An investor can obtain the cancellation of an investment if it turns out that it does not provide the expected tax benefit, ruled the Court of Cassation.
The expected tax advantage can indeed be an essential quality of the investment in the eyes of the investor, in the contract he signs with the financial company offering it.
If it turns out that it does not exist in reality, the contract would be very likely to be canceled for error. The error on the substantial qualities of the object of the contract is a defect of the consent and justifies as such the cancellation of the agreement, recalled the Court.
A couple had made a financial investment in the French West Indies by buying ship shares for the sole purpose of tax exemption. On the encouragement of a financial adviser, he had invested 160,000 EUR borrowed from the bank and this arrangement was to provide a tax reduction. But the tax authorities subsequently notified a recovery because the ship did not meet the conditions required for this assembly.
The investors then asked the finance company to cancel the investment, return the money and compensate them for their bank loan costs.
The possibility of tax exemption that it provides is a substantial quality of a good, confirmed the judges. Therefore, if it appears that this possibility of tax exemption does not exist, the consent of the investors could have been given by mistake, which would indeed be a cause for the cancellation of the contract.
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(Cass. Com, 22.6.2022, Q 20-11.846).