Tax abuse doctrine (Art. L64 LPF – France)

The French tax abuse doctrine (abus de droit fiscal, Article L64 of the French Tax Procedures Code and Article L64 A for "mini-abus de droit") allows the French tax authority (DGFiP) to disregard transactions that are either fictitious, or that have no substantial purpose other than avoiding tax (solely tax-motivated). A finding of tax abuse results in the tax being reassessed with an 80% penalty surcharge and late interest. In practice, it is one of the most powerful tools the DGFiP uses to challenge aggressive tax planning.

The traditional abus de droit (Article L64) requires that the transaction be either fictitious or exclusively tax-motivated. The "mini-abus de droit" introduced in 2019 (Article L64 A) covers transactions whose principal purpose (even if not the sole purpose) is tax avoidance — a lower threshold that significantly broadens the DGFiP's reach. Many Franco-Swiss structuring operations (apport-cession, donations with reserved usufruct, treaty shopping) must now be stress-tested against both standards.

In the context of business valuation and M&A structuring, tax abuse risk arises primarily in three situations: undervaluation of contributed assets (reducing the deferred gain or gift tax base), artificial structuring of holding companies with no economic substance, and transactions timed artificially to access tax regimes (Pacte Dutreil, CIR, parent-subsidiary regime). Documenting substantial economic rationale for each structural choice is essential to avoid tax abuse challenges.

At Hectelion, we produce defensible independent valuations and document the economic rationale of structuring choices to minimize tax abuse risk in our valuation and structuring mandates.