TAX NEWSLETTER November 2020

TAX NEWSLETTER November 2020


• Contribution of shares and gift: the context of the contribution must be taken into account to characterize the gift – Decision of the 3rd and 8th chambers of the French Administrative Supreme Court (“CE”) on October 21st, 2020, No. 434512, SAS société nouvelle Cap Management

In order to establish a gift at the time of a contribution of shares performed between parties in a relationship of interest, the CE judges that a significant difference must be demonstrated between the price agreed for contribution and the market value of the shares, but also that the context in which the transaction took place should be investigated as it may have an impact on the shares’ valuation.


• Interest-rate swap and “rabot” rule: interest paid or received within the framework of interest- rate swaps is excluded from the “rabot” rule – Decision of the 3rd and 8th chambers of the CE on November 4th, 2020, No. 438629, min. c/ Regional public establishment Epinorpa

The CE states that interest paid or received under an interest rate swap agreement is excluded from the computation of net financial expenses for the purposes of Section 212 bis of the French Tax Code (“FTC”) insofar as it does not remunerate amounts left or made available to the company.


• Identity of French tax officers: the anonymization measure for French tax officers comes into force – Decree No. 2020-1306 on October 28th, 2020

French tax officers working in the context of tax or criminal proceedings may be authorized not to be identified by their surname and first name when their mission is likely to endanger their life or physical integrity, or those of their relatives.


• Time limit for appeal: application of the rule of reasonable time limit for appeal in case of implied rejection of a complaint – Decision of the 9th and 10th chambers of the CE on November 13th, 2020, No. 427275, Sté des établissements Salvi

The CE considers that in the event of an implied rejection of a complaint (in the absence of answer from the French Tax Authorities, “FTA”, within two months), the rule relating to the reasonable time limit of one year beyond which a claim cannot be brought before a court is applicable. This time limit runs either from the date of the implied rejection decision, if the interested party was informed of this date when filing the complaint, or from the date on which he or she became aware of this decision.


• Enforceability of the FTA’s guidelines: a guideline is enforceable against the FTA even if it retains a degree of discretion – Decision of the 9th and 10th chambers of the CE on October 14th, 2020, No. 421028

According to the CE, the fact that a guideline leaves a discretionary power to the FTA does not prevent this guideline from being regarded as a formally accepted interpretation of the tax law, provided that the interpretation is of general application.

• Hidden distributions: the fine for non providing the identity of the beneficiaries is not disproportionate – Decision of the 3rd and 8th chambers of the CE on October 21st, 2020, No. 441126

The CE confirms that the fine of 100% of the sums paid or distributed (reduced to 75% when the company has spontaneously included the amount of the sums in question in its corporate income tax return) provided for in Section 1759 of the FTC should the identity of the beneficiaries of hidden distributions within 30 days be not provided is not disproportionate.



• Capital gains of non-residents: the levy on non-residents’ capital gains is not in line with European Union (“EU”) law and must be fully refunded – Decision of the 9th and 10th chambers of the CE on October 14th, 2020, No. 421524, AMV International Holding

The CE judges that the levy provided for in Section 244 bis B of the FTC on capital gains generated by non-residents on the sale of a substantial interest in a French company is not in line with EU law. The consequence is the total discharge from taxation.


• Combination of criminal and tax penalties: two preliminary questions referred to the Court of Justice of the European Union (“CJEU”) – Decision of the Criminal chamber of the French Civil Supreme Court on October 21st, 2020, No. 19-81.929

The French Civil Supreme Court referred two questions to the CJEU on the French system allowing the accumulation of criminal and tax penalties in the event of tax fraud; one on the concepts of clarity and predictability of the circumstances in which hiding of tax returns in respect of Value Added Tax (“VAT”) may be subject to accumulation of penalties, and the other on the requirement of necessity and proportionality for accumulation of such penalties.


• Cross-border tax schemes: publication of the revised FTA’s guidelines – BOI-CF-CPF-30-40 to BOI-CF-CPF-30-40-20 on November 25th, 2020

At the end of the public consultation on its first comments published on March 9th and April 29th, the FTA provided a number of additional details, in particular concerning intermediaries, reporting procedures and “markers”.


• Tax on precious objects: the condition of location in the EU is contrary to the French Constitution – Decision of the French Constitutional Court on November 27th, 2020, No. 2020-868 QPC

The fact that the election for the tax on precious objects, provided for in Section 150 VI, II of the FTC, applies only to transfers of precious objects and metals located in France or in another EU Member State, excluding those located in a third State, is declared contrary to the French Constitution.



• Professional property exempted from French wealth tax: the income of the professional furnished lessor is assessed on the net profit – Ministerial answer to question No. 12910, published in the Official Journal of the French Senate on August 27th, 2020, page 3707

The net profit of the professional furnished lessor should be taken into account to determine whether the annual income generated by this activity represents more than 50% of the income of the tax household, excluding retirement pensions, and thus meet the conditions for exemption provided for in Section 885 R of the FTC. In our view, this ministerial answer should be applicable to French real estate wealth tax.