Luxembourg, 12/03/2004 (Agence Europe) - The European Court of Justice has issued a ruling in the case of Lasteyrie du Saillant, a French taxpayer who left France to go and work in Belgium, while holding securities in France. The market value of those securities being then higher than the price at which they were acquired, Mr de Lasteyrie was subject to immediate taxation on the unrealised (or latent) increase in value of the securities held, in accordance with the provisions of the Code Général des Impôts (General Tax Code) applicable to taxpayers moving their residence for tax purposes outside France and was immediately taxed for unrealised increases in value on unrealised income on securities he owned in France, explains the Court in a press release.
Taking the view that those provisions both created “inequality of treatment” because they penalised only taxpayers wishing to leave France and were disproportionate to their declared aim of preventing tax avoidance, Hughes de Lasteyrie asked the Conseil d'Etat to annul the decree instituting them for excess of powers. The Conseil d'Etat decided to refer a question to the Court of Justice as to whether the French legislation to avert the risk of tax avoidance was compatible with the principle of freedom of establishment under the EC Treaty.
The Court ruled that the measure has 'at the very least a dissuasive effect on taxpayers wishing to establish themselves in another Member State, because they are subjected … to disadvantageous treatment by comparison with a person maintaining his residence in France,' and is therefore liable to hinder the freedom of establishment. Although provision is made for suspension of payment, that is not automatic and is subject to strict conditions, namely the setting up of guarantees and designation of a representative in France, explains the Court.