Current Tax Developments - Retroactivity

Three companies liable for corporate income tax each held a third of the capital of a partnership which had not elected for the corporate income tax regime. After the closing date of a given fiscal year, the general meeting of partners responsible for approving the accounts, decided to modify the rules governing the allocation of the company's income with retroactive effect as from the date on which the fiscal year ended. The Nancy administrative court of appeal ruled in a judgment (no.94 - 1627) dated October 12, 1995, that this retroactivity was not binding on the Administration. Indeed, according to consistent case law, the retroactive effect granted with the consent of the parties to a contract cannot affect the allocation of profits for fiscal years prior to the year in which it was entered into.