One of the joys of the French constitutional system is that the administration is by definition opposed  to the citizen, the remainder of the state, the European Union  and, lastly the courts within a framework of a particularly strenuous set of tensions.  Those are the sociological thrills of now outdated republican thinking.

 

The one binding principle under which the tax administration is required to operate is that of certainty after a certain point in time. In the French system, there has to be a point where the tax cannot be reclaimed and becomes irrecoverable, in order to enable the economy to function on some kind of stable basis. Limitation or préscription is therefore a constitutional issue as to law and order in a situation which would otherwise rapidly become anarchic.  The anarchy is perpetuated when the administration continues to act against the decisions of the Courts, which it frequently continues to do.  There is no general "Crown" sovereign coverage giving unwritten constitutional legitimacy in a Republican system of laws: cf The Queen in Parliament; Her Majestiy's Revenue and Custome, Her Majesty's judges, Her Majesty's armed forces etc..

 

In an international context, the French fiscal prescription periods have therefore been changed on several occasions to give the administration time to be able to understand and then tax the international structures with which it is now faced. The previously universal periods  of Three years general limitation in tax matters, subject to certin extensions in droits d'enregistrement such as ISF, succession and gift taxation was argued successfully in front of the Parliamentary process to be insufficient in the absence of promptly available information from abroad. That period was therefore extended to 10 years for trusts in general and for arrangements with fiscally privileged tax régimes, including Non Compliant States and Territories (ETNCs). This more general extension is probably in breach of EU capital market rules, which do not tolerate blanket arbitrary discrimination in areas where there is effective information exchange, even with the slight hiccups in the BVI TIEA.

 

The French Conseil d'Etat, 9ème et 10ème ssr 23/06/2014, in decision n° 355801 has just handed down a judgement of fundamental principle, that any fiscal audit and change of a taxpayer's position has to be initiated within a limitation period, which, if not stipulated in the taxing statute is, in internal legislation three years. A legislative failure to stipulate such a period means that there is a constitutional fallback to the principle of sécurité juridique.

 

The appeal had been brought by French Polynesia, a Collectivité d'Outre Mer, rather than a DOM, over a tax credit granted in an immovable property matter under its domestic tax legislation, which is based on the French tax code, and is therefore of universal domestic application within France.  The judgment is expressed to be limited to the French droit interne.  The issue was that there had been no defined prescription period set out in the COM's legislation.

 

Given that this COM is technically an uttermost extension of the EU, it would however be entirely inappropriate of the French administration to block extension of the  principle of sécurité juridique to other OCTs say in the Carribean, even those under laws based on other Member States' legal traditions.

 

The 10 years prescription period allotted to ETNCs, such as now BVI, may still stand, but where there is any doubt in its application there may be a recourse to the principle of sécurité juridique, and perhaps to the Three or even Six year periods generally applicable in internal legislation.

 

If the BVI can prove that it is providing information under its TIEA,  it is possible that the French prescription periods can be  shown to be discriminatory and invalid to the extent that they exceed equivalent treatment to for example other French territories overseas within the second zone of the OCT - EU Capital Market.