Incompatibility of French non-resident capital gains tax with free of movement of capital confirmed for the past and potentially for the future!

Written by Victor Camatta and Franck Morhain

Published on European Tax Blog

In a decision dated 20 October 2020, previously covered on this blog, the Administrative Court of Appeal of Versailles had ruled that the French capital gains tax applicable to non-French resident corporate sellers on the transfer of a significant shareholding (art. 244 bis B of the FTC) was likely to constitute a discrimination inconsistent with the EU principle of the free movement of capital, when this regime leads to a tax liability higher than the amount of corporate income tax that would have been payable had the non-EU taxpayer been established in France (e.g. pursuant to the French participation exemption regime). The Court further considered that this discrimination was not covered by the EU standstill clause and that eligible non-EU taxpayers were allowed to claim the full discharge of this capital gains tax. Read more