Case-specific decision by the Council of State regarding the presiding judge
Following a tax audit of a company that owns a hotel-restaurant, the manager of a shareholder company was notified of a tax assessment based on deemed distributed income.administration had determined that the manager should be consideredthe “sole controller” ofthe business generated by the hotel-restaurant.
When a taxpayer is considered to be the controlling party, he or she is presumed to have received the distributed profits of a corporation, even if he or she is not a shareholder of that corporation, and is therefore liable for tax on such distributed income.
In its decision of March 31, 2025, the Council of State notes, however, that fora taxpayerto be considered the controlling party in a matter, the tax authorities must demonstrate that“the taxpayer alone holds the broadest powers within the company [and that he] is able to use the company’s assets without restriction as if they were his own.”
In this case, the Administrative Court of Appeal had ruled that the taxpayer was in charge of managing the hotel-restaurant because:
he was the manager of one of the shareholders of the company that owned the hotel-restaurant;
he became the CEO of the company that owned the hotel-restaurant after the years under audit;
He responded“in a most insightful and detailed manner regarding the day-to-day operations of the company’s accounting records.”
The Council of State emphasizes that these facts are insufficient to establish that the taxpayer was in charge of the business and therefore overturns the judgment.
Furthermore, in ruling on the case, it overturned the individual’s tax assessment.
If you have questions about tax audits of businesses or individuals, you can consult our FAQs on tax audits of businesses or tax audits of individuals.