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
As such, Article 18 of the Finance Law for 2012 was found
compliant with the French Constitution.
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