On May 7, 2015, the Conseil d'Etat requested from
the Conseil constitutionnel, on behalf of a French bank, a
QPC on the conformity to the French Constitution of Article 18 of
the Amending Finance Law for 2012 dated August 16, 2012
(Finance Law for 2012), which introduced a
limitation on the deductibility of capital losses incurred on the
sale of shares occurring less than two years after their issuance.
In a nutshell, where the market value of such shares at the time of
their issuance is lower than their book value, the difference may
not be deducted from the taxable profits of the taxpayer at the
time of the sale.
While this provision was adopted on August 16, 2012, the Finance
Law for 2012 provided that it would be retroactively effective to
any sale of shares received within the course of a contribution
made on or after July 19, 2012.
This QPC request originated in the French bank's decision on
July 19, 2012 to contribute 2.32 billion euros for refinancing
purposes in the share capital of a Greek bank, prior to the
disposal of the Greek bank's shares for one euro.
In view of the French tax authorities' decision to disallow
the deductibility for tax purposes of the 2.32 billion euros
capital loss, the French bank argues before the Conseil
constitutionnel that the retroactive entry into force of
Article 18 of the Finance Law for 2012 infringed the rights and
freedoms guaranteed by the French Constitution, and inter
alia the principle of guarantee of rights set out in Article
16 of the Declaration of Human and Civic Rights of 1789. According
to past case law of the Conseil Constitutionnel, this
principle prohibits infringements of legally obtained positions
without sufficient grounds of general interest.
While the Conseil constitutionnel is expected to issue
its decision within the next few months, it remains to be seen
whether Article 18 of the Finance Law for 2012 was an infringement
of the legitimate expectations of the French bank in respect of the
recapitalization of its Greek subsidiary.
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