French General Tax Code
In forceI. - 1. When an industrial or commercial business extends its activity to operations whose results fall into the category of agricultural profits or profits from non-commercial professions, these results are taken into account to determine the industrial and commercial profits to be included in the income tax base.
2. When a holder of non-commercial profits extends his activity to operations whose results fall into the category of agricultural profits or industrial and commercial profits, these results are taken into account to determine the non-commercial profits to be included in the income tax base.
II. - 1. The net profit referred to in l'article 38 est :
1° Reduced by the amount of income that does not come from the activity carried out on a professional basis, excluding those taken into account to determine the capital gain or loss on the disposal of a fixed asset or to determine the results mentioned in I ;
2° Increased by the amount of expenses allowed as a deduction that are not required to carry on the business on a professional basis, excluding those taken into account for the determination of the capital gain or loss on the disposal of a fixed asset or for the determination of the results mentioned in I.
2. Subject to VII of article 151 septies, in the event of the sale of a fixed asset, articles 39 duodecies to 39 novodecies are applicable under the following conditions:
1° The sale price of the asset is deemed to be equal to the sum :
a) The actual disposal price of this item, multiplied by the ratio between, in the numerator, the period during which the item is used for the purposes of carrying on the business on a professional basis and, in the denominator, the period during which it is part of the business assets ;
b) And the original value of this item, multiplied by the ratio between, on the numerator, the length of time the item has been used for purposes other than carrying on the business on a professional basis since it became part of the business assets and, on the denominator, the length of time it has been part of the business assets ;
2° The book value of the asset sold is deemed to be increased by the amount of depreciation, other than that subject to 2° of 1 of III of this article, which has been added back to profit pursuant to 2° of 1 of this II; such depreciation is nevertheless deemed not to have been expressly excluded from deductible expenses.
3. Subject to an express option to this effect, 1° of 1 is not applicable, on the one hand, and 2° of the same 1 is applicable only to the share of the expenses relating to an asset which exceeds the amount of the income relating to the same asset, on the other hand :
1° Where the income referred to in 1° of the same 1 does not exceed 5% of all income for the financial year, including that taken into account to determine the income referred to in I but excluding capital gains on disposals;
2° Or that the income referred to in the same 1° does not exceed 10% of all income for the financial year, including that taken into account to determine the income referred to in I but excluding capital gains on disposals, if the condition referred to in 1° of this 3 was met in respect of the previous financial year.
III. - 1. The income and expenses mentioned in 1 of II are used, depending on their nature, to determine:
1° Income from property, income from transferable securities, profits mentioned in article 150 ter or capital gains from the sale for valuable consideration of property or rights of any kind mentioned in articles 150-0 A to 150 VH, according to the rules applicable to these categories of income;
2° A profit, distinct from net profit, taxable under the conditions provided for in 1°, 1° bis, 1° ter or 2° of I of article 156.
2. Subject to VII of article 151 septies, in the event of the disposal of a fixed asset, the difference between the actual disposal price of the asset and the amount determined under the conditions of 1° of 2 of II of this article is retained for the determination of capital gains from the disposal for valuable consideration of goods or rights of any kind according to the rules applicable to this category of income.
3. The income, profits and capital gains mentioned in 1° of 1 or in 2 are deemed to have been received or realised on the date of the close of the financial year or of the tax period for the application of the reporting obligations and for the recovery of the tax due.
IV. - 1. Subject to 2, professional practice implies personal, direct and continuous participation in the performance of the acts required for the activity.
2. The activity of directly or indirectly renting furnished residential premises or premises intended to be rented furnished is carried out on a professional basis when the following two conditions are met:
1° (Repealed)
2° The annual revenue derived from this activity by all members of the tax household exceeds €23,000;
3° This revenue exceeds the income of the tax household subject to income tax in the categories of salaries and wages within the meaning of l'article 79, industrial and commercial profits other than those from furnished lettings, agricultural profits, non-commercial profits and the income of managers and partners mentioned in l'article 62.
For the application of 3°, revenue relating to a tenancy that began before 1 January 2009 or relating to residential premises acquired or reserved before that date under the conditions provided for in articles L. 261-2, L. 261-3, L. 261-15 or L. 262-1 of the Construction and Housing Code are counted at five times their value, reduced by two-fifths of this value per year elapsed since the start of the tenancy, up to a limit of ten years from the start of the tenancy.
Renting of the residential premises is deemed to begin on the date of acquisition or, if the acquisition took place before completion of the premises, on the date of completion. In the year in which the letting begins, the revenue relating to it is, where applicable, reduced to twelve months for the purposes of assessing the thresholds mentioned in 2° and 3° of this 2. The same applies in the year in which the letting activity ceases altogether.
