French General Tax Code
In forceSubject to the provisions of article 244 bis A, the gains mentioned in article 150-0 A resulting from the transfer or redemption of company rights mentioned in f of I of article 164 B, made by individuals who are not domiciled in France within the meaning of article 4 B or by legal entities or bodies, whatever their form, having their registered office outside France, are determined in accordance with the procedures set out in articles 150-0 A to 150-0 E and subject to a levy at the rates mentioned in the second paragraph of this article where the rights in the profits of the company held by the transferor or the shareholder or the partner, together with his spouse, their ascendants and descendants, have together exceeded 25% of these profits at any time during the last five years. The levy is in full discharge of the income tax due on the sums that have borne it.
The levy referred to in the first paragraph is set at the rate provided for in the second paragraph of I of Article 219 when it is due by a legal entity or an organisation of any form and at the rate of 12.8% when it is due by a natural person. By way of derogation, the gains mentioned in the first paragraph are taxed at the flat rate of 75% regardless of the percentage of rights held in the profits of the company concerned, when they are made by persons or bodies domiciled, established or incorporated outside France in a non-cooperative State or territory within the meaning of Article 238-0 A other than those mentioned in 2° of 2 bis of the same Article 238-0 A, unless they provide proof that the transactions to which these profits correspond mainly have a purpose and effect other than to enable them to be located in a non-cooperative State or territory.
The first two paragraphs apply to the distributions mentioned in f bis and f ter of I of article 164 B made to the persons and bodies mentioned in the same first two paragraphs. The 25% threshold is assessed by adding together the rights held directly and indirectly by the persons or bodies mentioned in the first sentence of this paragraph, in the company mentioned in f of I of article 164 B. The rights held indirectly are determined by multiplying the percentage of rights held by these persons and organisations in the entities making the distributions by the percentage of rights held by the latter in the company mentioned in the same f.
The tax is paid under the conditions set out in IV and IV bis of Article 244 bis A.
International organisations, foreign States, central banks and public financial institutions of these States are exempt when the transfers relate to securities meeting the conditions set out in l'article 131 sexies.
The levy mentioned in the first paragraph of this article does not apply to undertakings for collective investment set up under foreign law, located in a Member State of the European Union or in another State or territory which has concluded an administrative assistance agreement with France to combat tax fraud and tax evasion and which is not non-cooperative within the meaning of article 238-0 A, and which meet the following conditions:
1° Raise capital from a certain number of investors with a view to investing it, in accordance with a defined investment policy, in the interests of these investors;
2° Have characteristics similar to those of undertakings for collective investment governed by French law falling within the scope of Section 1, paragraphs 1, 2, 3, 5 and 6 of Subsection 2, Subsection 3 or Subsection 4 of Section 2 of Chapter IV of Title I of Book II of the Monetary and Financial Code;
For undertakings located in a Member State of the European Union, the characteristics of the undertakings for collective investment must be similar to those of undertakings for collective investment governed by French law falling within the scope of Section 1, paragraphs 1, 2, 3, 5 and 6 of Subsection 2, Subsection 3 or Subsection 4 of Section 2 of Chapter IV of Title I of Book II of the Monetary and Financial Code 3° For undertakings located in a country that is not a member of the European Union or a party to the Agreement on the European Economic Area, not being effectively involved in the management or control of the company referred to in f of I of Article 164 B of this Code. The stipulations of the administrative assistance agreement referred to in the sixth paragraph of this article and their implementation must effectively enable the tax authorities to obtain, from the authorities of the State in which the undertaking for collective investment constituted on the basis of a foreign law referred to in the same sixth paragraph is located, the information necessary to verify compliance by this undertaking with the conditions set out in 1° to 3°.
The tax authorities may obtain a refund of the tax paid by the undertaking for collective investment constituted on the basis of a foreign law referred to in the same sixth paragraph. The following legal entities or organisations, regardless of their form, may obtain a refund of that part of the levy referred to in the first paragraph which exceeds the corporation tax for which they would have been liable if their registered office had been located in France:
a) Whose registered office is located in France. a) Whose registered office is located in a State of the European Union or in another State party to the Agreement on the European Economic Area that has concluded an administrative assistance agreement with France to combat tax evasion and avoidance and that is not non-cooperative within the meaning of Article 238-0 A;
> Or, provided that the registered office is located in a State of the European Union or in another State party to the Agreement on the European Economic Area that has concluded an administrative assistance agreement with France to combat tax evasion and avoidance and that is not non-cooperative within the meaning of Article 238-0 A;
b) Or, provided that they do not effectively participate in the management or control of the company whose securities are sold or bought back, whose registered office is located in a State or territory that has concluded a tax treaty with France that contains a clause on administrative assistance in exchanging information and combating tax fraud and evasion and that is not uncooperative within the meaning of the same Article 238-0 A.
