French General Tax Code
In forceI. - Capital gains generated by a company on the exchange of a property with the State, a local authority, a competent public establishment for inter-municipal cooperation or a public establishment or association mentioned in Chapters I, II and IV of Title II of Book III of the Town Planning Code may, on option, not be taxed on the exchange, provided that:
a) The property or properties handed over at the time of the exchange and the property or properties received at the time of this exchange are in the nature of real estate, whether built or unbuilt, or rights over real estate;
b) The property or properties handed over at the time of the exchange are allocated by the State, the local authority or the public establishment or association mentioned in the first paragraph to the realisation of works of public interest ;
c) If a balancing payment is made by either party, this does not exceed 10% of the market value of the property or rights handed over in the exchange or the amount of the capital gain realised on the exchange.
II. - The capital gains referred to in I are allocated to the assets or rights received in exchange in proportion to their market value on the date of the exchange.
The capital gain allocated to a non-depreciable asset or right is taxed when the asset or right is sold or, where applicable, when the right expires.
Capital gains allocated to depreciable assets or rights are added back to taxable income as and when the assets or rights to which the capital gains are allocated are depreciated. In the event of the sale of the asset or right or when the right expires, the fraction of the capital gain allocated to this asset or right and not yet reintegrated is taxed immediately.
III. - The company shall attach to its income tax return in respect of each of the years in which this scheme applies a statement in accordance with the model provided by the tax authorities showing, for each asset or right received on the occasion of the exchange, the information required to calculate the reintegrations mentioned in II and to calculate the taxable income on the subsequent disposal of the asset or right in question.
The production of the statement mentioned in the first paragraph of this III in respect of the financial year during which the exchange was carried out shall constitute an option for the taxation scheme defined in this article. For subsequent financial years, failure to produce or the inaccurate or incomplete nature of this statement shall result in the application of the fine defined in I of Article 1763.
