Can the Shares of Companies Owning French Real Estate be Categorized as Real Estate? Some Keys to Solve the Riddle

Volume 12 No 5    /    Read Article

By Xenia Lordkipanidze and Clement Pere (Guest Authors)

An immovable asset is a plot of land or a structure built on the land. Neither can be moved without being damaged or without damaging the land to which it is attached. Certain rights are also immovable due to their intrinsic link to immovable assets. An example would be real estate property rights, such as those embedded in a usufruct arrangement. In comparison, a movable asset can be transported from one place to another or is intangible by its nature. The French Civil Code expressly includes shares of companies in the concept of movable assets, even where such companies own real estate. The historical distinction between immovable and movable property is why French tax law created an autonomous concept of a “predominantly real estate company.” The definition of a predominantly real estate company varies depending on the tax being imposed. In their article, Xenia Lordkipanidze, a Partner in Overshield Avocats, Paris, and Clement Pere, an Associate in the Tax Department of Overshield Avocats, Paris, explain the inconsistency of French law and cases. The *Cour de Cassation*, the French Supreme Court for non-administrative matters, has jurisdiction over disputes relating to gift and inheritance duties and wealth tax has reached one conclusion – shares comprise movable property. The *Conseil d’Etat*, the French Supreme Court for administrative matters has jurisdiction over disputes relating to personal and corporate income tax, including capital gains tax, has reached a contradictory conclusion – shares of a predominantly real estate company comprise immovable property. The question posed by the authors is which Supreme Court reached the correct answer. Not surprisingly, the answer given is that it depends on relevant factors.   See more →