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France: Anti-avoidance tax provision (“Charasse amendement”) held constitutional

France: Anti-avoidance tax provision, constitutional

The French Constitutional Court ("Conseil Constitutionnel") issued a decision holding that a French anti-avoidance tax provision, known as the “Charasse amendement”—that prohibits the deduction of part of the interest charge borne by a French tax group for the acquisition of the shares of a French company that was not previously member of the tax group from a company that controls the acquiring company or is under common control with the acquiring company—was constitutional.


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Read the decision (French) issued on 20 April 2018.


Article 223B §6 of the French tax law is known as the “Charasse amendement” providing that:

  • There is a partial recapture of financial expenses borne by a French tax group. 
  • The recapture arises when: (1) a tax consolidated company acquires shares of another company from an entity that is not part of the French tax group but that controls the acquiring company or is under common control with the acquiring company within the meaning of Article 223B; and (2) the acquired company joins the tax group.

The aim of the “Charasse amendement” is to address a perceived tax abuse in connection with favorably locating the financial expenses of the tax group.

A challenge to the “Charasse amendement” was submitted to the Constitutional Court by France’s highest administrative court (“Conseil d’Etat”) on the basis that the provision automatically applies when the factual conditions (noted above) are met and could therefore be contrary to article 13 of the Declaration of Human and Civic Rights (that provides for the constitutional principle of equality of citizens before the law). Read TaxNewsFlash-Europe

At issue was whether the absence of a safe harbor clause in the application of what has been known as the “Charasse trap” as codified under article 223B §6 of the French tax law, could be considered as contrary to the French Constitution.

Constitutional Court decision

In its decision (20 April 2018) the French Constitutional Court answered that the absence of a safe harbor clause was not contrary to the provisions of the French Constitution.

The Constitutional Court considered that the aim of the provision was appropriate to avoid a situation when, in a transaction that is financed by borrowings, interest related to the acquisition borrowing is set off against the inclusion of the income results of the acquired company in the results of the tax group. The intention of the French measure was, in the court’s opinion, appropriate to avoid additional tax benefits.

The Constitutional Court noted that to the extent that:

  • the tax provision at issue does not create per se a presumption of tax fraud or evasion, and 
  • the contemplated transaction (i.e., inclusion of the results of the acquired company in the tax results of the group and the deduction of interest) could actually result in a duplication of tax benefits, 

then the French law used what were found to be rational and objective criteria in order to meet the objectives.

The Constitutional Court concluded that there was no infringement of the principle of equality for taxpayers to finance public spending and that article 223B §6 conformed to the rules of the French Constitution.


For more information, contact a tax professional with Fidal* in France or with the KPMG member firm in France: 

Olivier Ferrari | +33 1 55 68 14 76 | 

Gilles Galinier-Warrain | +33 1 55 68 16 54 | 

Laurent Leclercq | +33 1 55 68 16 42 |

Bruno Bacrot | +33 1 47 38 89 96 |

Patrick Seroin | + 33 (0) 1 5568 4802 |

* Fidal is a French law firm that is independent from KPMG and its member firms.

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