In a decision of 15 November 2016 (n°16VE00721), the Administrative Court of Versailles recognised that a company electing for the SIIC regime (French “REIT” regime applicable to listed property investment companies – Sociétés d’Investissement Immobilier Cotées) was entitled to assess the basis for computation of the exit tax on shares in real estate subsidiaries by taking into account a discount for tax on latent capital gains.
In the instance, the taxpayer had taken a filing position whereby the fair market value of the shares of its subsidiary has been determined, for the purpose of assessing the exit tax, by taking into account the tax discounts that are considered as market practice in France.
This position was challenged by the French tax authorities but the administrative court ruled that regardless of whether the fair market value of the shares is estimated in the context of a real transaction or for the purpose of assessing the basis of the exit tax, any discount that is admitted under normal market practice should be taken into account.