Income Tax Adjustments for SASUs: Is Income Treated as Income Received by a Shareholder?

As part of the wave of tax reassessments targeting SASU shareholders subject to income tax—which aim to subject the SASU’s profits to social security contributions on investment income—administration sometimes argue that the income taxed at the shareholder’s level corresponds to income received by virtue of the shareholder’s status as a shareholder.

She concludes that this income cannot, therefore, be derived from a professional activity.

However, such a position appears to conflict with the rules governing partnerships and the case law of Conseil d'Etat.

The latter has already responded to an argument made by a taxpayer who claimed that he was not engaged in any professional activity within his partnership because he received no compensation.

Stéphane Austry, in his opinion accompanying this decision, had clearly explained the mechanism, stating that such an argument“is obviously entirely ineffective under tax law since, for a partner in a partnership, it is the partnership’s business activity itself—by virtue of its tax transparency—that gives rise to the partner’s compensation” (Ccl ss CE, 3rd and 8th Sub-Sections, March 8, 2002, No. 225151, Lebon T.).

Furthermore, this is not the only decision by Conseil d'Etat undermines theadministration arguments used to justify its tax assessments.

This raises serious questions about the legality of the ministerial response dated June 2, in whichadministration partiallyadministration the reasoning behind its tax reassessment campaign.

Our firm will file an appeal against this ministerial response with the Conseil d'Etat August 2.

If you'd like, you can contact us to discuss this topic or join this initiative.

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.