Tax Residence: Owning estate is not sufficient
As a reminder, in 2007 and 2008 one tax household saw itself being charged with additional income tax and social security contributions on account of hidden dividends and distributions. This occurred due to the fact that the administration had considered that the household’s tax residence was located in France and not in Belgium.
In challenging the administration’s decision, the tax-payers appealed to be relieved of the duties and penalties that were imposed on them to the Administrative Court of Montreuil. The tax-payer’s request was partially approved by the Court. The tax-payers lodged an appeal against the judgement, whereby they asked for a remit on the remaining amount to the Administrative Court of Appeal of Versailles, which relieved them of the 25% penalty that was applicable to the surplus of the social security contributions.
The tax-payers lodged their appeal with the justification being that the location of their tax residence was in Belgium and not in France, under Article 4 B of the General Tax Code. Indeed, they considered that neither their home or principal residence, nor the location of their professional activity, nor their centre of economic interests were located in France.
The Court found that although their home and place of economic activity were not located in France, their centre of economic interests was, after evaluating the companies and property that they owned. They had not demonstrated and shown that they possesed further assets and holdings outside of France, or further income from other foreign sources.
On the basis of this decision, the Conseil d’Etat reminds us that the determination of tax residence is contigent upon the ratio between assets held in France and those held abroad.
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