12 Dec Tax newsletter november 2019
I. CORPORATE TAXATION
Bare ownership booked in the assets of a company: the waiver of the usufructuary results in an increase in assets – Decision of the 3rd and 8th chambers of the French Supreme Administrative Court (“CE”) on October 14th, 2019, n°417095, Sté Techmeta Participations
When the bare ownership of securities is booked as an asset of a company whose results are taxed in accordance with the rules provided for in Section 38, 2 of the French Tax Code (“FTC”), the waiver by the usufructuary of his usufruct constitutes, for the bare-owner company, an increase in its net assets generating a profit subject to corporate income tax.
Parent-subsidiary regime: loaned securities may benefit from the parent-subsidiary regime – Decision of the Versailles Administrative Court of Appeal (“CAA”) on October 15th, 2019, n°17VE02377, SARL Imanes
Dividends received by a company because of securities lent to it may benefit from the parent-subsidiary regime as soon as the latter are entitled to dividend, without prejudice to the general exclusion provided for by the Savings Act of June 17th, 1987.
Professional capital gains: securities subscribed to recapitalize a subsidiary before its sale constitute investment securities – Decision of the 3rd and 8th chambers of the CE on November 8th, 2019, n°422377, SA Crédit Agricole
The CE considers that securities subscribed by a bank to recapitalize a loss-making subsidiary in order to sell it constitute investment securities.
II. TAX AUDIT
VAT fraud: the proof lies with the French Tax Authorities (“FTA”) and must be based on objective elements – Decision of the 3rd and 8th chambers of the CE on October 14th, 2019, n°421925, Société Consus France
The CE considers that it is for the FTA, in the case of VAT fraud, to establish the objective elements allowing to conclude that the taxable person knew or should have known that the transaction was involved in a fraud. The judges cannot consider that such elements are established simply by referring to the tax reassessment notice (and considering that they are authentic until proven otherwise where they have been established by a sworn agent) and that, with respect to the existence of a fraud, only the taxpayer is likely to establish that the suppliers have declared and paid the tax.
Cumulative criminal and tax sentence: the solidarity provided for in Section 1745 of the FTC does not characterize a sentence but a guarantee of recovery – Decision of the Criminal chamber of the French Civil Supreme Court on October 23rd, 2019, n°18-85.088, F-PBI
A taxpayer sentenced for tax fraud to a criminal fine and to the joint and several payment of taxes and penalties due by the company is not protected by the limitation on the accumulation of tax and criminal sentences. The solidarity provided for in Section 1745 of the FTC does not constitute a sentence but a guarantee of recovery.
Tax audit on documents: comments on the hierarchical appeal following a tax audit on documents – FTA guidelines (BOI-CF-PGR-30-10) on October 30th, 2019
Since August 2018, taxpayers whose tax returns are subject to a tax audit on documents are able to refer their cases to an immediate superior. The FTA comment the terms and conditions of application in its guidelines on October 30th, 2019.
III. INTERNATIONAL TAXATION
Contribution of securities by a foreign company: compliance with the authorization requirement – Decision of the Constitutional Council (“CC”) on November 15th, 2019, Priority Question of Constitutionality (“QPC”) n°2019-813
The provisions of Section 115, 2 of the FTC in its version applicable before the law of December 28th, 2017 do not infringe the principle of equality before the law in so far as their purpose was to ensure the tax neutrality of only partial asset contributions carried out for the purpose of economic restructuring.
IV. INDIVIDUAL TAXATION
Quotient system: net income is not computed globally – Decision of the 3rd and 8th chambers of the CE on October 14th, 2019, n°423807
For the purpose of the quotient, the CE considers that professional expenses reported under the detailed reporting procedure can only be charged against deferred income if it is demonstrated that they were incurred to acquire such income.
Capital gains of individuals: bonds received as consideration for an exchange of shares are not a balancing item – Decision of the CAA of Bordeaux on October 17th, 2019, n°17BX00156
The CAA considers that the bonds convertible into shares cannot be considered as a balancing payment within the meaning of Section 150-0 B of the FTC.
Inheritance: life insurance can impact the inherited reserve – Decision of the 1st Civil chamber of the French Civil Supreme Court on November 6th, 2019, n°18-16.153
The French Civil Supreme Court considers that the contributions paid by a taxpayer with respect to a life insurance agreement cannot be called into question by his heirs (who are not beneficiaries) as long as these contributions are not excessive with respect to his wealth.
Income tax: the CE refers to the CC regarding the tax treatment of a mixed compensatory allowance – Decision of the 9th and 10th chambers of the CE on November 15th, 2019, n°434325
The CE referred to the CC the question of whether the fact that the equity part of a mixed compensatory allowance does not give rise to any tax reduction or deduction (if it is paid over a period of less than 12 months) infringes the constitutional principle of equality before the law.
Life insurance: the subscriber can buy back his contract without asking the agreement of the beneficiary – Decision of the 1st Civil chamber of the French Civil Supreme Court on November 20th, 2019, n°C16-5.867
A life insurance subscriber who does not expressly waive his right to surrender the policy does not make a gift to the beneficiary of the policy.