Selection of administrative court rulings

With regard to the 1970 reference rental value, the applicant company is requesting that, for premises with invariant numbers 584458, 584460, 584465, 584466 and 584468, standard premises no. 6 be used as the basis of comparison, whereas the tax authorities have retained standard premises no. 65, used as a workshop. It also contests the increase of 20 % applied to the 1970 reference rental value in application of article 324 AA of Appendix III to the CGI. With regard to the 2017 revised value, the applicant company is requesting that these same business premises be assigned to category DEP2, which includes all warehouses or hangars used to store merchandise, wholesale warehouses and those used for internet or catalog sales, whereas the tax authorities have maintained their assignment to category ATE2. According to the tax investigation, premises with invariant numbers 584458 and 584460 are operated by a division of A... specializing in the manufacture of electronic instruments and electromechanical devices, where the company carries out research and development in ultra-precision technologies, and designs and manufactures measuring, monitoring, calibration, test and analysis instruments, as well as portable and automated 3D measurement technologies for applications such as 3D digitizing, reverse-engineering, inspection and testing, reverse engineering, non-destructive testing, and digital simulation for process industries, and used in a variety of sectors, including aerospace, heavy industry, healthcare, manufacturing, oil and gas, and power generation. It follows from the investigation that the premises in question cannot be considered as being used simply as a warehouse, but constitute one of the company's innovation centers, where design and manufacturing operations are carried out. While the premises also house an office area, some of which are used for customer services, and meeting rooms, the main activity carried out on the premises is research and development and maintenance. To this end, the premises also house a 3D robot, a freight elevator, a maintenance storage area, an air-conditioning system for the R&D work rooms and a repair area. The undated photographs produced by the applicant were not conclusive, and did not demonstrate that the main activity carried out on the premises was warehousing. The tax authorities were therefore justified in using as a basis of comparison, for the 1970 reference rental value, the standard premises no. 65 used as a workshop, with an adjustment of +20 % to take into account the difference in maintenance and layout with the standard premises built in 1950 in a state of maintenance described as mediocre. With regard to the revised 2017 rental value, and for the same reasons, the tax authorities were justified in retaining the ATE2 category for premises used for processing, handling or maintenance. It follows from the investigation that the premises with invariant numbers 584462, 584465 and 584466 operated on January 1, 2020 by the Z... company, which manufactures scientific and technical instrumentation, cannot be considered as being used simply as a warehouse, but as a workshop where design and manufacturing operations are carried out. The new operator confirms the presence of a workshop area. In addition, the provisions of I of article 1517 of the CGI list the only changes liable to modify the rental value of a premises on an annual basis. These provisions in no way cover the simple vacancy of a premises, which does not constitute one of the changes defined in this article. Consequently, the mere fact that a property is not in use cannot give rise to a change in its rental value, and consequently to a change in the category assigned to it. The undated photographs produced by the applicant for these premises in no way indicate that they have been converted for storage purposes, but rather that they are vacant premises whose rental value, and consequently category, cannot be modified in accordance with the aforementioned article 1517 of the CGI. As a result, the tax authorities were justified in retaining, as the basis of comparison for determining the 1970 reference rental value, standard premises no. 65 for workshop use, with an adjustment of 20 % to take account of the difference in maintenance and fittings compared with the standard premises retained. For the same reasons, with regard to the revised 2017 rental value, and contrary to the applicant's contention, for the valuation of these premises, the ATE2 category should be retained, housing premises used for processing, handling or maintenance activities. It follows from the investigation that the premises with invariant number 584468, operated on January 1, 2020 by SAS P..., which carried out a sales activity accompanied by a maintenance service, had an entrance door with opening hours and could not be considered as warehouse premises. As a result, the applicant could not claim that the premises should be classified in category DEP2, which includes all warehouses or hangars used to store goods, including wholesale warehouses but not wholesale businesses where sales are made, as well as, as in this case, a maintenance and repair service. Since October 2021, the premises have been occupied by company A..., which has carried out interior fittings for its installation. The applicant company has not provided any evidence to show that the main activity carried out in the premises at the time would justify the use of the DEP2 category. Under these conditions, the tax authorities were justified in selecting the ATE2 category, in the absence of MAG1, which corresponds to a store activity and would not, in any event, give rise to any tax relief for the applicant.

The applicant company argues that the building in dispute should be classified in category 2 "premises used for processing, handling or maintenance" of sub-group IV "workshops and other similar premises" (ATE 2), and not in category 5 "very large stores (main surface area greater than or equal to 2,500 m²)" of sub-group I "stores and sales premises" (MAG 5), which has been retained by the tax authorities. In support of this claim, the applicant argues that its vehicle repair business occupies a larger surface area than that allocated to its car dealership business, i.e. 3,344 m² versus 1,361 m². However, given that the total surface area of the premises at issue is 13,995 m², it is not clear from the investigation that the surface area occupied by the vehicles to be sold would be limited to 1,139 m², or 64 vehicles, whereas it is clear from the investigation, in particular from the site plan, the official report drawn up by a bailiff on January 17, 2022, and the photographs submitted by the applicant company, that more than 350 "Audi" vehicles are parked on the outside surfaces of the premises. Moreover, even if some of these vehicles are not accessible to the public, or if some of them are awaiting repair, it is clear that all of them are destined to be sold. Furthermore, the company's vehicle sales accounted for 90 % of its sales in 2020. Under these conditions, given the nature of the activity carried out mainly on the premises in dispute and their intended use, the tax authorities were right to assess them in category 5 of sub-group I within the meaning and for the application of article 310 Q of Appendix II to the General Tax Code.

The applicant company maintains that, on January 1, 2020 and January 1, 2021, the building in question was occupied by the consortium of companies in charge of the site, so that it should have been reclassified in category 2 "covered warehouses" of sub-group III "warehouses and parking lots", with a surface area of 719 m². However, it is common ground that the applicant company did not inform the tax authorities of a change of use of the building in question in accordance with the procedures defined by the provisions of I of article 1406 of the CGI. Furthermore, the fact that the work carried out has temporarily rendered the building unfit for office use is not such as to justify considering it as having undergone a change of use. Lastly, the investigation did not show that the building in question had been made available for warehouse use during the work. Consequently, the premises owned by the applicant were still to be considered as office premises on January 1 of the tax years in question.

According to the investigation, the applicant company, managed by Mr. A., owns a building in Valenciennes comprising two apartments, one on the first floor and the second floor, the other on the second floor. The first apartment is occupied by six people, including Mr. A and five elderly people, linked to the applicant company by a shared tenancy agreement. It is clear from the investigation that the shared-tenancy contract entered into by the occupants forms part of an inclusive housing scheme within the meaning of article L. 281-1 of the Social Action Code. Although the five above-mentioned flatmates have also signed a contract for the provision of services such as cleaning, linen care, administrative assistance, catering and remote assistance, with the company W... also managed by Mr. A., it is clear from the investigation that the flatmates are free to use the service providers of their choice for any personal services they may require. Lastly, even if the furnished room rented by Mr. A. were to be sublet by the company W... as a bed and breakfast, and if the company W..., listed on specialized websites as a non-medicalized retirement home or semi-medicalized establishment, had affixed a plaque to the facade of the building in question, these circumstances are not such as to establish that the accommodation occupied by the aforementioned flatmates would be commercially exploited in such a way as to lose its status as residential premises. Consequently, in determining the rental value of the property in dispute, the tax authorities were wrong to apply the rules set out in article 1498 of the CGI. It follows from the foregoing that the rental value to be used to determine the property tax in dispute must be determined in accordance with the rules set out in article 1496 of the CGI.

To determine the rental value of the Montluçon exhibition center owned by the applicant association, the tax authorities applied the valuation method provided for in A of III of article 1498 of the French General Tax Code (CGI), and indicated that the premises, comprising all the buildings, outdoor exhibition areas, offices, storerooms and part of the parking areas, should be valued globally in accordance with a of 1° of article 324 A of Appendix III to the CGI. On the basis of the appraisal report produced by the applicant, the Court determined that an estimated market value of €398,000 for the land and €5,130,000 for the cost of construction, i.e. after application of the 2013 and 2018 Insee indices, a total estimated market value of €5,445,295 and a rental value on January 1 of the reference period of €217,812 after application of the rate of 8 % and the reduction by half of the rental value since it retained the allocation of the property to the general utility. It follows from the investigation, and in particular from the appraisal report dated June 19, 2019 produced by the applicant association, that in order to determine the market value of the properties in dispute, the appraiser proposed two methods, one based on the integrated built/land comparative method and the other on the "soil + construction" comparative method. The latter method led to the determination of the value of the land, estimated at €398,000 in May 2019, based on the average of values obtained using a comparative method based on comparable "mutated land" located in the Montluçon area, and using a method based on the discounting of the purchase price, taking into account, as indicated by the appraiser, of the fact that the "comparative values are not strictly comparable, notably because of the total surface area of the complex, as well as the distance" and, secondly, of the value of the buildings as new, estimated at €5,130,000 in May 2019 after application of a dilapidation rate of 65 %. Lastly, the appraiser applied an economic environment coefficient (economic environment, land pressure, accessibility-visibility, versatility of premises, nature of the urban area and quality of life of employees) of 75 % to the values of the land and buildings to determine the market value of this complex at €4,146,000. In its final submission, the applicant association, rejecting the conclusions of the expert it had itself commissioned to determine the fairground's market value, argued that the latter should be determined on the basis of the acquisition and construction costs of the land and buildings, discounted to January 1, 2013, and produced a list of fixed assets representing a sum of €4,617,340, corresponding to the discounted value of the land and buildings, instead of the sum of €5,445,295 retained by the Administration. However, the direct valuation method recommended by the association cannot be adopted, since it is based on the acquisition costs of the land in 1987, 1989 and 1997, and on the construction costs established in 1987 and 1992, which are too far in the past in relation to the reference date of January 1, 2013, despite the fact that the association has produced an appraisal drawn up at its request to determine the market value of the exhibition center, based on the provisions of the second paragraph of A of III of article 1498 of the General Tax Code. Furthermore, as previously indicated, the tax authorities refused to take into account the "economic environment coefficient" of 75 % proposed by the expert. While the applicant association contests this position and maintains that local economic factors necessarily have an influence on the market value of buildings and must be taken into account, the legislative or regulatory provisions applicable to the present dispute do not provide for any abatement rule. In addition, the tax authorities have applied the Insee construction cost indexes to the total market value of the buildings. Although the association maintains that the BT01 index should be substituted for these indices, it does not explain why this index would be more appropriate. Consequently, the total market value of the properties in dispute must be set at May 2019 at €5,528,000. Finally, to determine the rental value at January 1, 2013, the tax authorities applied the Insee 2013 and 2018 construction cost indices to the total market value of the properties. However, it follows from the instruction that, as the market value was established in May 2019 euros, the Insee rate for the second quarter of 2019 should be applied, and not the 2018 rate as the tax authorities wrongly did. Thus, the application of these rates results in a market value of €5,211,390 at January 1, 2013 [€5,528,000 x 1646 (Insee index for the first quarter of 2013) / 1746 (Insee index for the second quarter of 2019)]. It follows from the foregoing that the applicant association is only entitled to request a reduction in the property tax assessment to which it was liable in respect of the years in dispute, taking into account a rental value at January 1, 2013 determined by taking into account a market value of €5,211,390 at the same reference date.

With regard to the damage and acts of vandalism suffered by the property complex in dispute, it is clear from the investigation that the statement of facts drawn up by a bailiff on October 14, 2015, when the site was shut down, mentions numerous disorders, safety problems, environmental and insurance problems, and the fact that the site is unfit for use in its current state in terms of security and electricity, but does not identify any damage to the shell of the building such that the premises have lost their character as built property and become unfit for any form of use. Similarly, while the report of the inspection of classified facilities dated November 28, 2019 indicates the existence of damage, and its amplification due to repeated intrusions, consisting of the breaking of partitions, glass, cable passages, fire extinguishers, structural elements of certain buildings, damage to electrical transformers, oil spills on the floor, and garbage dumping. Taken as a whole, these findings are no different from those set out in the minutes of October 14, 2015, and do not point to any irremediable damage to the shell of the buildings, making them unfit for use as a whole. In any case, they only lead the inspector of classified installations to note the unacceptable state of the site with regard to the protection of the interests mentioned in article L. 511-1 of the Environmental Code, which has no influence on the assessment of the built nature of the premises within the meaning of the provisions of article 1380 of the CGI. Under these conditions, by relying on a bailiff's report dated July 1, 2022, and an architect's inspection report dated December 20, 2022, both of which post-date January 1 of the tax years in dispute, the applicant company has not demonstrated that its property was in such a state of disrepair at these dates that it could no longer be used and could no longer be considered as a built-up property, within the meaning of the provisions of article 1380 of the CGI.