Arsene Taxand - Real Estate

The French 3% annual tax put into question?

A case, known as the Elisa case, was brought before the European Court of Justice (ECJ) on the basis of a prejudicial question by the French Supreme Court. The ECJ confirms the arbitrary character of the French 3% annual tax with respect to companies located in the European Union (decision of October 11th).

These companies should be able to benefit from an exemption of the tax under the usual conditions applicable to French companies (by taking a formal commitment or filing a specific annual tax return), regardless of the existence of a double tax treaty protecting them.

This court decision should unravel some uncertainties regarding European structures excluded from the benefit of double tax treaties by the French tax authorities. We may think about SICAVs or other forms of Luxembourg UCITs. However, the court decision does not put into question the very existence of the French 3% annual tax and its application to foreign companies and especially to non-European companies. The ministry of Economic affairs may have now the opportunity to review, (may we dare hoping, to suppress?), a tax which hinder the fluidity of the real estate transactions. A story to be continued…