Tax allowance and profitability at work

How to prove the consequences of one's disability on one's professional career? Is early retirement sufficient to characterise the admissibility of a tax deduction in favour of disabled persons within the meaning of the General Tax Code?

This is what the Commercial, Financial and Economic Chamber of the Court of Cassation had to interpret in its judgment of 23 June 2021.

On the facts

Mr Q suffers from an enucleation of his left eye at a young age. However, he worked as a draughtsman for 26 years in the same company. He benefited from a retirement plan at the age of 55, a provision specific to the company that employed him. In any event, Mr Q was declared his sister's legatee and therefore applied for the deduction provided for in article 779-II of the general tax code in favour of disabled persons in order to obtain a deduction of 88,821€. As the tax authorities did not believe that they should allow the application of the said allowance, Mr Q had to put forward his legal and factual arguments before the competent court, all the way to the Court of Cassation.

On the applicable law

Article 779-II of the General Tax Code provides that:

"For the collection of transfer duties, an allowance of €159,325 is made on the share of any heir, legatee or donee who is unable to work under normal conditions of profitability, due to a physical or mental infirmity, congenital or acquired.

On the role of the judge of the Court of Cassation

The Court of Cassation sanctions the correct application of the law by the other judges (called judges of the merits). The nature of the control exercised by the Court concerns the law itself rather than the dispute between the parties. It is said that the judge of cassation is in fact a judge of the law, of its correct interpretation and its proper application. This raises the question of the interpretation of the law with regard to the evidence provided by Mr Q in his defence.

On the usual forms of evidence

A quick reminder: methods of proof are the means by which the parties to the proceedings can prove an act or a fact. The means of proof vary according to whether a fact or a legal act must be proved. In principle, legal acts are proven in writing, whereas legal facts are proven by any means. More specifically, the Civil Code regulates five main types of evidence:

  • literal evidence,
  • testimonial evidence,
  • evidence by clues and presumptions,
  • confession and finally,
  • oath.

In any case, Mr Q had to prove that he was unable to work under normal conditions of profitability because of his disability, by any means necessary to prove a legal fact. In any event, the Court of Cassation has also considered the issue of proof of recognition of disability.

Now, first of all, to be recognised as disabled, you need to:

  • have a health problem or disability,
  • be recognised as a disabled worker and receive the Disabled Adult Allowance,
  • being disabled,
  • having an occupational disease or being the victim of an accident at work.

The law of 11 February 2005, which is one of the main laws on the rights of disabled people since the law of 30 June 1975, states:

"A disability, within the meaning of this law, is any limitation of activity or restriction of participation in society suffered by a person in his or her environment due to a substantial, lasting or permanent impairment of one or more physical, sensory, mental, cognitive or psychological functions, a multiple disability or a disabling health disorder.

But having a health problem or a disability is not enough to be officially recognised as a disabled person. However, this recognition of disability is essential in order to benefit from a certain number of specific aids, including the tax deduction that Mr Q was claiming. In addition, the disabled person must belong to one of the following categories according to Article L5212-13 of the Labour Code to benefit from the employment obligation:

  • Workers recognised as disabled by the Commission des droits et de l'autonomie des personnes handicapées (CDAPH)
  • Victims of an accident at work or occupational disease with a permanent disability of at least 10%, who receive a pension under a compulsory social protection scheme or under the provisions governing public employees,
  • Invalidity pensioners, provided that the invalidity reduces their working or earning capacity by at least two-thirds,
  • The beneficiaries mentioned in Article L. 241-2 of the Code of military invalidity pensions and victims of war,
  • The beneficiaries mentioned in Articles L. 241-3 and L. 241-4 of the same code,
    Volunteer firefighters who receive a disability allowance or pension for an accident or illness incurred on duty,
  • Holders of the mobility and inclusion card bearing the mention "invalidity" according to article L. 241-3 of the Code de l'action sociale et des familles,
  • Holders of the Disabled Adult Allowance.

However, the Court of Cassation clearly states in its ruling that Mr Q's disability situation was not discussed. This means that he had to properly assert the provisions of Article L5212-13 of the Labour Code. Subsequently, the court then carried out a precise analysis of the notion of capacity to support himself. In order to better interpret the provisions of Article 779-II of the General Tax Code, the court noted that:

  • Mr Q provided evidence of a stable career lasting 26 years as an actor in the same company without providing any evidence that he was unable to pursue higher education or that his professional activity was limited or that his advancement was blocked due to his state of health.
  • He benefited from a retirement plan at the age of 55 for which he did not communicate the financial conditions.
  • He does not provide evidence that such a departure, which he says would necessarily have been anticipated because of his disability, would have had a negative impact on his income.
  • He does not show that because of his disability he was unable to pursue a career in the Navy.
  • He does not demonstrate that such a career would have offered him better economic prospects in his working life and retirement.

This means that it is necessary to be as exhaustive as possible and not to go astray in alleging facts that cannot be proven...