What are the applicable rules specified by the Lyon Administrative Court of Appeal regarding green spaces adjoining an industrial establishment?
In a landmark decision handed down in 2008, the Conseil d'Etat ruled that, in the case of a building housing a professional activity, an outbuilding of this building can only be considered indispensable to it if it is directly necessary for the exercise of the professional activity (CE, June 6, 2008, no. 287 941, SNC Foncimarine). In this case, the green spaces surrounding a commercial building used as a restaurant, although pleasant for customers, were deemed not directly necessary for the restaurant activity hosted by this building, ruling out the qualification of indispensable and immediate dependence.
Logically, the Lyon Administrative Court of Appeal reiterated this solution with regard to green spaces adjoining an industrial establishment.
Analysis of the decision by our tax expert
Context
In this particular case, Lustucru Frais, an industrial pasta manufacturer, filed a claim for a reduction in its local taxes, arguing that extension reserves consisting of undeveloped green spaces should be excluded from the tax base.
Administration's position
In an attempt to counter the Conseil d'Etat's jurisprudence SNC Foncimarine (cited above), the tax authorities based their decision on the existence of a single block of property belonging to the same owner, and concluded that the value of the plots should be assessed as a whole.
In this regard, it relied on the provisions of thearticle 1494 of the French General Tax Code and thearticle 324 A of Annex III to the same CodeThe latter text specifies, with regard to industrial establishments, that property normally intended for a distinct use is understood to mean all the land, buildings and installations that contribute to the same operation and form part of the same topographical grouping (the fraction of property normally intended for a distinct use is understood to mean the industrial establishment, the components of which contribute to the same operation).
Review
However, the texts invoked by the tax authorities in support of their claims were intended to ensure consistency in the methods used to value properties or fractions of properties in order to determine their rental value, on condition that sine qua non that they first fall within the scope of the property tax on built-up properties, the only tax for which these provisions are intended to specify the conditions of application.
Solution
Not surprisingly, the Lyon Administrative Court of Appeal censured the position of the tax authorities. Here is the relevant extract from the ruling:
" It is clear from the investigation, and in particular from the documents produced on appeal by the applicant, consisting of photographic snapshots representing aerial views of the site of its business in the commune of Communay, as well as a table showing the evolution of the cadastral survey of this site for the period 2014-2019, drawn up by an engineering consultancy, identifying in particular the surface areas of the green spaces on the various plots acquired from the Société d'équipement du Rhône et de Lyon as well as their respective surface areas, that These green spaces constitute undeveloped areas surrounding industrial premises and their external fittings.owned by the applicant, are not directly necessary for the activity hosted by the building. This finding is not seriously contested by the Minister, who merely points out that all the plots concerned by the land in dispute support buildings and improvements, that the original parcel division has been preserved as it stands and that the whole has an indisputable unity, these circumstances not in themselves revealing the applicant's intention to use these assets for her professional activity. Thus, the land at issue cannot be considered either as an indispensable and immediate dependency of the building housing the applicant's business, or as used for commercial or industrial purposes. Finally, if the Minister argues that the land in dispute contributes to the same operation and forms part of the same topographical grouping within the meaning of article 324 A of Appendix III to the General Tax Code, these regulatory provisions cannot legally be interpreted differently from the tax law applied above. Consequently, the applicant is entitled to claim that the tax authorities wrongly included these green spaces in the surface area used to calculate the rental value on which she was assessed for property tax on built-up properties. ".
Practical implications for companies
Land (green spaces, land reserves, etc.) adjoining the industrial facility but not directly required for business operations must be excluded from the calculation of the rental value used as a basis for property tax on built-up properties.
Companies should therefore remember to remove land for purely recreational purposes from their fixed asset files, and submit a claim to the tax authorities to have it exempted from property tax on built-up properties. For its part, the tax authorities will have to charge the land in question to the property tax on undeveloped properties (whose valuation rules are more favourable), which they very often fail to do in practice.
Would you like to find out more about the tax situation of your industrial plant?
Role of G.A.C. Group experts and partner lawyers
G.A.C. Group and its partner lawyers acted as counsel for Lustucru Frais. An initial claim concerning property tax on built-up properties was submitted to the Lyon Administrative Court, which, without analyzing the relevance of the question raised, simply ruled that the claimant company had not submitted any documents in support of its allegations.
Lustucru Frais's appeal to the French Supreme Court against this ruling (which could not be appealed in this case) was dismissed, as the Conseil d'Etat considered that the Court had not ruled on the matter. ultra petitaneither disregarded the adversarial principle nor misrepresented the documents in the file.
Lustucru Frais was then forced to submit a new application, this time concerning the company's property tax liability, in order to have the substantive issue settled, and this finally gave rise to the judgment under review.
The appeal to the French Supreme Court lodged by the Ministry of the Economy, Finance and Digital Sovereignty was rejected by the Conseil d'Etat. The above-mentioned decision has therefore become final.
Article written by:
Clément CARRAY - Local tax expert at G.A.C. Group
As a senior consultant in local taxation, I acquired my technical and specific expertise as soon as I completed my Master II degree. Since 2009, I have been able to handle a wide range of specific situations (more than 100 assignments a year) and develop my experience in line with changes in legislation, regulations and case law. My day-to-day work consists of analyzing my clients' tax bases, making recommendations and suggesting potential optimizations, and assisting them in implementing these actions.
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