Companies that have elected for the specific REIT-like tax
regime set forth under Articles 208 C et seq of the French
tax code (Société d'Investissements
Immobiliers Cotée, SIIC) are exempt
from corporate income tax on (i) rental income (realized either
directly or through tax flow-through partnerships), (ii) capital
gains arising from the sale of eligible real estate assets, and
(iii) dividends received from subsidiaries having themselves
elected for the specific SIIC tax regime.
Article 208 C of the French tax code, however, provides that the
election for the SIIC tax regime gives rise to the taxation of the
unrealized latent capital gains attached to assets that are
eligible for the SIIC tax regime (real property rights, wholly
owned buildings, usufruct rights, the rights of a lessee under a
construction or ground lease, rights of a lessee under a financial
lease, rights on properties temporarily granted by the French State
or one of its subdivisions, and shares in certain partnerships or
SIIC subsidiaries that have the same business purpose as a SIIC
(Eligible SIIC Assets)) at the reduced rate of 19
percent. Such so-called exit tax has to be paid in four
installments over four years as from the SIIC election year
Article 208 C ter of the French tax code further provides that the
Exit Tax is also due by a company that has already elected for the
SIIC regime on unrealized latent capital gains attached to Eligible
SIIC Assets that become eligible to the SIIC regime. This is the
case, for instance, where a non-SIIC company holding Eligible SIIC
Assets is merged into a SIIC company, or where a SIIC subsidiary
that has not elected for the SIIC regime is transformed into a
partnership (in such case, the Eligible SIIC Assets give rise to
the Exit Tax only to the extent of the share held by the SIIC into
the newly formed partnership).
Unlike the regime provided for by Article 208 C of the French tax
code, Article 208 C ter of the French tax code does not
provide that the Exit Tax installments to be paid on the years
following the year where the relevant event (e.g. the merger) took
place will remain due at the rate applicable on such year. Such
difference became relevant in 2009, when the initial Exit Tax rate
of 16.5 percent was increased to the current rate of 19
In the context of an ongoing procedure between a SIIC company and
the French tax authorities, presumably involving an application of
the provisions of Article 208 C ter of the French tax code after
the above-mentioned rate increase but in respect of an event that
took place before such increase, a SIIC company has thus challenged
the constitutionality of these provisions.
Considering that such provisions had never been reviewed by the
Conseil constitutionnel and could potentially create a
breach of equality between taxpayers, the Conseil
d'Etat requested a QPC from the Conseil
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Cyprus Tax Department recently issued Forms T.D 38, T.D 38Qa and T.D 38Qb applicable to individuals being Cyprus tax residents but non-Cyprus domiciled.
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