E-newsletter  -  October 2014

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Tax Law
Clarification on the tax treatment of management packages: the Conseil d’Etat “punishes” shareholding managers

Jean Pierre Chaux

Management packages have developed with the rise of LBO deals. They serve as an incentive to managers - keys persons to the success of a LBO deal - by enabling them to have a stake in the capital and, therefore, to benefit from an exit capital gain, in conditions that are generally relatively favorable.

For a long time, common practice considered the exit capital gain as a capital gain on securities, as opposed to a salary, until the French Tax Authorities (the “FTA”), through a Tax Instruction initially published in 1995, updated since then and still in effect today, made it clear that taxable gains earned under schemes providing access to capital other than those schemes specifically provided for by the French legislator (stock options, nowadays free shares, etc.) would likely be subject to re-characterization. 

Yet, the first tax inspections were carried out only later, i.e. at the beginning of the 2000’s. 

In a decision issued on September 26, 2014, the Conseil d’Etat (French Supreme Administrative Court) ruled - for the first time to our knowledge - on the nature of the taxable gain. 

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Tax Law
Companies are now subject to a new filing requirement with respect to their transfer pricing policy

Sandrine Boeglin

For financial years ended as from the enactment of the Law of December 6, 2013, companies that exceed certain defined thresholds have the obligation to file an annual return form and provide information on their transfer pricing policy.

Companies that closed their financial year on December 31, 2013 will have to file for the first time this transfer pricing return form on November 20, 2014. 

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Real Estate
Latent defects: Purchaser has no right to claim for the cancellation of the sale if he has been sluggish in initiating legal proceedings

Sophie Risaletto

The warranty against latent defects is a legal obligation imposed on the seller of a real estate property in order to protect the purchaser. When a latent defect is identified on a sold property and insofar as three cumulative requirements are met, the purchaser had so far the option to request either the cancellation of the sale (so called action rédhibitoire) or a reduction of the purchase price (so-called action estimatoire). In a decision dated June 25, 2014, the Cour de Cassation (French Supreme Court) seems to now deny the purchaser the right to request the cancellation of the sale if he has been sluggish in initiating proceedings to enforce the warranty against latent defects.
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The AMS Group acquires ASDIA

Catherine NommickChems Idrissi and Jean-Pierre Chaux have assisted the AMS Group, specialized in the trade and lease of medical devices and the supply of home care services, in connection with the acquisition of ASDIA, a provider of home healthcare services dedicated to the treatment of diabetic patients at home.

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