In a case (no. 94-309) dated April 17, 1996, the Lyon Administrative Court of Appeals laid down the conditions under which Article 160 of the French Tax Code applies. The Article imposes a flat rate of taxation at 16% on the sale of a significant quantity of shares. The Article is applicable on the condition that the seller of all or part of the shares in a company has held, directly or indirectly, more than 25% of the shares in the given company for a period of 5 years preceding the sale. The Court considered that the indirect holding of shares in the company, by an interposed company, will not be taken into consideration unless the seller and his spouse, their ascendants and descendants, hold the majority of capital in this interposed company and that one of these persons exercises a managerial position in the interposed company.

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