceeds are treated as a capital gain or dividend depending on structure — French tax treatment should be modelled carefully.
Managed wind-down: Some French companies are reducing their Russian operations gradually — running down inventory, completing existing contracts, allowing the subsidiary to become dormant — rather than executing a formal legal exit. This avoids the Government Commission process but leaves the legal entity alive with ongoing compliance obligations.
The decision depends on the specific financial profile, sector, and the group's strategic assessment of Russia re-entry possibilities.
Related service: Company registration →Practical support for international business in Russia.