French General Tax Code
In forceI. - Where rights in a company or group referred to in Articles 8,8 quinquies, 239 quater, 239 quater B, 239 quater C or 239 quater D are included in the assets of a legal entity liable to corporation tax under the conditions of ordinary law or an industrial, commercial, craft or agricultural business subject to income tax by operation of law under a system of actual profit, the share of profit corresponding to these rights is determined according to the rules applicable to the profit made by the person or business that holds these rights.
If the rights in question are held by a company carrying on an agricultural activity created before 1 January 1997 or a joint farming group mentioned in Article 71 who are subject to income tax under the regime provided for in the article 64 bis or, on option, according to the simplified real profit tax system, the methods of taxation of the corresponding profit shares follow the rules applicable to corporation tax. The same applies if the company or group manages its own movable or immovable assets. However, if the taxpayer provides proof that a fraction of the rights in the latter company or grouping is itself held directly or indirectly by natural persons or undertakings, which fall within the scope of II, this rule does not apply to the corresponding share of profit.
A decree sets out the conditions for the application of the second paragraph, particularly with regard to reporting obligations (1).
II. - In all other cases, the share of profits as well as the profits resulting from the transfer of corporate rights are determined and taxed taking into account the nature of the activity and the amount of revenue of the company or grouping.
