French Tax Update - Recently Published Noteworthy Decisions

French Tax Update - Recently Published Noteworthy Decisions

The present French Tax Update will focus on an overview of several noteworthy French tax court decisions issued during the past few months. 


The tax treatment of buybacks, from the shareholders' point of view, has now been simplified through a change of legislation, i.e., capital gain/loss treatment in all situations (see French Tax Update of January 2015).

In a decision dated April 1, 2015, the Conseil d'Etat ruled on a specific question regarding the tax treatment of a listed issuer that had purchased its own shares, with the initial purpose of using them for existing ESOPs, and that had subsequently decided to cancel them. This change of purpose had resulted in an accounting reclassification of the shares. In the meantime, the issuer had created a reserve, inter alia, to recognize the depreciation of the shares compared to their buyback price. The French tax authorities (FTA) were of the view that the reserve should have been reinstated once the decision was made to cancel the shares.

The Conseil d'Etat ruled in favor of the issuer by considering that the decision to cancel the shares (which was made after the shares had been purchased) should be likened to a decision to sell the same and buy them back again. Accordingly, unless the FTA could prove (under the abuse of law procedure) that the issuer knew from day one that it was going to cancel the shares, the reserve should not be reinstated.

Please contact Siamak Mostafavi if you are interested in this issue.

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