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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