02/07/2019 by FRANCE TAX LAW 0 Comments
NEWSLETTER JULY/AUGUST 2019
Welcome to our July issue and to our new subscribers, last month I attended the annual Notaires’ conference, that took place in Brussels. What a perfect
place to discuss this year’s topic: International law - Family and Estate planning. The conference is always a very good opportunity to discuss our
practise, experience and exchange information with professionals, lawyers, University professors. Four committees composed of Notaires work on a subject in connection with the topic and propose relevant suggestions to make the Law evolve.
Welcome to our July issue and to our new subscribers, last month I attended the annual Notaires’ conference, that took place in Brussels. What a perfect place to discuss this year’s topic: International law - Family and Estate planning. The conference is always a very good opportunity to discuss our practise, experience and exchange information with professionals, lawyers, University professors. Four committees composed of Notaires work on a subject in connection with the topic and propose relevant suggestions to make the Law evolve. The suggestions often result in modifications of the law, vote of decrees by the Government. This year there are a few suggestions that, we hope, will be taken on board by the Government:
- Ratification of the Hague convention regarding Trusts
- Introduction of an international Private Act (code de droit international prive) to set out international private law, as it exists in Monaco notably.
- Introduction of a bilingual title deed to be signed by the parties.
The suggestions are sensible and at the right time, with the recent regulations on European succession, marriage and partnerships, international private law has become more and more important to Notaires, who realise that the law has to evolve to be able to apply the regulations or conventions without any restrictions.
We had some very interesting judgments rendered by the Courts in France, either in domestic or international law.
1 – CONTRACT LAW
The cooling-off period and notification:
For the past few months, we have had different cases regarding the cooling off in France, whether it relates to the handover of the notification, by post or by hand, the name of the recipient. Whereas the precedent cases often involved a Notaire, this time it is the estate agent who is “in the front line”.
In this case, a real estate agent sold a residential property, drafted the contract and notified each purchaser by registered post, for the cooling-off period. The purchasers refused to complete the sale and used their right of withdrawal. The sellers assigned the purchasers and the real estate agent the payment of the penalty clause and damages.
The precedent case law dated 10th March 2016, which stated that the mission of the real estate agent was not extended to the verification of the signatures of each recorded letter is overruled: now the estate agent must check the signatures on each receipt. It is now the real estate agent’s responsibility"to verify the sincerity, at least apparent, the signature on the notice of receipt of the registered letter addressed to the purchasers" (case law dated 21 March 2019).
Estate agents will have to be vigilant when they send a registered post notification to their clients and ensure that each notification is signed by the correct recipient. Very often two letters are signed by the same person. Without a valid mandate to sign on behalf of the other recipient, in most cases the other spouse, the cooling-off period could be used to withdraw from a contract and after the expiry of the 10-day period.
Capital gain tax and residence
The tax administration recently lost a case against a notaire regarding the sale of a land for 1.4m euros. In this case, the notaire indicated in his deed that the land was the vendor’s main residence. The vendor did not have any house built on it but a caravan. The caravan was there, the vendor lived there for a relevant number of years and it would have been difficult to remove it without damaging the land. As far as the High Court of justice is concerned, the caravan has become an immovable and the vendor was entitled to benefit from the exemption of Capital Gain tax.
We often see a questionnaire to be completed by a vendor in an English property transaction with reference to any neighbouring problems, whether it is a bad relationship or ongoing contentious. This is still fairly unknown in France. This recent case dated 18th April 2019 is interesting and should
make Notaires add a paragraph in their deeds, as it is something we do not often see. A contract for the sale of an apartment was signed between the
parties. The buyer refused to complete the sale on the grounds that the final deed mentioned the existence of an ongoing procedure for repeated nuisances by a neighbour. The seller assigned the purchaser the payment of the amount of the penalty clause.
The judge rejected the vendor’s claim and declared the contract null and void. The judge noted that the tranquillity and security of a property are key elements in a property transaction. It also transpired that the purchaser did ask the vendor about any ongoing procedures or nuisance from any neighbour when he visited the property, nuisances that were not disclosed by the vendor.
2 – TAX
Rate of the stamp duty and land registration tax (CGI, Article 1594 D)
The rates that compose the stamp duty on a property transaction, currently 5.80% in 96 departments of France will remain the same from 1st June 2019 to 31st May 2020. In contrast, in Indre, Isère, Morbihan and Mayotte, the rates that compose the stamp duty will remain at 5.09%.
End of the Taxe d’habitation
It is official, the taxe d’habitation will be removed for everyone in 2023. Prime Minister Edouard Phillipe confirmed the total abolition of the housing
tax on the main residences on Wednesday 12th June 2019, during his general policy speech. The reform of the housing tax was one of the emblematic measures of Emmanuel Macron's electoral program, which promised that by 2020, 4 out of 5 French citizens would no longer pay the housing tax regarding their principal residence.
3 – ESTATE PLANNING-SUCCESSION
Law applicable to an estate - residence
This case was rendered on the 29th May 2019, the day after Johnny Hallyday’s hearing. This case might give Johnny’s widow some hope, when she appeals.
In this case, a person died in New York after the 17th August 2015, the date when the European succession came into force. He left 3 children and
disinherited one of them (his daughter) in his Will. The daughter seized the French court to argue that her father was a French resident. The purpose of her claim was to apply the French law to the settlement of her father’s estate and receive her “reserve”.
The Court of Appeal noted that "the deceased shared his time between the United States and Europe, and more specifically Paris, without the length of stay in one or the other country being determinant for the solution of the dispute, so that the nationality and status of all of his principal property constitute the particular criteria to be used for the overall assessment of the factual circumstances for determining his habitual residence ".
From an appreciation of many facts, the Court of Appeal considered that the deceased was a resident of the United States and that the French jurisdiction was incompetent. In particular, it includes the deceased’s American nationality, as he was born in New York, where he died, exercised all his professional life, and he wrote his will there, declaring in this document "reside in New York", that in New York he owned a real estate consisting of several buildings of significant value and his place of residence was in the United States.
The daughter appealed the decision before the High court of Justice which rejected her claim.
4 – INTERNATIONAL PRIVATE LAW - REGULATIONS
Foreign public documents
The obligation to legalise foreign public documents produced in France finds a textual basis with the reform law for justice.
In the event of a sale or a purchase of a property in France by a foreign person, the notary will be confronted with the foreign civil status records of the interested parties, in particular for the purpose of certifying the identity of the parties. The law of 2019-2022 programming the reform for justice has just reaffirmed the binding nature of their legalisation: "except contrary international commitment, any public act established by a foreign authority and intended to be produced in France must be legalised to produce any effect”.
The new text then reiterates the definition of legalisation already given by Decree 2007-1205 of 10 August 2007 on the powers of the Minister for Foreign Affairs, Ambassadors and Heads of Consular Posts in the legalisation of acts: "Legalisation is the formality by which the veracity of the signature, the quality in which the signatory of the act has acted and, where applicable, the identity of the seal or stamp of which that act is affixed is attested. "
However, as the legalisation process is long and complex, several international conventions make exceptions to this requirement. This is particularly the case of the Hague Convention of 5 October 1961, which replaced the requirement of legalisation with the simplified formality of the apostille.
Most importantly for our British clients, since the 16th February 2019, within the European Union, the EU regulation 2016/1191 of 6 July 2016 exempts from legalisation or apostille certain public documents - in particular, birth certificates, marriage or registered partnerships - issued by the authorities of a Member State and which must be presented to the authorities of another Member State.
However, there is no guarantee that the regulation will remain in place when England leaves the E.U. It is possible that British people will have to provide birth and marriage certificates with an apostille. That will considerably delay the process of buying or selling a property when a Notaire
refuses to instruct the transaction without the required legalised document; not to mention the cost of legalising the original document and obtaining the
apostille certificate from the Foreign and Commonwealth Office.
Brussels II TER!
The Brussels II bis Regulation which contains uniform rules for jurisdiction, recognition and enforcement of judgments in matrimonial matters and in matters of parental responsibility became effective as of 1st March 2005 for 24 Member States of the European Union. The Council adopted on
the 25th June a revision of Brussels II bis, i.e. the future Brussels II ter.
One of the main objectives of the revision is to improve the current legal rules that protect children in cases of cross-border parental responsibility disputes, such as those related to custody, access rights and child abduction.
The new rules amend several aspects of the existing Brussels IIa regulation and foresee in particular:
clearer rules on the opportunity for the child to express his/her viewswith the introduction of an obligation to give the child a genuine and
effective opportunity to express his/her views;
the complete abolition of exequatur for all decisions in matters of parental responsibility. This will save time and money for citizens whenever a
decision needs to circulate from one member state to another. This abolition of exequatur is accompanied by a number of procedural safeguards;
enhanced and clearer rules on intra-EU child abduction cases with the introduction, for example, of clear deadlines to ensure that these cases are treated in the most expeditious manner;
clearer rules on the circulation of authentic instruments and extra-judicial agreements. The text foresees that agreements on divorce, legal separation or matters of parental responsibility, will be allowed to circulate when they are accompanied by the relevant certificate.
clearer provisions on the placement of a child in another member state, including the need to obtain prior consent for all placements, except where a child is to be placed with a parent; the harmonisation of certain rules for the enforcement procedure. While the enforcement procedure remains governed by the law of the member state of enforcement, the regulation includes some harmonised grounds for suspending or refusing enforcement, thereby giving more legal certainty to parents and children