Refund of the 3% tax time-barred according to the limitation period applicable under the ordinary law

11 Oct 2018

Following the decision of the Constitutional Council dated October 6, 2017, the assessment of the 3% tax on dividend distribution has been considered as illegal.

The question arising here is to know which are the impacts of this decision of unconstitutionality on the deadline to file a claim by a taxpayer.

It should therefore be determined whether a decision of the Constitutional Council of unconstitutionality of a tax provision is likely to reopen the deadline to file a claim.

Arguments to claim the 3% tax refund

On this point, it should be reminded that Article R 196-1 of the French Tax Procedures Book provides that:

« To be admissible, the claims relating to taxes other than direct local taxes and their corresponding taxes, must be filed with the tax authorities at the latest by December 31 of the second year following the one, (…) :
c) either when the event motivating the claim took place. A Court decision or an opinion mentioned in the third and fifth paragraph of Article L. 190 does no constitute a such event.»

The question raised aims at assessing whether a decision of the Constitutional Council ruling on the unconstitutionally of a tax provision is a court decision or an opinion such as covered in the third and fifth paragraphs of Article L. 190 which provides that:
« For the purposes of the third paragraph, are considered as court decisions or opinion rendered at the litigation stage, the Supreme Tax Court’s decisions as well as the decisions rendered in application of Article L. 113-1 of the Administrative Code of Justice, the decisions of the Appeal Court as well as those rendered in application of Article L. 441-1 of the Code of Judicial Organization, the decisions of the Tribunal of Conflicts and the decisions of the European Court of Justice ruling on a cassation appeal, an action on failure to fulfill or on a preliminary question ».

The decisions of the Constitutional Council are not included in this list. As a consequence, it could then be argued that by definition the decisions of the Constitutional Council do not fall within the scope of the specific mechanism of the above-mentioned Article L 190.

The question to know whether the above-mentioned provisions are applicable to a decision of the Constitutional Council is controversial and to date neither case law decision nor comments from the French Tax Authorities have been rendered on this point.

Nevertheless, for part of the doctrine, reinforced by a judgment of the Administrative Court of Versailles rendered in 2018, this silence implies that the decisions of the Constitutional Council are likely to reopen the deadline for claim.

It is in this context that in a decision of October 9, 2018, the administrative court of Montreuil decided to question the Higher administrative Court on the question of whether "a decision of the Constitutional Council ruling the non-compliance with the Constitution of a legislative provision [...] constitutes a decision mentioned in the third paragraph of Article L. 190 of the LPF, which could not be consider as an event likely to motivate a claim in respect of direct taxes likely to reopen the time limitation?

The Higher administrative court has three months to render its decision.

Time limitation/FYs to be claimed

In this context, serious arguments exist to support that the decision of the Constitutional Council which motivates a claim by the taxpayer opens a new right to act so that the claims against the alleged illegal tax can then be filed until December 31 of the second year following the one of the decision evidencing the unlawfulness i.e. 31 December 2019.

In this case, taxpayers would be able to claim the 3% contribution paid wrongly since the entry into force of the 3% tax in 2012.

Summary

  • Following the decision of the Constitutional Council dated October 6, 2017, the assessment of the 3% tax on dividend distribution has been considered as illegal.
  • Taxpayers would be able to claim the 3% contribution paid wrongly since the entry into force of the 3% tax in 2012.

 

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