Now more than ever, Family Offices are expected to provide state-of-the-art multi-disciplinary advice, based on a dual approach:
1) preservation of family coherence
2) long-term intergenerational vision.
Though the adviser is inevitably a forward thinker, he constantly fears that the tax administration will challenge the carefully crafted strategic balance chosen by the family or families in question.
I have observed time and again that tax advice given on such projects, which often have international reach, fails to take sufficient account of the potentially litigious tax approach of a given country (which may consider itself concerned by a specific operation), deeming such issue to be premature. Yet, failure to address the issue could derail any strategic choices made. Conversely, anticipating it from the outset can be a game changer. Yet the family office needs to know exactly how to tackle the tax administration's approach to litigation.
In France, only a tax litigator with in-depth experience of the mechanics of tax litigation before France's highest tax jurisdictions i.e. the Council of State ("Conseil d'Etat") and the Court of Cassation ("Cour de Cassation") has the required insight and expertise. Experience gained at this level goes far beyond the mere interpretation of case law, which is within the scope of any tax attorney or adviser.
I can provide you with such insight and expertise having more than 20 years’ experience in tax litigation with France's highest jurisdictions, which is extremely rare for a French attorney at law.
Let’s say for instance, an American or Saudi family with worldwide ramifications plans to invest 2/3 of its fortune, across several generations, in combating and preventing Covid-19 type pandemics, as well as in the fight to preserve the future of humans in artificial intelligence.
The Family will certainly be advised to diversify its investments and wealth across multiple countries, including France, using various vehicles such as foundations, equity investments, creation of holdings, groups of companies and purpose-built start-ups, and real estate acquisition.
Family offices can of course advise on a range of more or less complex options aimed at being sustainable over time and tax optimized.
However, from the moment that the family in question has the slightest interest in France, the French Tax Administration is entitled, in principle, to tax it on its worldwide assets/income, by means of a highly complex and powerful set of tools at its disposal.
For this reason, family offices should above all bear in mind that the tax situation in France of any taxpayer (individual or company) is assessed by the French Tax Administration first and foremost under French law, even if subsequently, depending on the case, international law and other domestic laws have to be taken into consideration (such as the Franco-Saudi Tax Treaty for the characterization of a start-up as a ‘virtual permanent establishment’).
Next, family offices should be familiar with how France’s highest jurisdictions - the Council of State ("Conseil d'Etat") and the Court of Cassation ("Cour de Cassation") - exercise control over the concepts of abuse of law, the distinctions between fact, right and qualification, and even the famous principle of the ‘autonomy of tax law’, which allows the French Tax Administration to interpret legal concepts as it deems appropriate (whether from civil law, industrial property law or even banking law).
Above all, they should be aware of how in practice, sometimes even ten years on, tax disputes in France are initiated and ruled on by France's highest jurisdictions, which have been known to render all sorts of contradictory decisions over the years.
Unfortunately, experience shows that family offices rarely have such insight when it comes to devising strategic priorities for families.
This is precisely where I come into play, not in competition with you, but to complement your expertise, giving you that edge over your competitors and your clients.
Feel free to contact me should you need any clarification or have any questions, bearing in mind that I work on these aspects in tandem with my colleague Deniz Gulan, paralegal specialized in tax matters.