IFI – Anti-abuse clause in Article 973 II of the French General Tax Code: when transfer takes precedence over taxation

JBLA

15/09/2025

Compiègne District Court, September 2, 2025, Case No. RG 24/00911

Key points in 30 seconds

The Compiègne Judicial Court has overturned increases in wealth tax (IFI) by ruling out the automatic application of the “anti-abuse” clause in Article 973 II of the French General Tax Code (CGI). It ruled that the taxpayer had demonstrated that the intra-group financing (shareholder current account and loan) did not have a primarily tax-related purpose, as the transaction was part of a wealth transfer strategy (creation of two real estate investment companies, intra-family transfers, shared gifts), and that the cost/benefit analysis should be carried out in relation to the IFI savings and overall asset benefits, rather than by comparing it to property income.

The facts

Two spouses set up two real estate investment companies (including SCI THINIPRO) to organize the transfer of family real estate assets.

The SCI buys buildings from the spouses, mixed financing:

Bank loan (≈ €500,000)

Contributions to the partners' current account (≈ €348,000)

A donation-sharing in favor of the children will take place on June 1, 2022 (postponed for health reasons, Covid, reorganization of the notary's office).

The administration applies the anti-abuse clause of Art. 973 II and reinstates the debts in the IFI valuation of the shares (2020–2021).

The spouses dispute this: patrimonial purpose (equalization of assets, preparation for transfer, need for liquidity in retirement), and absence of a primarily tax-related objective.

The relevant legal framework

Article 965 of the French General Tax Code: IFI tax base = net value of property and shares representing real estate assets.

Art. 974 CGI: deduction of debts (acquisition, works, etc.) subject to conditions and restrictions (abnormal intra-family loans, threshold > €5 million and cap of 60%/50%).

Art. 973 II CGI: when valuing shares, certain debts are not taken into account (in particular debts incurred to purchase an asset from the taxpayer or intra-family/controlled debts). Exception: if the taxpayer can prove that the loan was not taken out primarily for tax purposes (or under normal conditions for certain loans).

The French Tax Authorities' position

Automatic application of Art. 973 II (purchase of real estate from spouses, financing by CCA/bank).

Comparison with the property income generated, put forward to demonstrate the preponderance of the tax objective.

Emphasis on the donation-sharing subsequent to the proposed amendment (March 7, 2022) to minimize the patrimonial purpose.

The court's decision

Burden of proof: it is up to the taxpayer to demonstrate that there is no primarily tax-related objective.

Method of analysis: :

The concept is broader than abuse of rights (L.64 LPF).

The assessment must take into account the IFI savings in relation to all the gains/benefits of the arrangement (financial, civil, family).

Error in reasoning by the administration: the comparison is not made with total property income, but with IFI savings and capital gains.

Proven heritage purpose: :

Overall strategy: two real estate investment companies (SCI), transfer to children, authentic shared donation (even if subsequent to the initial steps), balancing of assets between spouses, need for liquidity in retirement.

The time lag (health, Covid, notarial study) does not invalidate the consistency of the plan.

Consequence: IFI tax relief for 2020 and 2021 (principal + interest) totaling €12,241, €800 under Article 700 CPC; R.207-1 LPF costs to be borne by the State.

Scope and practical lessons

Clause 973 II is not automatic.

Even in the case of a transfer to partners and intra-family/controlled financing, the deduction may still apply if it can be demonstrated that the main objective was not tax-related.

2) The right metric: IFI savings vs. wealth benefits

The analysis is qualitative and quantitative: cost of operations (fees, interest, constraints), civil objectives (transfer, liquidity, governance), security of family assets > only IFI savings.

3) Timing matters... but it's not a deal breaker

A subsequent donation may complete an already justifiable trajectory if the circumstances explain it and if the consistency of the project is demonstrated (writings, deeds, correspondence, deliberations).

4) CCA and loans are not “toxic” by nature

The shareholder current account may pass the test if it can be demonstrated that its main purpose is not to reduce the IFI and that the conditions are normal (traceability, effective repayment, credible rates/maturities).

Please note: this decision is a first instance ruling. It provides useful insight into the evidence and method of analysis, but does not exempt parties from rigorously securing their files.

Checklist for securing your operations (SCI/IFI)

Asset management file: statement of intent, civil objectives (transfer/balancing/liquidity), family constraints, alternatives ruled out.

Documented timeline: stages, reasons for delays (health, study deadlines, context), provisional schedule.

Financing: contracts (bank/CCA), rates, terms and conditions, proof of payments and actual repayments, meeting decisions.

Notarized deeds: transfers, shared gifts, governance clauses; overall consistency.

Modeling: IFI savings vs. asset costs and benefits (qualitative and quantitative).

Parallel warning points: :

Art. 974 IV (threshold €5 million and cap 60%/50%),

“Tied” loans (974 III) and normal conditions,

Valuation of assets (methodology, discounts) as of January 1,

Alignment of IFI (French real estate investment fund) / property income / possible VAT options if relevant (in the case of operating structures).

Key takeaways

Proof that the primary objective is not tax-related cannot be provided with a slogan, but rather with documentation: demonstrated patrimonial purpose, IFI savings relative to civil benefits, traceability of flows, and temporal consistency. When well prepared, a family transaction can withstand 973 II.

General information article – does not constitute legal advice. For an analysis tailored to your situation, please contact us.