French supreme administrative court considers Article 209 B of the French Tax Code to be compatible with international tax treaties: does this close the long-running legal debate?

Written by Sébastien de Monès and Victor Camatta

Published in the journal Revue de Droit Fiscal by LexisNexis.

The French Conseil d’État (supreme administrative court) recently held that Article 209 B of the French Tax Code (French CFC regime) is compatible with international tax treaties, even in the absence of an express provision authorizing its application. Applying the principle of subsidiarity of tax treaties as laid down in the Schneider Electric decision of June 28, 2002, the French Conseil d’État thus draws all the consequences from the fact that French domestic law, following the 2005 Finance Act, qualifies the foreign entity’s profit as investment income. The legislator’s use of legal fictions as provided for in domestic law to ensure a domestic law provision is compatible with the tax treaty is thus validated. While this position is not illegitimate in the case at hand, in view of international standards and the primary function of tax treaties, the opinion of the rapporteur public (independent legal officer giving impartial opinion on all cases before the court) raises questions more generally about the possible use of domestic law legal fictions beyond anti-abuse measures. Read more