Brussels, 28/10/2010 (Agence Europe) - The French rule that allows companies registered in Liechtenstein to be exempt from 3% of the annual tax on the market value of buildings they own in France does not contravene the agreement on the European Economic Area (EEA) because although it restricts the principle of free circulation of capital under the EEA, the French rule can be justified for “imperious reasons of general interest” in order to combat tax fraud and the need to preserve tax controls.
This is the substance of the ruling of the European Court of Justice issued on Thursday 28 October 2010 in Case C-72/09, in response to a question from the French court of appeal, asking whether the French rule was in conformity with the EEA agreement, because is distinguishes between the way companies registered in the EU are treated for tax purposes and the way companies are treated that are registered in other EEA countries. The French rule gives a 3% exoneration of the tax on the market value of buildings in France to companies registered in France or another EU member state, but for companies registered in non-EU countries that are part of the EEA, this exoneration is conditional upon the existence of an administrative aid agreement between France and the country in question in order to discourage taxpayers from avoiding the tax by setting up companies in countries that have not signed such agreements with France, companies that would then buy up real estate in France.
The Court of Justice points out that Liechtenstein has not signed such an agreement and the French rules automatically exclude companies registered in Liechtenstein from benefitting from the 3% tax exoneration, which therefore makes investment in French real estate less attractive for the companies in question. The regulation is therefore a restriction that runs counter to Article 40 of the EEA (free circulation of capital).
The absence of any administrative aid agreement, tax agreement or other deal including a discriminatory clause on tax matters between France and Liechtenstein, however, prevents the French civil service from obtaining from the government of Liechtenstein the information it requires to verify statements and information provided by companies registered in Liechtenstein which own property in France. The French rule must therefore be considered as justified for reasons of general interest, in that it aims to combat tax evasion and ensure effective tax controls. (F.G./transl.fl)