Precompte is an additional tax withheld on dividends distributed from earnings and profits which have not been taxed at the regular tax rate of 33.1/3%. In a decision dated March 2, 1995 (req. no. 91-247), the Besancon Administrative Court considered as illegal the administrative commentaries according to which the principle of the independence of tax allocations in relation to accounting entries does not apply to distributions drawn from the long-term capital gains special reserve. Consequently, according to the Court, the calculation method of the precompte is correct if the distributions drawn from the long-term capital gains special reserve follow the order of allocation provided for by the French Tax Code.
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