Price difference between the actual value and the sale price: a prior commitment may invalidate the gift

Taxpayers sold shares in a holding company—which owned companies operating a large retail store—to a company that was a member of a retail group. The value of the shares used for this sale was their par value.

Following a tax audit, the French Tax Administration (administration ) determined that the sale should not have been conducted at face value but at the actual value of the securities. It then concluded that a gift had been made and issued a tax assessment against the taxpayers.

The reassessment was challenged all the way to the Administrative Court of Appeals.

The Court then cites the case law of the Court of Appeal of Paris ( Conseil d'Etat ;CE, 8th and 3rd Chambers, July 2, 2025, No. 497011, Lebon T.), according to which a transfer at a price that has been deliberately undervalued by the parties constitutes a gift that may represent a hidden benefit.

However, there is an exception to this rule in the specific case where there was a contractual agreement that specified the sale price. In such a case, the taxpayer can demonstrate that the price has not been understated if he or she can show either:

• that, on the date the contract was entered into, the price set forth therein“was not significantly lower than the future market value of the property as could reasonably be anticipated by the parties to the contract”

• that he had a personal interest in agreeing to a lower price "in light of the expected benefits from the transaction"

The Court will then find that, in this case, the taxpayers had entered into several contracts, one of which set the sale price of the securities. These contracts provided, in particular, for equity ownership by a company belonging to the retail group in order to prevent the retail outlet operated by the taxpayers from being acquired by competitors.

It finds that these factors demonstrate that the consortium member company stands to benefit “by ensuring the continued operation and development of the retail location operated under [a specific brand name].” This justifies setting the sale price of the securities below their actual value.

The tax assessment is therefore rescinded.

CAA Nancy, August 6, 2026, No. 24NC03015

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