Article 123 bis French Tax Code: Paris Tribunal taxes a French resident on the income of a UAE passive holding company (Administrative Court of Paris, 6 May 2026, No. 2503546, Cornille)
A ruling worth flagging for anyone holding or structuring assets through the UAE.
The facts. Following a desk audit combined with an international exchange-of-information request to the UAE, the French tax authority re-attributed to a French resident — as deemed investment income — the profits of a UAE company, Lettuce Holding Limited, of which he was the sole shareholder and beneficial owner. A non-operating entity, made up exclusively of securities, receivables, deposits and current accounts, and locally subject to a privileged tax regime within the meaning of Article 238 A. A textbook Article 123 bis case. The reassessment: nearly €239,000 in tax, interest and penalties over 2013–2015.
The taxpayer’s three arguments, all rejected:
– Documents in English? No rule prevents the court from relying on them, all the more so as the authority had translated them in the reassessment notice.
– UAE bank statements not “authenticated” by seal or signature? The exchange of information was lawful, no statute requires such authentication, and the taxpayer raised nothing casting doubt on the documents’ authenticity.
– No deemed investment income under 123 bis? The taxpayer did not dispute being the beneficial owner and produced no financial records capable of contradicting the statements provided by the UAE authorities.
My takeaways:
- Exchange of information with the UAE is now operational — and effective. Bank data (here, Emirates NBD) genuinely flows across borders.
- The burden of proof shifts quickly. Once the authority has assembled the evidence, challenging the documents’ “reliability” without producing the company’s own financial statements goes nowhere.
- The defence appears to have missed the key point. The 123 bis safe harbour — available to non-EU entities since 2019 — allows the taxpayer to escape the charge by showing the absence of an artificial arrangement. It does not seem to have been raised.
- One to watch going forward. The introduction of the UAE’s 9% corporate tax does not automatically neutralise Article 238 A: the test remains whether local tax is more than half below the French corporate rate (25%) — i.e. a 12.5% threshold that a 9% rate still falls beneath.
The underlying lesson: a purely passive UAE holding company, without substance or activity, remains a high-risk vehicle for a French resident. Structuring must be thought through upfront — not at the litigation stage.
#InternationalTax #PrivateWealth #UAE #Dubai #FrenchTax #TaxAudit