Section II: Scope of the tax

I. - Legal entities subject ipso jure or by option to corporation tax under the conditions of ordinary law, which, within five years of the establishment of one of the zones provided for in Article 1 of Ordinance no. 86-1113 of 15 October 1986, set up to operate a business there, are exempt from this tax on profits made up to the end of the one hundred and twentieth month following their creation;

Corporate entities created as part of a concentration or restructuring of pre-existing activities in the zone or for the takeover of such activities are not eligible for this exemption.

II. - The exemption provided for in I does not apply:

1° To income from company shares or units, and to the results of holdings in organisations mentioned in articles 8,8 quater, 8 quinquies, 239 quater and 239 quater B ;

2° Subsidies, gifts and waivers of receivables;

3° Income from receivables and financial transactions for the amount that exceeds the financial expenses incurred during the same financial year;

4° Income from industrial and commercial property rights, where these rights do not originate in the activity created in the zone;

5° Income that is not declared under the conditions provided for in Article 223.

III. - In order to benefit from the exemption provided for in I, the legal entity must meet the following conditions:

1° Its registered office, activities and means of operation must be located in one of the zones created in application of article 1 of order no. 86-1113 of 15 October 1986;

2° Its activities must be industrial and commercial within the meaning of article 34; however, the exemption provided for in I does not apply if the company carries out the following activities on a principal or accessory basis:

a) A storage or distribution activity that is independent of the industrial production units located in the zone;

b) A service activity that is not directly necessary to an activity involving the manufacture or processing of movable tangible property;

c) A banking, financial, insurance, property rental or management or real estate work activity;

d) An activity falling within one of the following sectors:
steel, synthetic fibres, textiles-clothing, shipbuilding, flat glass, milk powder, butter, sugar, isoglucose;

3° Its headcount of employees benefiting from an employment contract of indefinite duration or a duration of at least six months must be equal to or greater than ten during each financial year of the exemption period; if the headcount varies during the financial year, it is calculated taking into account the length of time the employees in question have been present during the financial year.

IV. - If the minimum number of employees provided for in 3° of III is not reached during the first two financial years, the exemption is granted provided that the number of employees is at least ten during the third financial year.

If, after the third financial year, the legal entity ceases to meet the headcount condition, it no longer benefits from the exemptions from the financial year in which this condition is no longer met.