The payment of a cash adjustment to compensate for the inability to distribute dividends does not constitute an abuse of rights

As part of a series of rulings on the abuse of rights and the payment of a cash adjustment, the Paris Administrative Court of Appeal has issued a new ruling in which it finds that the taxpayer’s circumstances preclude a finding of abuse of rights.

A taxpayer had received a cash adjustment in connection with a securities contribution transaction. The cash adjustment had been placed under a tax deferral regime pursuant to Article 150-0 B ter of the General Tax Code.administration thenadministration there had been an abuse of rights.

The Administrative Court of Appeals will nevertheless note that the taxpayer stated that the payment of the cash adjustment was part of a restructuring transaction that had the effect of preventing the companies, following the restructuring, from distributing dividends to the taxpayer. The payment of the cash adjustment was intended to compensate for the lack of distributions in the coming years.

The Court further notes thatadministration dispute the business rationale for the restructuring, just as they did not dispute the fact that the companies were unable to make distributions following the restructuring. The Court further notes that it has not been demonstrated that the“terms of the [taxpayer’s] group restructuring were chosen, as compared to alternative restructuring models, exclusively for the tax purpose of benefiting from a cash adjustment whose taxation is deferred.”

Under these circumstances,administration evidence of the exclusively fiscal purpose required to establish an abuse of rights.

The adjustment is therefore canceled.

CAA Paris, July 18, 2025, No. 23PA02168

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