Tax abuse of law and the mini abuse of law

A closely framed procedure

The abuse of law procedure is surrounded by safeguards: an enhanced statement of reasons, the possibility for both the taxpayer and the tax authorities to refer the matter to the tax abuse of law committee, whose opinion orients the burden of proof. Upstream, the advance ruling of article L. 64 B of the French Book of Tax Procedures allows a transaction to be secured by questioning the tax authorities: silence within the prescribed period amounts to a safeguard.

Reassessments are in principle accompanied by a surcharge of 80%, reduced to 40% depending on the taxpayer role in the arrangement (French Tax Code art. 1729 b).

Frequent examples and areas of abuse of law

Abuse of law arises on recurring grounds that case law and the tax abuse of law committee have progressively mapped out. Knowing their contours helps to gauge the risk and prepare the defence.

A few classic configurations:

• Gift before sale: the gift of shares followed by their sale is legitimate, but becomes abusive if the donor in fact recovers the price (fictitious gift or reappropriation of the funds);
• Contribution-sale (French Tax Code art. 150-0 B ter): the tax deferral is challenged where the sale proceeds are not reinvested in a genuine economic activity within the time limits;
• Interposition of companies devoid of substance, shell holdings intended to house a loss, or circular arrangements lacking any economic justification;
• Artificial recourse to a tax treaty or a favourable regime (parent-subsidiary, exemptions) for the sole purpose of avoiding tax.

The tax abuse of law committee publishes its opinions each year: they provide a valuable analytical framework, as they set out the criteria used to establish, or rule out, an abuse. Conversely, a transaction endowed with genuine economic substance and documented non-tax motives withstands the characterisation.

The committee in 2025, the Conseil d’État in 2026: what has been decided

The committee’s 2025 annual report (impots.gouv.fr, in French) gives the measure of its activity. Seized of 24 new cases in 2025 (36 in 2024), it examined 30 files in four sittings and issued 13 opinions in favour of applying the abuse of law procedure, that is, for the tax authorities, and 17 against. Income tax accounts for 16 files (4 opinions for the authorities, 12 against), registration duties and wealth tax for 10 (6 and 4), corporate income tax for 4 (3 and 1). Two cases grouping twelve related files account alone for 70% of the files that received an opinion against the authorities: the raw ratio therefore has to be read with caution.

• Conseil d’État, 8th and 3rd Chambers sitting together, 6 July 2026, no. 496500 (not published in the Lebon reports). A civil company had received, as a contribution from a Luxembourg company of its group, the shares of a real-estate company, which it then dissolved with universal transfer of assets, applying the so-called “Quéméner” correction to the cost basis of shares in a partnership-type company. Ruling on the merits on a second appeal on points of law, the Conseil d’État holds that this correction was not contrary to the neutrality objective it pursues, and that the tax authorities had not shown that the operations were decided for the sole purpose of benefiting from it. It also refuses the substitution of grounds sought by the minister, based on an abuse of the France-Luxembourg tax treaty: that abuse of law is distinct from the one underlying the notice of reassessment, and accepting it would deprive the company of the safeguard of referral to the tax abuse of law committee. The minister’s application is dismissed (Légifrance, in French).
• Tax abuse of law committee, opinions no. 2025-23 and no. 2025-24, sitting no. 1 of 19 March 2026. A real-estate civil company taxed under income tax leased to its partner, who held nearly all of its shares (90.1% in usufruct, 9.7% in full ownership), the house she occupied, and declared property deficits which the partner set against her other property income. The committee notes that the works significantly exceeded the rents, that the company did not behave towards the partner as towards a third party, and that she had the use of the property as an owner-occupier: the tax authorities were entitled to disregard those deficits under article L. 64 of the Book of Tax Procedures, the purpose being exclusively tax-driven and contrary to the objective of II of article 15 of the Tax Code, even though the amount of the rent was not challenged. It accepts the 80% surcharge for 2021. The tax authorities took note of these opinions (impots.gouv.fr, in French).
• The committee’s 2025 annual report, other positions. In three cases of capital reduction not motivated by losses, the committee each time gave an opinion against the abuse of law: the tax authorities did not show the tax saving, social levies included, or the operation formed part of a family transfer or a restructuring. It recalls that a gift can be set aside only where the donor is not immediately and irrevocably divested, which a valid quasi-usufruct clause without security does not contradict. In the first two PACS cases it heard, it holds that the tax authorities must establish that the pact was concluded only to achieve a result foreign to its purposes, and rules against the abuse in one, for it in the other (impots.gouv.fr, in French).
• Opinion no. 2026-01, sitting no. 2 of 19 March 2026. Gift of the bare ownership of shares followed by their sale, with a quasi-usufruct agreement: the committee rejects the abuse, the tax authorities do not follow it. The case is detailed on the quasi-usufruct page.

Two markers for the defence. The first is the parties’ actual behaviour, for instance a company that does not treat its partner as a third party. The second is the ground relied on: before the court, the tax authorities cannot substitute an abuse of law distinct from the one notified where that would deprive the taxpayer of the safeguard of referral to the committee, as the decision of 6 July 2026 holds. A committee opinion does not bind the tax authorities; where the committee has been seized, they bear the burden of proof in principle in the event of a claim, whatever the opinion given, subject to the exceptions in that provision (Book of Tax Procedures, art. L. 192).