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Decision of the Council of State: End of tax discrimination 

The Council of State , in a decision dated November 20, 2013, had to address the question of the tax rate applicable to capital gains on real estate generated in France by taxpayers residing for tax purposes in Switzerland.

He considered that the call by the Minister of the Budget to apply the rate of 33 1/3% was unfounded because it was discriminatory: Swiss residents should have been subject to a rate of 16% in terms of real estate capital gains, the rate applicable before January 1, 2011.

Indeed, article 244 bis A of the General Tax Code specifies the tax rate applicable to capital gains made on the sale of goods or rights with reference to article 219 of the said code which sets the tax rate at 33 1/3%.

The Council of State ruled out the 33 1/3% tax by making the non-discrimination clause prevail.

He maintains that article 244 bis A of the General Tax Code provides for exceptional taxation at the rate of 19% (16% before January 1, 2011) which must also apply to nationals and residents of a state outside the EU and the EEA by virtue of the application of the non-discrimination clause contained in the Franco-Swiss Convention in its article 26, paragraph 1: “Nationals of a Contracting State are not subject, in the other Contracting State, to any tax or obligation which is different or more onerous than that to which nationals of that other State who are in the same situation are or may be subject. »

Implications and relief for Swiss taxpayers

This decision of the Council of State confirmed the consistent case law of the Administrative Court of Appeal of Versailles concerning the rate applied to the taxation of capital gains on real estate resulting from the sale of real estate located in France and belonging to a Swiss national residing in Switzerland:

CAA VERSAILLES July 9, 2013 CAA VERSAILLES January 19, 2012 CAA VERSAILLES July 21, 2011

From now on, the French administration will be forced to respect the position of the Council of State. A tax rate of 19% will therefore be applied in terms of final levy, with regard to real estate capital gains in terms of real estate transfer.

Concerning capital gains made before the decision of the Council of State, Swiss taxpayers will be able to request a reduction of 19% within the action period.

The time limit for action is two years from payment of the contested tax, which concerns taxpayers who have paid capital gains tax since December 2011. Law No. 2013-1117 of December 6, 2013 relating to the fight against tax fraud and serious economic and financial crime has also taken note of this state of law in article L190 of the Book of Tax Procedures.

These taxpayers can therefore legitimately request relief, allowing them to recover significant sums.

DAMY law firm , 2014