Invalidating the administrative doctrine, the French High Court has recently decided that property developers selling buildings more than five years after the completion are not liable for V.A.T. on the margin.

The fact that the taxation regime to V.A.T. provided by article 257-7 is not applicable, according to point 2 of the latter, to operations on buildings completed since more than five years, can indeed not imply that the latter operations enter into the field of application of article 257-6, even though they would be on account of a person having, on behalf of other activities, the capacity of estate agent. Indeed, the consequence from the preliminary works of the law dated January 6, 1966, from which article 257-6 of the French General Tax Code is extracted, is that the regime of taxation to V.A.T. on the margin which the latter provides can only be applied to usual operations of purchase-resale of buildings as they are (CE, March 13, 1996, no.11239).

Article 257-6 of the French General Tax Code subjects to V.A.T. (computed on the margin: French General Tax Code, art. 268), operations linked to buildings, business, shares or estate companies shares and the results of which must be comprised in the bases of income tax as industrial and commercial profits. By way of restricting the application of this article to estate agent operations in the strict sense of the expression, the French High Court invalidates the administrative doctrine and reconsiders the case law resulting from a decision dated December 1st, 1982, confirmed by another decision dated February 8, 1986.

The solution retained, based on the origin of the texts involved, is also more in accordance with article 268 of the French General Tax Code defining the V.A.T. base "estate agent": the latter is indeed composed by the difference between the sales price and the sums paid for the acquisition of the good.

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