ENJEUX ACTUELS

Taxpayers who contributed the securities of their operating company to a holding company before 14 November 2012 (under the tax deferral regime) had a nasty surprise when the legislature introduced the system of deductions for holding periods.

Such contributions were supposed to be tax neutral, but the government takes the view that for the application of the holding period allowance regime (which has become optional since 1 January 2017, the ordinary law providing for a flat tax of 30%), while the holding period must date back to the acquisition of the contributed securities, the fact that by definition the recipient company does not meet the conditions for it (since it was incorporated in the context of a restructuring of activities) automatically deprives them of the benefit of the increased deduction of 85%, which would allow them to obtain the higher marginal taxation rate of 24.25%, which is much lower than the flat tax.

We find this view to be highly questionable because it gives the contribution of securities a tax effect that results in the securities received as remuneration being taxed differently from how they would have been had they not been contributed. The transaction is therefore not tax neutral, which we believe violates Article 8 of the Merger Directive.

As when the deduction for the duration of the holding period was applied to capital gains carried forward (see the relevant fact sheet), we very much hope the ECJ will uphold our interpretation of the Directive and that the Constitutional Council will punish the indirect discrimination that taxpayers who have exchanged securities not covered by the Directive may suffer in comparison with those who have benefited from the Directive.

Bornhauser is available to help taxpayers in this situation assert their rights now, before the clock runs out, as it will if they wait for the courts to rule on the cases we have already brought.