France: Anti-abuse rules applied in EU Merger Directive | KPMG Global
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France: Anti-abuse rules applied in context of EU Merger Directive

France: Anti-abuse rules applied in EU Merger Directive

The Court of Justice of the European Union (CJEU) this week issued a judgment in a case concerning a determination by the French tax authority not to defer the taxation of capital gains realized with respect to a French company’s assets at the time of its merger with a company established in another EU Member State. The French tax authority denied the tax deferral on the bases that the merging companies had not sought prior approval from the French tax authority and that the merger was not for “valid business reasons” but was for the purposes of tax evasion or tax avoidance. The CJEU found that the derogation from the tax deferral provided for under the EU Merger Directive was to be interpreted restrictively.


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The case is: Société Euro Park Service, venant aux droits et obligations de la société Cairnbulg Nanteuil v. Ministre des finances et des comptes publics, C-14/16 (8 March 2017)

The CJEU found that the provisions of the EU Merger Directive are not intended to achieve exhaustive harmonisation to counter tax evasion and avoidance at the EU level. The CJEU reiterated its established position that, in line with the preamble of the Directive, a cross-border merger is not to be hampered by restrictions, disadvantages or distortions arising from domestic law provisions. The CJEU concluded that in determining whether a merger, division, transfer of assets or exchange of shares pursues the objective of tax evasion or avoidance, each case must be analyzed on its own merits in order for the derogation to be applied in line with the EU Merger Directive.

The CJEU held that transposition of the derogation into French law, by prescribing procedural and substantive requirements for taxpayers, went beyond the provisions of the EU Merger Directive and that which is necessary to prevent tax evasion or tax avoidance and cannot be justified on the basis of protecting the balanced allocation of the power to impose taxes between the EU Member States—i.e., such constitutes an obstacle to the freedom of establishment.


Read a March 2017 report prepared by KPMG’s EU Tax Centre

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