Victory in the Conseil d’Etat over Article 164C CGI

As you may or may not know, the infamous French Income Tax code Article 164C CGI (Code General des Impots), has been a point of contention with international buyers particularly from those countries who are not exempt from the double taxation treaty with France. Those who are from countries that do have a double tax treaty with France are of course exempt from this tax.

Article 164C states that any non tax resident of France who has property in France available to them, is liable for French income tax which is 3 times the annual rental value of that property.

So, for residents in countries that do not have double tax agreements with France, such as Monaco, it means that if you have a second home in France, you have to pay the 3 times annual rental value.

So, here is the big news for you.

Last year, on December 26, 2013, a ruling No. 360488, was made by the French Conseil d’Etat which is the supreme court here in France, confirming that Article 164C of the French tax code is actually in breach of EU law.

The case, commonly known as Kramer from a german couple living in Monaco, challenged article 164C for a property they bought in France for their own use, and actually won their case in the Conseil d’Etat.

The ruling was based on a decision formerly made by the Court of Justice of the European Union taken on the 17th of October, 2013 C-181/12 that relates to the 4th freedom of the European single market which is freedom of the movement of capital, specifically Article 64.1 of the Treaty on the Functioning of the European Union which states that “prohibiting restrictions on the movement of capital shall be without prejudice to the application to third countries of  any restrictions which exist on 31 December 1993 under national law or Union law adopted in respect of the movement of capital to or from third countries involving direct investment including real estate-..”

So this means that anyone living in Monaco who has property in France for personal use should be able to use this December 26th ruling by the Conseil d’Etat to avoid paying this -3x the annual rental value income tax from Article 164C.

Please note that this is an informational update on this ruling, and is by no means any legal counsel.

That being said, it is probably a good time to meet with your financial or tax advisors to see if your situation is in anyway affected or benefitted by this ruling.

Related article

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