The Conseil d'Etat (Supreme Administrative Court) decided on December 29, 1995 that revenues which are deemed to have been distributed under Article 111 bis of the French Tax Code, which concerns profits and reserves, whether they have been capitalised or not, of a company subject to corporate income tax which ceases to be liable, are not subject to the payment of equalisation tax. Indeed, the Court considered that equalisation tax is only due on distributions to which an "avoir fiscal" (dividend tax credit) is attached. However, in accordance with Articles 158 bis and ter of the French Tax Code, the "avoir fiscal" is exclusively attached to income distributed by a company to its shareholders in the form of dividends, in accordance with a decision duly taken at its General Meeting of Shareholders. Consequently, profits deemed, on a tax viewpoint, to have been distributed owing to the sole fact that one legal entity ceases to be subject to corporate income tax, do not fall within the scope of the "avoir fiscal", and by consequence, nor are they subject to equalisation tax. Note that this decision does not make reference to the restrictive definition of dividends laid down in a previous decision by the Conseil d'Etat, dated July 8, 1992, concerning a company's repurchase of its own shares, according to which the income must be periodical and renewable in nature. Indeed, such a condition would have excluded the liquidation surplus distributed upon the dissolution of a company from benefiting from the "avoir fiscal".
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