Challenging a reassessment in respect of the IFI

The situation

Our support

1. 01

   Reconstructing and documenting the value of the assets

   We reworked the calculation of the taxable base year by year and gathered the elements needed to justify the declared values:

   • the features and condition of the properties;
   • legal or letting constraints;
   • comparable transaction references;
   • debts relating to the taxable assets;
   • the articles of association and accounts of the property companies;
   • restrictions affecting the transfer of the shares.

   For assets held through an SCI (a French property company), we analysed the value of the company, its debt and the specific features of the shares. In a comparable matter, the absence of a secondary market, the closed governance and the clauses restricting transfers had, in particular, been documented to justify an illiquidity discount.

   Article 973 of the CGI provides that taxable assets are valued according to the rules applicable to inheritance transfer duties. For shareholdings in companies, it also lays down specific rules on the account taken of certain debts.

   Point of attention. The IFI value of shares in an SCI does not necessarily correspond to a simple pro-rata share of the property’s value. It must take into account the company’s financial position and the actual features of the shares.
2. 02

   Responding to the tax authorities and challenging the reassessment

   We prepared a reasoned response setting out:

   • the valuation method adopted by the client;
   • the elements justifying the discounts applied;
   • the treatment of the debts and liabilities;
   • any errors affecting the comparables used by the tax authorities;
   • the arguments relating to procedure and to the reassessment time limits;
   • the supporting documents backing up each position.

   The tax authorities may ask the taxpayer for clarifications and justifications regarding the make-up of their real estate assets, as well as their assets and liabilities.

   We also checked whether the audit had been started within the applicable time limit. In a matter handled by the team, the defence consisted in particular in showing that the returns filed already allowed the tax authorities to carry out their review without further research, in order to support the application of the three-year reassessment period rather than the six-year period.

   Point of attention. An IFI dispute is not only about the value of the assets. The grounds for the reassessment, compliance with procedure and the statute of limitations must also be examined.
3. 03

   Managing the dispute

   We then supported the client in their exchanges with the tax authorities and adapted the arguments to the department’s responses.

   Depending on how the matter develops, our involvement may include:

   • observations on the proposed reassessment;
   • exchanges with the auditor;
   • the use of hierarchical appeals;
   • the preparation of a formal claim;
   • the discussion of late-payment interest and penalties;
   • referral to the competent court where the disagreement persists.