The validity of an assessment notice sent to a translucent company

The Paris Administrative Court considers, by its settled and recently reiterated case law (CAA Paris 16-2-2017 no. 15PA01239, Sté Vanves Solferino) that an assessment notice sent to a French translucent company, i.e. an entity in the scope of Article 8 of the French Tax Code (FTC) such as a tax “transparent” SCI, is regular. Indeed, the Court rules that the assessment notice validity arises from the application of the article 150 VF of the same Code which creates an obligation for the company, as for the shareholders, to pay the personal income tax due on capital gains realized on the sale of a real estate asset. According to the Court, as the company is required to pay the tax, it may be considered as liable to tax under section L.256 of the French Book of Fiscal Procedures or, to another extent, joint-debtor of such payment within the meaning of section R.256-2.

However, this position splits the trial judges. In a decision ruled on January 22, 2015, the Nantes Administrative Court considers that the assessment notice can only be submitted to the shareholders and not to the company (CAA Nantes 22-1-2015 no 14NT01467, SCI La Lieutenance).The Court reasoning stems from the conclusions of the public rapporteur Marie-Astrid Nicolazo de Barmon (rendered as part of the decision CE 3e-8e s.-s. 7-5-2014 no 356328, SCI La Lieutenance). In this case, the rapporteur considered as invalid a reassessment notice which was only sent to an SCI, whereas it has not a taxpayer status but a distinct legal personality from that of its shareholders, who are liable to tax for their ownership in the company. According to these conclusions, section 150 VF of the FTC, which provides that the tax paid by a translucent company discharges the payment of corresponding personal income tax on real estate capital gains, should not constitute an exception to this rule but rather be considered as only a particular modality of tax recovery. Unfortunately, the Supreme Court has not explicitly ruled on this particular point of disagreement.

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Sarvi Keyhani

Sarvi Keyhani, Partner, specializes in real estate tax. She advises international investors on major real estate operations. She particularly advises a large number of international real estate funds on the […]