Information Note on the Court’s case-law 197

June 2016

Société Oxygène Plus v. France (dec.) - 76959/11

Decision 17.5.2016 [Section V]

Article 7

Article 7-1

Heavier penalty

Increased tax liability as a result of loss of special tax status: inadmissible

Facts – The applicant is a company carrying on the activity of “property dealer” * . Between 1997 and 2001 it benefited from favourable tax treatment in relation to the ordinary stamp duty for property conveyancing ( droits d’enregistrement ). In 2002 the tax authority observed that the applicant company had not satisfied one of the statutory conditions for that regime, namely the obligation to keep a register of all property transactions, and considered that the anomalies were serious enough to warrant the forfeiture of the favourable treatment. Consequently, the applicant company was required to pay EUR 213,915, corresponding to the tax ordinarily levied on property transactions, including EUR 43,353 in default interest.

The applicant company challenged that reassessment. During the proceedings a new law replaced the measure of forfeiture of the favourable tax treatment by a system of tax penalties. Subsequently, even the obligation to keep a register was abolished. The applicant company thus found it justified to rely on the principle of the application of the more lenient criminal law. But the Court of Cassation dismissed its appeal on points of law on the ground that the new law could not call into question obligations that had lawfully arisen on the date of the event which rendered the tax assessable.

Law – Article 7: In the present case, the impugned forfeiture of the favourable treatment had not been decided further to any conviction of a criminal offence. That finding was not, however, decisive in itself, as the Court had to examine the case in the light of the criteria set out in Engel and Others v. the Netherlands ( 5100/71 et al., 8 June 1976).

The first of those criteria – the fact that the forfeiture did not fall within the criminal law but was matter of tax law – was not decisive here.

The second criterion, concerning the nature of the offence, was the most important. The relevant provision of the General Tax Code provided for the possibility of derogation from the ordinary law and exemption from the tax ordinarily levied on property purchases, subject to compliance with certain formalities. It thus appeared logical that a property dealer claiming preferential treatment but failing to satisfy the conditions, which constituted a decisive factor for granting the tax regime, should have that treatment withdrawn, resulting in the application of the ordinary law and therefore in the payment of taxes which it would normally have had to pay. It could not be said that the forfeiture of the preferential treatment was based on a rule whose aim was both preventive and punitive.

As to the third criterion, lastly, it was true that the applicant company had been ordered to pay significant amounts. However, they consisted merely of a tax reassessment together with default interest. No penalties had been imposed on the applicant company, whose good faith was not disputed by the tax authority.

Regard being had to the foregoing, the withdrawal of the preferential treatment did not, in the present case, constitute a “penalty” within the meaning of Article 7 of the Convention.

Conclusion : inadmissible (incompatible ratione materiae ).

* A property dealer ( marchand de biens ) buys and sells real estate to generate capital gains.

© Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court.

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