In the case the Paris Court of Appeal overturned a lower court decision, ordering the French state to refund over €73,000 to a Swiss tax resident couple.
In April 2019, the couple made a gift of the bare ownership (nue-propriété) of shares in a Luxembourg based company to their three children, who were French tax residents. The parents retained the life interest (usufruit).
The gift was registered in both France and Switzerland, resulting in gift tax payments in both countries: €244,425 in France on the bare ownership and €183,897 in Switzerland on the full freehold.
The couple then applied to the French tax authorities for a refund of the amount paid in Switzerland, based on Article 784 A of the French tax code, which allows for the offsetting of taxes paid abroad against French tax, to avoid double taxation.
The tax authorities partially approved the request, refunding only €110,179 — a fraction of the amount claimed.
The dispute centered on the method used to calculate the refund. The French administration limited the deduction of the duties paid in Switzerland to the share corresponding to bare ownership only, excluding the part relating to life interest, on the grounds that the foreign basis for taxation was broader.
The couple challenged this method, arguing that Article 784 A does not mention the tax base, only the amount of tax paid abroad on assets located outside France.
The Paris Court of Appeal, in a reasoned judgment, sided with the couple, stating: “The application of this provision justifies taking into account, for the offset, the amount of tax paid abroad due to the transfer of assets located abroad, regardless of the method of calculation.” In other words, the refund should cover the entire amount paid in Switzerland, up to the limit of the French tax, without considering differences in the tax base between the two countries.
The Court overturned the lower court’s decision and ordered the state to refund €73,718, plus legal interest from September 2019. It also ordered the tax authorities to pay €3,000 legal costs.
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