French General Tax Code
In forceI. - The provisions of I of article 238 bis I relating to the revaluation of non-depreciable fixed assets are extended to depreciable fixed assets appearing in the balance sheet for the first financial year ending on or after 31 December 1976.
The revalued values of these fixed assets must not exceed the amounts obtained by applying to the net book values indices representing changes in:
The price of buildings as regards assets of this nature;
The price of equipment and tooling as regards other depreciable fixed assets.
These indices are determined by order of the Minister of the Economy and Finance.
II. - Revaluation gains on depreciable fixed assets are taken directly, free of tax, to a special provision on the liabilities side of the balance sheet. A detailed statement of this provision must be produced as an appendix to the balance sheet and to the tax returns of those concerned.
The annual depreciation instalments for financial years commencing on or after 1 January 1977 are calculated on the basis of the revalued values.
The special provision is deducted from the results of these financial years under the following conditions:
As regards revaluation gains on assets depreciated using the straight-line method: by equal annual fractions over the residual depreciation period assessed at 31 December 1976;
As regards revaluation gains on assets depreciated using the reducing balance method: by annual fractions, each of which is calculated under the same conditions and at the same rate as the corresponding depreciation annuity. This rate may not exceed that which the company would have been authorised to apply in the absence of revaluation.
In the event of the disposal of a revalued depreciable asset, the residual fraction of the special provision corresponding to the item disposed of is taken into account in the results for the financial year of the disposal. The gain or loss on disposal is calculated on the basis of the revalued value.
III. - Depending on the economic and budgetary situation and taking into account the investment needs of companies, they may be authorised to deduct from their tax base part of the sums deducted in application of the preceding provisions from the results of financial years ending on or after 31 December 1978. The rate and terms of this deduction will be set, for each of the years in which it is applied, by the Finance Act.
IV. - The revaluation of fixed assets provided for in this article may be carried out in the accounts for the first financial year ending on 31 December 1976 or for the three following financial years.
V. - A Conseil d'Etat decree, issued after consultation with the French Accounting Standards Authority (Autorité des normes comptables), sets out the conditions for the application of this article, the revaluation procedures, in particular those applicable to buildings, and the nature of the obligations incumbent on companies.
It specifies the rules for determining, from a tax point of view, capital gains or losses on the disposal of depreciable fixed assets, revalued in such a way that the revaluation provided for in this article is completely tax neutral, as well as deferred depreciation. It adapts the provisions of this article to the agricultural and liberal professions.
VI. - Deficits carried forward as at 31 December 1976 may be offset, for tax purposes, against the special provision.
VII. - The present revaluation, as defined in paragraphs I to V, will have no effect on the basis of assessment for local taxes (cotisation foncière des entreprises and property taxes).
