Tax Treaty Case Law around the Globe 2012

France: Taxation of Partnerships: France versus the OECD

9.1. Introduction

The Quality Invest decision, dealing with business profit, focuses on the status of partnerships under the France-Norway tax treaty. The judges of the Council of State (Conseil d’État, the supreme administrative court) applied the subsidiarity principle in order to recognize expressly that a French partnership is considered as a French resident under the France-Norway treaty. After confirming the taxation in France of such profits, the Council of State concluded that a non-resident partner is taxable in France on his profit share and could not use the applicable tax treaty provisions to avoid such taxation. Indeed, the tax treaty applied only to the profit made by the partnership itself. This case reinforces the isolated French position compared to the general principle of transparency laid down by the OECD. This is likely the reason for the significant volume of French literature on this case.

S. 809.1.1. Concepts of “partnership”

The concept of “partnership” varies from one state to the next, and more precisely from one legal system to the next. Under common law legal systems, “a partnership is a relationship among...