On the conformity to the French Constitution of the allegedly retroactive entry into force of Article 18 of the Amending Finance Law for 2012 dated August 16, 2012 (Finance Law for 2012), the Conseil Constitutionnel ruled that there was no infringement of the legitimate expectations of the taxpayer and therefore no breach of the rights and freedoms guaranteed by the French Constitution.
Article 18 of the Finance Law for 2012 introduced a limitation on the deductibility of capital losses incurred on the sale of shares occurring less than two years after their issuance, a limitation that applied to any sale of shares received within the course of a contribution made on or after July 19, 2012.
This provision had inter alia an impact on the tax position of a French bank which had decided 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.
The Conseil Constitutionnel ruled that, notwithstanding the taxpayers intentions or even the price the shares were sold for, an acquisition of shares within the course of a capital contribution, could not give rise to any legitimate expectations as per the tax treatment of the sale of these shares.
In addition, the Conseil Constitutionnel ruled that the retroactive entry into force of this provision to any sale of shares received within the course of a contribution made on or after July 19, 2012, date on which this provision was first submitted to parliamentary vote, was intended, in the interest of loyalty, to safeguard the rights of taxpayers who would sell shares acquired within the course of a contribution made prior to this date.
As such, Article 18 of the Finance Law for 2012 was found compliant with the French Constitution.
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