French General Tax Code
In forceI.-Public limited companies (sociétés anonymes), simplified joint stock companies (sociétés par actions simplifiées) and limited liability companies (sociétés à responsabilité limitée), the securities of which are not admitted to trading on a financial instruments market, at least 50% of the capital and voting rights of which are held by one or more natural persons and at least 34% by one or more persons having, within the said companies, the status of chairman, chief executive officer, chairman of the supervisory board, member of the management board or manager, as well as by the members of their tax household within the meaning of in Article 6, may opt for the partnership tax regime referred to in Article 8.
For the purposes of determining the percentages mentioned in the first paragraph, holdings in venture capital companies, venture capital mutual funds, specialised professional funds covered by Article L. 214-37 of the Monetary and Financial Code as it read prior to the ordonnance n° 2013-676 du 25 juillet 2013 modifying the legal framework for asset management, professional private equity funds, sociétés de libre partenariat, sociétés de développement régional, sociétés financières d'innovation and sociétés unipersonnelles d'investissement à risque or equivalent structures established in another State of the European Community or in a State or territory that has entered into a tax treaty with France that contains an administrative assistance clause with a view to combating tax evasion or avoidance are not taken into account provided that there is no arm's length relationship within the meaning of 12 of Article 39 between the company in question and these companies, funds or equivalent structures.
For the application of 1° of II of Article 163 quinquies B, of 1 of I of Article 208 D, of the first paragraph of I of the first paragraph of I of Article L. 214-31 of the Monetary and Financial Code and the third paragraph of 1° of article 1-1 of law no. 85-695 of 11 July 1985 containing various economic and financial provisions, companies that have exercised the option provided for in I are deemed to be subject to corporation tax under the conditions of ordinary law at the normal rate.
II.-The option provided for in I is subject to compliance with the following conditions:
1° The company is primarily engaged in an industrial, commercial, craft, agricultural or liberal activity, excluding the management of its own movable or immovable assets;
2° The company employs fewer than fifty employees and had annual sales or a balance sheet total of less than €10 million during the financial year;
3° The company was created less than five years ago.
The condition relating to the number of employees mentioned in 2° of this II is assessed in accordance with the procedures set out in I of Article L. 130-1 of the Social Security Code. If the employee headcount threshold determined in accordance with the procedures set out in II of the same article L. 130-1 is exceeded, article 206 of this code becomes applicable to the company.
The conditions mentioned in 1° and 2° of this II, other than the condition relating to the number of employees, as well as the condition relating to the holding of capital mentioned in I are assessed on a continuous basis during the financial years covered by the option. Where one of these conditions is no longer met during one of these financial years, Article 206 shall apply to the company, with effect from that same financial year.
The condition mentioned in 3° of this II is assessed on the opening date of the first financial year in which the option applies.
III.-The option may only be exercised with the agreement of all the members, excluding the members mentioned in the second paragraph of I. It must be notified to the tax department with which the income tax return is filed within the first three months of the first financial year for which it applies.
It is valid for a period of five financial years, unless renunciation is notified within the first three months of the opening date of the financial year from which the renunciation applies.
In the event of early exit from the partnership tax regime, for whatever reason, the company may not opt again for this regime pursuant to this article.
