Information Note on the Court’s case-law No. 181
January 2015
Arnaud and Others v. France - 36918/11, 36963/11, 36967/11 et al.
Judgment 15.1.2015 [Section V]
Article 1 of Protocol No. 1
Article 1 para. 1 of Protocol No. 1
Peaceful enjoyment of possessions
Retroactive liability of French nationals residing in Monaco to wealth tax: no violation
Facts – The applicants are eight French nationals who live in Monaco. In 2001 France and Monaco negotiated a change to the Franco-Monegasque Tax Convention to the effect that those French nationals who had changed their residence to Monaco since 1 January 1989 would be liable to pay the wealth tax (ISF) from 1 January 2002, on the same basis as French taxpayers who were domiciled in France for tax purposes. This measure was announced publicly in October 2001, with an indication that it would take effect from 1 January 2002. The taxpayers concerned were informed, in particular by a ministerial letter notifying them of the forthcoming enactment of the law and its envisaged retrospective effect. In addition, they were advised that it would be preferable to anticipate the entry into force of this law by submitting tax returns and paying tax from 2002, although there was no legal obligation to do so. In March 2005 a law validating France’s approval of the Protocol to the Tax Convention was enacted and a decree promulgating it was published in the Official Gazette.
Before the Court, the applicants alleged that the fact of being required to pay wealth tax with retrospective effect, from 2005 for two of them and from 2002 for the four others, had infringed their right to the peaceful enjoyment of their possessions.
Law – Article 1 of Protocol No. 1: The interference to which the disputed tax liability amounted had been expressly provided for by law: approval of the Protocol to the Tax Convention had been validated by the legislature and its text had been published by decree. Moreover, this interference had been intended to combat tax evasion, namely the settling of French nationals in Monaco with the sole aim of avoiding wealth-tax liability in respect of their assets located outside France. The disputed tax liability fell within the broad margin of appreciation enjoyed by the State in tax matters, and could not therefore be considered arbitrary as such. The retrospective application of this law did not in itself constitute a violation of Article 1 of Protocol No. 1, given that the retrospective application of a tax law was not as such prohibited by that provision.
As to whether this retrospective application had imposed an excessive burden on the applicants, it was to be noted that the contested Protocol had been enacted in the context of a longstanding and close relationship between France and Monaco in tax matters, particularly in respect of the French nationals who had settled in the Principality, for reasons related to that State’s specific geographical and fiscal features. In addition, the retrospective nature of the disputed measure, in so far as it applied to the year 2005 for two of the applicants, was not at all exceptional from the perspective of fiscal legislation, as legislative authorisation for approval of the Protocol to the Tax Convention had been enacted in the course of the same tax year. With regard to the amounts paid by the other applicants for the years 2002 to 2004, the applicants complained about the amount of tax to which the French nationals living abroad had been subjected in 2005, as it had corresponded to four years of liability. Yet the taxpayers had been informed of the forthcoming enactment of the measure and its envisaged retrospective effect as early as October 2001, through a public announcement, and again in May 2002 through a letter from the Minister. That letter invited them to anticipate the text’s entry into force by submitting tax declarations and paying their tax from 2002, although there had been no legal obligation to do so at that stage. Certain taxpayers had opted to follow that advice and had thus not been subjected in 2005 to a tax bill that was higher than the sum corresponding to the relevant tax year. Others, in contrast, had preferred to await the measure’s entry into force in 2005 before submitting the declarations and the corresponding voluntary payments. In respect of those persons, the tax authorities had announced that arrangements for payment would be introduced and that no sanctions would be imposed for the period preceding ratification of the Protocol. In addition, the applicants had not been deprived of their right to challenge, before the relevant courts, the lawfulness of the liabilities in respect of which they had made voluntary payments.
Thus, in spite of the retrospective nature of the contested measure, the authorities had provided the taxpayers with prior information enabling them to anticipate its effects. Equally, appropriate measures had been taken to minimise the amount of tax payable from 2005 onwards by those who had awaited the law’s entry into force before complying with it. In consequence, no excessive burden had been imposed on the applicants as a result of the contested measure and it had not fundamentally interfered with their financial position. In view of those factors, the liability provided for in the Protocol to the Tax Convention had not upset the “fair balance” which had to be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights.
Conclusion: no violation (unanimously).
The Court also concluded that there had been no violation of Article 14 taken together with Article 1 of Protocol No. 1, finding that the French nationals resident in Monaco were not in an identical situation to those of other French nationals living abroad. It held that, in the area of international bilateral tax conventions, the rules defined by the States were the result of negotiations which depended both on the diplomatic relations existing between them and on their respective national taxation systems, and that, in consequence, French nationals living abroad could not be regarded as forming a single category whose members were in an identical situation.
© Council of Europe/European Court of Human Rights
This summary by the Registry does not bind the Court.
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