French General Tax Code
In forceI. The depreciation of assets leased or made available in any other form is spread over the normal period of use in accordance with the procedures laid down by decree in the Conseil d'Etat.
By way of derogation from the provisions of the first paragraph, companies leasing assets under the conditions provided for in 1 and 2 of Article L. 313-7 of the French Monetary and Financial Code and those operating leasing transactions with a purchase option may, as an option, spread the depreciation of these assets over the term of the corresponding leasing or rental contracts with a purchase option. The depreciation charge for each financial year is then equal to the fraction of the rent acquired in respect of that financial year, which corresponds to the depreciation of the capital committed to acquire the leased assets.
If the option mentioned in the second paragraph is exercised, it applies to all assets allocated to leasing or rental operations with a purchase option. However, the companies mentioned in I of Article 30 of Law no. 80-531 of 15 July 1980 relating to energy savings and the use of heat will be able to exercise this option contract by contract.
II.-1. In the event of the leasing or provision in any other form of property located or operated or registered in France or in another State party to the Agreement on the European Economic Area which has entered into an administrative assistance agreement with France with a view to combating tax evasion and avoidance, granted by a company subject to the regime provided for in article 8, by a co-ownership referred to in article 8 quater or 8 quinquies or by a grouping within the meaning of articles 239 quater, 239 quater B, 239 quater C or 239 quater D, the amount of depreciation of these assets or co-ownership shares is deducted from taxable income. For a period of thirty-six months counted from the start of the letting or making available, this depreciation is allowed as a deduction, in respect of a single financial year, up to a limit of three times the amount of rent acquired or the share of the co-ownership's income.
The fraction of the deficits of the companies, co-ownerships or groupings mentioned in the first paragraph corresponding to the amount of depreciation allowances deducted, under the conditions defined in the same paragraph, in respect of the first twelve months of depreciation of the property is deductible up to the amount of one quarter of the profits taxable at the standard rate of corporation tax that each partner, co-owner, member or, where applicable, group within the meaning of Article 223 A or Article 223 A bis to which it belongs withdraws from the rest of its activities.
In the event of the leasing or making available in any other form of assets located or operated or registered in a State which is not a party to the Agreement on the European Economic Area or which has not entered into an administrative assistance agreement with France with a view to combating tax fraud and evasion, granted by companies, co-ownerships or groupings mentioned in the first paragraph, the amount of the depreciation of these assets or co-ownership shares is allowed as a deduction from taxable income, in respect of the same financial year, up to the amount of the rent acquired, or the share of the co-ownership's income, less the amount of the other charges relating to these assets or shares.
The limitation on depreciation provided for in the first and third paragraphs and on the amount of deficits provided for in the second paragraph does not apply to the share of income accruing to the companies using the assets, where the lease or provision is not granted indirectly by a natural person.
2. Where assets are leased or made available in any other form directly or indirectly by a natural person, the amount of depreciation on these assets or co-ownership shares is allowed as a deduction from taxable income, in respect of the same financial year, up to the amount of the rent acquired, or the share of the co-ownership's income, less the amount of other charges relating to these assets or shares.
3. Depreciation regularly booked in respect of a financial year and not deductible from the profit or loss for that financial year pursuant to 1 or 2 may be deducted from the profit or loss for subsequent financial years, subject to the conditions and limits set out in 1 or 2.
When the property ceases to be leased or made available during a financial year, the non-deductible depreciation in application of 1 or 2 and which could not be deducted in accordance with the conditions set out in the first paragraph is deducted from the profit for that financial year. If this profit is not sufficient for the deduction to be made in full, the excess depreciation is carried forward and deducted from the profits of subsequent financial years.
In the event of the disposal of this asset, the depreciation not deducted in application of 1 or 2 increases the net book value taken into account for the calculation of the capital gain or loss on disposal.
The fraction of losses not allowed as a deduction in application of the second paragraph of 1 may be deducted from the profits of subsequent financial years subject to the limit provided for in the same paragraph in respect of the first twelve months of depreciation of the asset.
