TUP and tax dispute: can a real estate investment company still take legal action?

The universal transfer of assets (TUP) leads to the disappearance of a company's legal personality, which can have significant consequences on the tax admissibility of appeals filed. A recent decision by the Administrative Court of Paris highlights this issue for real estate investment companies (SCI) in the face of capital gains taxation.

What is TUP and what are the consequences for an SCI?

The universal transfer of assets (TUP) is a legal mechanism that allows a company to dissolve without liquidation in favor of its sole partner. In this case, all the assets, rights, and obligations of the dissolved company are transferred to the sole partner.

However, once the TUP is completed, the company immediately loses its legal personality, meaning it can no longer take legal action. This rule has major implications for SCIs that wish to contest a tax assessment after their dissolution.

Can an SCI contest a tax assessment after its dissolution?

In a decision dated September 17, 2024 (TA Paris, No. 2207483, SCI Varese), the administrative judge declared the request of an SCI inadmissible on the grounds that it had been dissolved before filing its appeal.

The case concerned the application of the withholding tax under Article 244 bis A of the General Tax Code (CGI), which imposes capital gains tax when the seller is controlled by a foreign entity. The tax administration had subjected a transferring SCI to this withholding tax on the grounds that it was controlled by a Luxembourg company, whereas it was actually owned by another French SCI.

However, the dissolution of the requesting SCI before the introduction of the appeal led to the inadmissibility of its request, thus confirming the importance of legal personality in the admissibility of tax disputes.

What lessons can be drawn for SCI managers and real estate investors?

This case law has concrete consequences for SCIs and real estate management companies:

• Anticipate any tax disputes before proceeding with a TUP. Once the company is dissolved, it will no longer be able to initiate legal action.

• Check the application of the withholding tax under Article 244 bis A of the CGI in the event of the sale of a property, especially when the ownership structure involves foreign entities.

• Ensure compliance with the requirements of Article 1609 nonies G of the CGI, which governs the taxation of real estate companies controlled by non-residents.

To avoid losing any recourse in tax matters, it is crucial to obtain appropriate legal support before making decisions that affect the continuity of an SCI.

Conclusion: Increased Vigilance for SCIs in the Face of Tax Disputes

The disappearance of the legal personality of an SCI after a TUP prevents any legal action, which can be problematic in the event of a tax assessment dispute. This case law underscores the importance of carefully anticipating the tax consequences before proceeding with a dissolution.

Need advice on SCI taxation? Contact PRAX Avocats.

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TUP and Taxation: Can an SCI Contest a Tax Assessment?

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Can a dissolved SCI contest a tax adjustment? Analysis of a recent decision on TUP and tax admissibility. Explanations and advice.