French General Tax Code
In forceI. Capital gains subject to the articles 39 duodecies to 39 quindecies and realised by an individual on the occasion of the contribution to a company subject to a real taxation system of a sole proprietorship or a complete branch of activity may benefit from the following provisions:
a. The taxation of capital gains relating to non-depreciable fixed assets is deferred until the date of the sale, repurchase or cancellation of the company rights received as consideration for the contribution of the business or until the sale of these fixed assets by the company if this is earlier. However, in the event of a gratuitous transfer to an individual of the corporate rights remunerating the contribution or of the bare ownership of these rights, the deferral of taxation is maintained if the beneficiary of the transfer undertakes to pay the capital gains tax on the date on which one of the events provided for in the previous sentence occurs ;
Where the contribution has been granted to a professional non-trading company or an agricultural non-trading company, the deferral of taxation provided for in the first paragraph of this a is maintained, in the event of transactions subject to the provisions of I of article 151 octies A or the conversion of the professional non-trading company into a liberal practice company. This deferral is terminated when one of the events mentioned in this same I occurs;
The deferral of taxation provided for in the first paragraph is maintained in the event of an exchange of the corporate rights mentioned in the same paragraph resulting from a merger or demerger until the date of sale, redemption or cancellation of the rights received at the time of the exchange;
b. Capital gains relating to other fixed assets are taxed in the name of the company receiving the contribution in accordance with the procedures set out in d of 3 of Article 210 A for company mergers.
By way of derogation from b, the contributor may opt for taxation at the rate provided for in 1 of I of article 39 quindecies of the overall long-term capital gain relating to his depreciable fixed assets; in this case, the amount of the reintegrations provided for in b is reduced accordingly.
Profits relating to inventories are not taxed in the name of the transferor if the transferee company records these inventories as assets on its balance sheet at the book value for which they appear on the last balance sheet of the transferring company.
Under the conditions set out in a of 3 of article 210 A, provisions relating to the items transferred are only brought back to the taxable income of the transferring company if they become irrelevant.
The provisions of 5 of article 210 A are applicable to the contributions referred to in this article;
The provisions of this article are applicable to the contribution to a company, of a sole proprietorship or a complete branch of activity with the exception of buildings, if these are made available to the company receiving the contribution under a contract for a period of at least nine years ;
When the buildings referred to in the tenth paragraph cease to be made available to the company receiving the contribution, the capital gains, not yet taxed, relating to the non-depreciable items are included in the bases of the tax due by the individuals referred to in the first to sixth paragraphs, in respect of the year during which this provision ceased; capital gains and profits relating to other items contributed that have not yet been subject to tax, as well as provisions relating to all items contributed that have not yet been written back, are included in the results of the company receiving the contribution in respect of the financial year during which the making available ceased.
II. The regime defined in I applies:
a. By simple option exercised in the deed recording the formation of the company, where the business is contributed to a general partnership, a limited partnership, a limited liability company in which the management has a majority stake or to a non-trading company carrying on a professional activity;
b. (Expired).
The option is exercised in the deed of contribution jointly by the contributor and the company; it entails the obligation to comply with the rules provided for in this article.
If the company ceases to meet the conditions allowing it to benefit from the regime provided for in I on the basis of a simple option, the deferral of taxation of the capital gains on the contribution may, with prior approval, be maintained. Otherwise, these capital gains become immediately taxable.
The contributor must attach to the declaration provided for in article 170 in respect of the year in progress on the date of the contribution and subsequent years a statement in accordance with the model provided by the administration showing the information required to monitor the capital gains whose taxation is deferred in accordance with the first and third paragraphs of a of I. A decree shall specify the content of this statement.
III. The provisions of II of article 93 quater and of l'article 151 septies do not apply to capital gains recorded on the occasion of contributions to companies referred to in I and II of this article.
IV. (Repealed with effect from 1 January 2000).
