Tax alerts – May & June 2019

Tax alerts – May & June 2019


• Interest rate: comparables drawn from the bond market – Judgement of the Versailles Administrative Court (« TA ») on April 4th 2019, n°1607393 and 1606803, SAS Wheelabrator Group

The Versailles TA ask for the opinion of the French Administrative supreme Court (« CE ») on whether the borrowing company can justify its interest rate based on loans bond’s rate applied by third-party companies.

• Merger of assets: « Quémener » is back – Decision of the CE on April 24th 2019, n°412503, Société Fra SCI

In the « Lupa » case, the CE had held that the « Quémener » tax adjustment mechanism could only apply to a dissolution without liquidation transaction provided that it generates a taxation at the absorbing company level. The CE operates a change of its jurisprudence by removing the effective double taxation requirement of the partner.

• The “butoir” rule: referral to the Court of Justice of the European Union (“ECJ”) – Decision of the CE on April 24th 2019, n°399952, SA Société Générale

The CE has just submitted a preliminary question to the ECJ as to whether the “butoir” rule is consistent with the free movement of capital.

• Equity securities: appreciation of the acquirer’s intention to exert influence – Decision of the CE on May 29th 2019, n° 411209, SARL Montisambert

The CE considers that it seems necessary to examine whether the purchase conditions of the equity securities reveal the initial intention of the acquirer to influence the issuing company and give it the means to exercise it.



• Favorable tax regime: Delaware limited partnership – Decision of the Versailles Administrative Court of Appeal (“ACA”) on March 5th 2019, n°16VEO2168, Société Rexel

The ACA considers that the US limited partnership benefits from a favorable tax regime because, in Delaware, neither the limited partnership nor the general manager are taxed whereas the limited partnership is similar, in France, to a société en commandite simple subject to tax.

• Favorable tax regime: details – Decisions of the CE on April 24th 2019, n°413129, Société Control Union Inspections France and n°412284, Société Gémar Lumitec

The CE recalls in Case No. 413129 that the burden of proof of the favorable regime lies with the tax authorities and that the tax rate is not sufficient to characterize it. The tax burden should be compared in practice with the one that the company would bear should it be established in France.

In Case No. 412284, the CE specifies in the case of remuneration paid to a Taiwanese service provider transiting through a financial institution located in Hong Kong, it is necessary to assess the tax burden of the beneficiary should it be establish in the State of the financial institution (i.e. Hong Kong here) with regard to the tax burden it would bear in France.

• Non-cooperative countries and territories: European Union (« EU ») list – Press release, Council of the EU on May 17th 2019, JOUE 2019/C 176/03

12 states are mentioned on the EU list: American Samoa, Belize, Dominica, United Arab Emirates, Fiji, Guam, Oman, Marshall Islands, Samoa, Trinidad and Tobago, British Virgin Islands and Vanuatu.



• German Exit Tax: application with Switzerland – Decision of the ECJ on February 26th 2019, C- 581/17, Martin Wätchtler

In this case, the ECJ questions the application of the German Exit Tax regime, on the principle of the free movement of people, in the case of a German taxpayer who settles in Switzerland. This decision offers opportunities to request, in France, the release (with default interest) of guarantees provided by taxpayers upon their departure from France to Switzerland.

• Management Package: social regime applicable to earnings – Decision of the French Supreme Court (“CC”) on April 4th 2019, n°17-24470

In this case, the CC notes that share subscription warrants (“BSA”) were reserved for a small circle of beneficiaries which led to the requalification of such as salary gain.

• Life usufruct right: depreciationif it relates to real estate – Decision of the CE on April 24th, n°419912 et 419913

In the case of a furnished rental activity, the CE recognizes the depreciable nature of the life usufruct right of a real estate property when it is possible to determine the end of its effects by referring to statistics on life expectancy set by the INSEE.

• Charter of Rights and Obligations of the Taxpayer: publication 2019 – May 2019

The provisions contained in this charter, updated annually, are enforceable against the French tax authorities. It is now specified that the taxpayer whose good faith is questioned by the divisional or principal tax inspector may directly contact the departmental tax interlocutor.

• 3% tax: the CE confirms the French tax authorities’ guidelines applicable to trusts – Decision of the CE on May 9th 2019, n° 426431, Société Amicorp Limited

The CE confirms the tax authorities’ comments that a trust is liable for the 3% tax on the value of its real estate assets or rights (BOI-PAT-TPC-10-10, No. 90).

• Trusts: changes on the reporting obligations of trusts – Decree of June 13th, 2019

A decree was published on June 14th, 2019 on the reporting obligations of trusts. The tax authorities also published the new trust forms (trust form 2181-Trust 1 & 2).