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Treaty between France and Switzerland – French Supreme Administrative Court holds Swiss resident taxable in France on payments for services performed in France but paid via UK company

The Supreme Administrative Court (Conseil d'Etat) on 28 March 2008 (CE, 9ème et 10ème sous-sections réunies, No. 271 366, A.) confirmed an earlier decision of the Court of Appeals of Paris of 19 April 2004 (CAA Paris, 10ème chambre, No. 00PA02248). Details of the decision No. 271 366, A. are summarized below.

(a) Facts. A, a Swiss resident, gave a concert performance in France on 18 April 1989. The French company, Cinéma Communication Vidéo, made payments for the services of the Swiss resident to the promoter company, Tangerine Music Productions Ltd., a UK company. The UK company, in turn, paid A.

Under Art. 155A of the Tax Code (Code Général des Impôts), income received by a foreign entity (UK company) for services provided by one or more individuals, whether a French or foreign resident performing services in France, is taxed in France in the hands of the individual if:

-   the individual controls, directly or indirectly, the foreign enterprise, company or other body;
-   the individual is unable to establish that the foreign entity carries on an industrial or commercial activity other than the services provided to it; or
-   the foreign entity receiving the compensation is resident in a jurisdiction benefiting from a privileged regime.

Pursuant to Art. 155 A of the French Tax Code (CGI), A was assessed French income tax.

(b) Issue. Can the French administration tax a Swiss resident on an amount paid via a UK company? A objected to the assessment of tax in France on the grounds that the tax administration should apply a tax treaty to avoid double taxation (France-Switzerland or France-UK).

(c) Decision. The Court confirmed that A is taxable in France because of his activities performed in France, and held that:

-   the France-UK tax treaty could not be applied to a Swiss resident taxable in France. Art. 6 of the France-UK treaty could apply only to the UK promoter company, and not to A; and
-   the 1966 France-Switzerland tax treaty could not be applied to A. According to Art. XIX-1, any income derived by a Swiss resident from his personal activity in France was taxable in France (although it could be taxed in Switzerland as well under Art. XIX-2).

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