A natural person who transfers his or her place of residence to Switzerland and manages shareholdings in companies located in EU member states from there may not, in matters concerning capital gains tax, rely on the provisions concerning the freedom of establishment set out in the EU-Switzerland agreement on the free movement of persons, the Court of Justice of the EU ruled on Thursday 15 March (judgment C-355/16).
In 2002, a Mr Christian Picart moved his residence from France to Switzerland. At the time of the move, he held substantial shareholdings in the capital of a number of French companies. Under French tax law, unrealised capital gains from substantial shareholdings owned by a person in French companies is taxed immediately upon transfer of residence, unless securities are set in place for the subsequent recovery of the tax. Individuals owning such shareholdings whilst continuing to reside on French soil, on the other hand, are not taxed until they sell them.
In line with French law, Picart declared unrealised capital gains in his holdings upon transferring his residence to Switzerland and provided a security in order to be able to pay the tax at a later date. In 2005, he sold the instruments in question, thereby unfreezing the tax payment obligation. Following an examination of his personal fiscal situation, the French tax authorities re-evaluated the level of the capital gains declared and ordered Picart to pay extra income tax and social contributions, plus fines.
Picart appealed to have the extra tax and fines cancelled. After this was rejected by the French tax authorities, he referred the matter to the French courts. The French Council of State, to which the case was referred in the final instance, wanted to know whether the right of establishment as an independent individual set out in the EU-Switzerland agreement on the free movement of persons has the same scope as the freedom of establishment guaranteed to EU citizens by Article 49 of the TFEU, which would mean that Picart would have to be treated in the same way as French residents concerning his taxation in France.
In its judgment, the Court points out that the notion of independent individuals within the meaning of the EU-Switzerland agreement on the freedom of movement covers two situations: (1) French citizens settling in Switzerland for the purposes of non-salaried employment; (2) French citizens carrying out a non-salaried activity in France and returning to their Swiss domicile at least once per week.
According to the Court, the plaintiff cannot rely on the EU-Switzerland agreement. He does not carry out his activities in Switzerland, having kept these in France, and does not travel from the place of his economic activity to his place of residence in Switzerland at least once a week. (Original version in French by Mathieu Bion)