French Tax Hearing Has Implications For EU Cross-Border Tax Discrimination

by Robin Pilgrim, LawAndTax-News.com, London

17 February 2003

The Accounting Web news service has predicted that a French case heard last week at the European Court of Justice could have serious implications for cross-border tax discrimination in the EU.

The Conseil d'Etat v de Lasteyrie du Saillant case, which received a preliminary hearing on Thursday, was concerned with whether a French residential exit tax owed by an individual who wished to transfer his tax residence out of France, infringed upon the freedom of establishment principle contained within the EC Treaty.

According to Accounting Web:

'The transfer of tax residence out of France triggers capital gains taxation (CGT) on shares in the hands of a French individual if the individual has been tax resident in France for at least six years, and if the individual has held during the five years preceding the transfer at least 25% of the share capital of a company subject to corporate income tax.'

'The capital gain is equal to the difference between the market value of the share at the time of the transfer anf his acquisition price and is taxed at the rate of 26%. While an individual can benefit from a deferral of the CGT if certain conditions are met, the CGT is nonetheless due in case of a share disposal during a five year period following the transfer of residence.'

Speaking to the news service following the preliminary hearing, Peter Cussons of PricewaterhouseCoopers suggested that in light of the verdict delivered by the ECJ in the Re X and Y (C436/00) case last November, the European Court is again likely to rule in favour of the taxpayer.

Recommended