The 2011 Amending Finance Act of September 19, 2011, made significant modifications to the carry-back and carry-forward regimes for tax losses incurred by companies subject to corporate income taxes. In a January 27, 2014 decision, the Montreuil Administrative Court ruled on the application of these new provisions on tax loss carry-backs. The case involved the issue of the time periods for opting to carry back losses for the fiscal years ended before the end-of-year 2011 reform.
In this case, the plaintiff company reported losses for its fiscal year ended in 2010. At the end of 2011, it filed a declaration to opt to carry back these losses. The tax authorities denied its request in April 2012, notably on the ground that the company chose to carry back losses too late.
The Administrative Court stated that the option to carry back losses, which was exercised after the new act took effect, is subject to the new conditions enacted by the act. The act limits the time period within which the choice can be made to the time period set for filing the earnings declaration for the fiscal year during which the losses subject to the option were incurred. In this respect, the December 28, 2011 Act provided that these declaration terms applied to losses to be carried back at the close of the fiscal years ended before the act took effect.
The Administrative Court confirmed that, if the company had chosen its option before the new act took effect, it would have been eligible for a credit of tax loss carry-backs (based on legislation and case law on the previous regime, thereby allowing it to opt for the carry-backs during the claims period of Article L. 190 of the French Book of Tax Procedures). However, the Court also ruled that the terms of the new act henceforth prevented the company from doing so, even if involving losses incurred in a previous fiscal year.
To our knowledge, this decision regarding the time period of the option to carry back tax losses incurred in a fiscal year before the new rules took effect is the first of its kind. It is clearly in line with tax authorities intent, although it remains to be seen whether it is upheld on appeal.