There appear to be a number of advisors questioning the extent to which the French Conseil d'Etat has invalidated article 164C CGI in its judgement N° 360488 handed down on 26th December 2013, applying a CJEU decision in Yvon Welte Case n° C-181/12 of 17th October, 2013.

 

There are even some who are questioning the extent to which the general principle laid down in no uncertain terms by the highest court in France, and are attempting, for reasons which remain obscure, to insist that the decision can only concern the specific Treaty relationship between France and Monaco.  There is no mention made of that particular anomaly in the Judgement, and it does not require that anomaly to be present for its principle to be effective.

 

Before going further, I would invite the reader to read the judgement of the Conseil d'Etat, and see whether the Conseil D'Etat in addressing a fundamental principle of EU law, saw fit to render the TFEU subject to that agreement. It is clear that the Conseil d'Etat was doing no such thing. It was inferring in no uncertain terms that the French administration had gone too far on far too many occasions for it to be allowed to continue to embarrass the French Republic in front of the Court in Luxemburg. Its reference to Welte was clear enough to render any superficial need for reliance upon the equivalence clause in the Monegasque Treaty irrelevant. The Minister was quite simply prohibited from relying on the standstill provisions in article 57(1) TFEU, as it was not a commercial investment, but a personal one.

 

Those with wobbling knees may wish to refer to the reasoning given by the French Treaty negotiating team to their British counterparts during the 2004 renegotiations of the DTR between  France and the United Kingdom for the removal of what was then article 24 (c)  of the 1968 Treaty, granting effective exemption from article 164C to British residents:

 

Article 24 (c)     A resident of a Contracting State who maintains one or more places of abode in the other Contracting State shall not be subject in that other State to an income tax according to an imputed income based on the rental value of the place or places of abode.

Note that this is not applicable within the Biso analysis, as it applies to residents of the United Kingdom, not to British nationals.  It is not what used to be termed a strong Treaty exemption like the Spanish. However, as the EU freedom of movement of capital applies to residents within the EU, the French assertions appeared trustworthy.

 

The reason given by then French negotiators was that British residents did not need the exemption, as they effectively had the right not to be subjected to taxation under article 164C by virtue of the EU freedoms already applicable. Note that the existing 1968 treaty was in force prior to 1972, the year of accession by the United Kingdom to the EU.

 

Had this assurance not been given, the British would not have persuaded to withdraw article 24(c) from the negotiating table. Whilst the head of the French negotiating team was not known for his "droiture", he was heard to have said that he had slipped something in to nobble trusts, the opportunity for purloining the other Revenue's taxpayers was apparently not lost on the French Finance Ministry.

 

The French administration therefore by "admitting", or rather asserting that article 164C was not valid as against these principles, were able to state that the pre-existing exemption from the tax in the Treaty was superfluous and could be omitted. It would be nice to see the "travaux préparatoires" of the Treaty signed in 2004, but these are generally not released in this detail.

 

De deux choses, l'une: either the French administration admit a total misrepresentation of the effect of the EU freedoms, and reinstate the effective treatment of British residents from article 164C, or they admit that they have effectively, in a contractual context, made a statement that the EU Freedoms render article 164C unenforceable.  Going further into the light of day and stating that  the French are systematically unable to read and apply a Tax Treaty is the truth, but a trifle unnecessary here.

 

The Conseil D'Etat, has confirmed the correct position as being that article 164C is simply invalid as against the EU Freedom of movement of capital provisions irrespective of the application, or not, of standstill provisions; yet another French distraction.

 

This is yet another symptom of cynicism from European treasuries, including HMRC. The current general subsidiarity politic seems to be to pass legislation which is in fundamental breach of the treaties, then garner in taxation in contravention of the TFEU. Then await the appeals, which generally take about eight years, if any European is sharp, or wealthy enough to take them on. The combined psychological effect of the "Faux Amis" of subsidiarity and proportionality, coupled with the assumption that the EC Commission's resources are too stretched is sufficient to persuade the more poker faced civil servants to attempt to tax where comity and incidentally the Treaties, require abstention from draining other treasuries' limited resources.

 

Is that any way to run a European legal and administrative system, within Europe? Apparently so, providing that the Commission doesn't notice!

 

I can leave that question open to debate.

 

Insofar as the validity of article 164C is concerned, I see no reason to continue to blindly respect it, as no less an institution than the Conseil d'Etat has been perfectly clear. The French tax administration and the politicians seeking to manipulate and exploit non-resident taxpayers into paying taxes for which there is no constitutional or legal standing are an embarrassment to the TFEU, and the European electorate.

 

Note that British nationals resident in Monaco are already getting their overpaid taxes back, and there is no reason not to reclaim.

I trust that the British resident rumoured to have been pursued by the Nice administration for this tax on his property in Cap Ferrat has successfully refuted that incursion.

 

I stress that HMRC are not exempt from this criticism either, in other areas.