Can Challenging Building Permits Lead to a Tax Assessment?

A taxpayer and several members of his family filed numerous appeals against building permits. In some cases, a settlement agreement was reached with real estate developers so that they would withdraw these appeals. As a result, the taxpayer received 190,000 euros for the year 2014.

Following a tax audit, the French Tax Authority (administration ) determined that these various appeals constituted a taxable business activity and that, since this activity had not been reported, it constituted an undeclared business.

It therefore issued a tax assessment, which was challenged by the taxpayer all the way to the Administrative Court of Appeals.

The court will then find that the transaction agreements underlying the payment of the sums in question do indeed specify the payment of compensation for damages caused by the real estate projects.

However, it considers that the protocols“contain no specific details or figures regarding the damage suffered, particularly with regard to the loss in value of the taxpayer’sproperty,” and that the taxpayer has not provided any evidence to substantiate the existence of such damage.

She also notes that a significant number of appeals filed by taxpayers have been rejected by the courts and have even, in some cases, resulted in convictions for abusive litigation.

It therefore finds that the gainful activity is clearly established“in light of the litigation strategy adopted and the number of appeals filed, and given that the tax administration (administration ) was entitled to take into account, as part of the overall context, the actions of other members of [the taxpayer’s family], who cannot seriously claim that he merely sought to assert his rights in court.”

The tax assessment is therefore confirmed.

CAA Marseille, Sept. 17, 2026, No. 24MA03122

This legal watch produced by Mispelon Avocat, a law firm specializing in French tax audit and French tax litigation. You can follow this legal watch subscribing to the newsletter via this link.