On the conformity to the French Constitution of the provisions of the French tax code relating to the specific REIT-like tax regime (Société d'Investissements Immobiliers Cotée, SIIC) set forth under Articles 208 C et seq of the French tax code (FTC), the Conseil Constitutionnel ruled that these provisions, which lead to a differentiated tax treatment of unrealized capital gains, did not create a breach of equality between taxpayers.
In the case at hand, the taxpayer was challenging the constitutionality of Article 208 C ter of the FTC, which provides that a tax on unrealized capital gains is due, when certain non-eligible assets of a company who has already elected for the SIIC tax regime become eligible to this regime. Unlike the tax on unrealized capital gains which applies upon the election of a company for the SIIC tax regime and which is also paid in four installments over four years, the applicable tax rate of such so-called exit tax is the rate applicable on such year.
The Conseil Constitutionnel ruled that companies which are subject to the tax on unrealized capital gains upon their election for the SIIC tax regime and companies which are subject to this tax following this election are not in the same situation, and therefore that the FTC could lawfully provide for a differentiated tax treatment of without creating a breach of equality.
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