French General Tax Code
In forceI. - The delivery of securities as collateral entailing transfer of ownership and carried out under the conditions set out in I or III of Article L. 211-38 of the Monetary and Financial Code are subject to the regime provided for in this article when the following conditions are met:
1° The guarantor and the beneficiary of the guarantee are taxable on their profits according to a real tax regime;
2° The remittances relate to the financial securities mentioned in Article L. 211-27 or the items referred to in Article L. 211-34 of the Monetary and Financial Code and comply with the conditions laid down in article L. 211-28 of the same code;
3° The collateral is returned to the collateral provider in equivalent securities of the same type as those provided as collateral;
4° The collateral is provided as part of over-the-counter forward transactions in financial instruments, securities loans or repurchase agreements provided for in articles 38 bis and 38 bis-0 A, or as part of the transactions provided for in article L. 330-2 of the Monetary and Financial Code.
II. - 1. Securities delivered by the collateral provider under the conditions set out in I are deemed to be drawn in priority from securities of the same type acquired or subscribed to on the most recent date.
The receivable representing the securities delivered is recorded separately in the balance sheet at the original value of these securities. When the securities are returned, they are recorded in the balance sheet at the same value.
2. The remuneration paid in respect of the pledged securities constitutes debt income. Where the period of pledging covers the date of payment of the income attached to the securities pledged, the amount of the remuneration may not be less than the value of the income waived by the pledgor. The portion of the remuneration corresponding to this income is subject to the same tax treatment as the income from the securities provided as collateral.
III. - 1. The securities received by the beneficiary of the guarantee under the conditions set out in I and the debt representing the obligation to return these securities are recorded separately on the balance sheet of the beneficiary of this guarantee at the market price on the day the guarantee was given.
At the close of the financial year, the securities received as collateral which appear on the balance sheet of the beneficiary of the guarantee and the debt representing the obligation to return which results from the current contracts are recorded at the price that these securities have on the market on this date.
When they are returned, the securities are deemed to be returned at the value for which the debt representing the obligation to return appears on the balance sheet.
2. Securities received as collateral under the conditions provided for in I which are the subject of a loan under the conditions provided for in Article 38 bis or a repurchase agreement under the conditions provided for in article 38 bis-0 A are subject to the rules set out respectively in 1 bis of article 38 bis and II of article 38 bis-0 A.
3. When the beneficiary of the guarantee disposes of securities, these are taken in priority from the securities of the same nature received as collateral under the conditions provided for in this article on the earliest date. Subsequent purchases of securities of the same type are allocated by priority to the replacement of these securities.
IV. - In the event of default by one of the parties, the transfer is deemed to have taken place on the date of default for tax purposes. In this case, the result of the transfer of the securities by the provider who put them up as collateral is equal to the difference between their real value on the date of the default and their cost price for tax purposes in its records.
For the application of Article 39 duodecies, the securities transferred are deemed to have been held until the date they were put up as collateral.
