OD FLASH | The Council of State overturns the BOFiP ruling and extends the exemption from the trust levy to individual retirement plans

Decision No. 511615 – Council of State

The Council of State overturned established administrative doctrine by ruling that the exemption from the specific levy applicable to trusts applies to all “retirement trusts,” including those established to manage individual retirement plans.

For the record, Article 990 J of the General Tax Code establishes a sui generis levy intended as a deterrent, historically aligned with the highest rate of the ISF (Wealth Tax) and subsequently transferred to the IFI (Real Estate Wealth Tax) by the 2018 Finance Act. This levy applies to assets held in a trust when annual reporting obligations are not met. It must be paid no later than June 15 of each year.

The legislature has, however, provided for an exemption for trusts established to manage pension rights acquired by beneficiaries in the course of their professional activity, under a pension plan set up by a company or a group of companies (CGI, Art. 990 J, II).

In its administrative doctrine (BOI-PAT-IFI-20-20-30-20, No. 140), the tax administration had nevertheless adopted a restrictive interpretation, specifying, in a simple remark, that:

“Trusts established to manage individual pension plans, however, remain subject to the levy provided for in Article 990 J of the CGI. ”

Following an appeal for abuse of power against the implicit decision of the Minister of the Economy refusing to repeal this doctrine, the Council of State overturned this refusal, relying in particular on the legislature’s intent as reflected in the 2011 parliamentary proceedings.

The High Court notes, first, that Article 990 J of the CGI makes no distinction between whether the pension plan established by the company benefits multiple employees or a single individual.

It emphasized, secondly, that an individual pension plan falls within the scope of the exemption provided that it was established by a company in connection with the beneficiary’s professional activity, subject to compliance with the condition regarding the administrator’s location.

Consequently, by generally and absolutely excluding individual retirement plans from the benefit of the exemption, the tax authorities misinterpreted the meaning and scope of the law and committed an error of law.