A capital gain realized by a French non-trading real estate company (Société Civile Immobilière – SCI) cannot be taxed at a different rate when its individual partners are non-residents of the European Economic Area (EEA)
The article 244 bis A of the French General Tax Code (GTC) which establishes a different tax rate for the taxation of the capital gains on the sale by a SCI of a property located in France, when partners are non-residents of the EEA, is contrary to the Treaty on the Functioning of the European Union.
According to this article, gains realized by a SCI in which partners are non-residents of the EEA are taxed at a flat rate of 33,33% whereas residents are taxed at 19%.
The French Supreme Administrative Court (“Conseil d’Etat”) confirmed that the article 244 bis A of the GTC is contrary to the free movement of capital principle implying, as a consequence, the ban of any restrictions to movements of capital between member states themselves and between member states and other states.
This means that a capital gain realized by a SCI should be taxed at the normal rate of 19%, regardless the place of residence of its partners.
As a consequence, it is possible to claim for the reimbursement of the portion of the taxation corresponding to the difference between the two tax rates, i.e. equal to 14.33 %.
In principle, such a claim should be submitted to the French tax authorities before the end of the year, i.e. December 31st, 2014, regarding any taxation intervened during the year 2013.
Avocat à la Cour / Attorney-at-law