French General Tax Code
In force1. Notwithstanding the provisions of article 38, capital gains from the disposal of fixed assets are subject to separate regimes depending on whether they are realised in the short or long term.
2. The short-term capital gains regime applies:
a. To capital gains from the disposal of items acquired or created less than two years ago. Where applicable, these capital gains are increased by the amount of depreciation expressly excluded from deductible expenses as well as that which has been deferred in disregard of the provisions of Article 39 B ;
b. To capital gains realised on the disposal of items held for at least two years, insofar as they correspond to depreciation deducted for tax purposes. Where applicable, these capital gains are increased by the amount of depreciation expressly excluded from deductible expenses as well as that which has been deferred in contravention of the provisions of article 39 B;
c. To capital gains realised on the disposal of shares in companies established 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 held for at least two years, unless the company holding these securities provides proof that the operations of the company established outside France in which the shareholding is held correspond to genuine operations which have neither the purpose nor the effect of allowing profits to be located in such a State or territory for the purpose of tax evasion.
3. The long-term capital gains regime is applicable to capital gains other than those defined in 2.
4. The short-term capital losses regime applies:
a. to capital losses incurred on the disposal of non-depreciable assets held for less than two years;
b. to capital losses incurred on the disposal of depreciable assets, regardless of how long they have been held. Where applicable, these capital losses are reduced by the amount of depreciation expressly excluded from deductible expenses as well as that deferred in contravention of the provisions of Article 39 B.
5. The long-term capital losses regime applies to capital losses other than those defined in 4.
6. For the application of this article, disposals of securities included in the portfolio are deemed to relate in priority to securities of the same nature acquired or subscribed to on the earliest date.
For the application of these provisions, securities entered in an allocation sub-account which are subject to the rules of article L. 134-4, article L. 142-5, of article L. 143-7, of VII of article L. 144-2, of article L. 381-2 or of article L. 441-8 of the Insurance Code, constitute a separate portfolio.
For the application of the provisions of the first paragraph, securities received as consideration for a partial contribution of assets or a demerger subject to the regime provided for in article 210 B and those acquired or subscribed independently of the contribution or demerger transaction constitute two distinct categories of securities until the end of the three-year period provided for in article 210 B. Sales of securities during this period are deemed to relate first and foremost to securities acquired or subscribed to independently of the transfer or demerger.
6 bis. The tax regime for long-term capital gains and losses provided for by this article and the following articles is not applicable to the share of profits distributed by a real estate investment fund mentioned in article 239 nonies.
6 ter. The capital gains and losses tax regime provided for in this article applies to disposals of units in a real estate investment fund referred to in article 239 nonies where, at the time of the disposal of the units, the assets of the fund comprise, for more than 50% of their value, by buildings to which are allocated, with a view to their rental, furnishings, equipment or movable property allocated to these buildings and necessary for the operation, use or exploitation of the latter by a third party, mentioned in article L. 214-34 of the Monetary and Financial Code and if the unitholder is considered to be carrying on business on a professional basis, within the meaning of IV of article 155 of this Code. The amount of the capital gain is then increased by the theoretical depreciation fractions of the buildings deducted under the conditions mentioned in 2 of II of article 239 nonies and which have not been subject to reintegration pursuant to f of 1 of the same II.
7.
PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED BEFORE 31 DECEMBER 1995.
The capital gains tax regime provided for by this article and the following articles is not applicable to capital gains realised by leasing companies or, more generally, companies whose corporate purpose is the leasing of equipment, on the sale of fixed assets leased as part of their business.
PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED AS FROM 1 JANUARY 1996.
The capital gains tax regime provided for by this article and the following articles is not applicable to capital gains realised:
a. by companies carrying out operations referred to in 1 and 2 of article L. 313-7 of the Monetary and Financial Code when disposing of items from their fixed assets that are the subject of a leasing contract;
b. by companies whose corporate purpose is the leasing of equipment on the disposal of fixed assets that are leased as part of their business.
These provisions apply only where the item disposed of was previously leased before being sold and the purchaser is the lessee itself.
8. In the event of the transfer by the lender or the initial settlor of securities returned at the end of a loan referred to in article L. 211-22 of the Monetary and Financial Code or a pledge made under the conditions set out in article 38 bis-0 A bis, the two-year period provided for in 2 and 4 is assessed from the date on which the securities returned are first recorded on its balance sheet.
9. When the sale of an item of fixed assets is cancelled or resolved during a financial year subsequent to that during which the sale took place, the transferor shall enter this item on its balance sheet together with the related depreciation and provisions of all kinds as they appeared in its annual accounts on the date of the transfer.
The sum corresponding to the amount of the long-term capital gain realised on the sale of the item in question is deducted directly or in the form of provisions, in accordance with the rules applicable to long-term capital losses.
The same applies in the event of a reduction in the sale price subsequent to the end of the financial year in which the sale takes place. In this case, the corresponding loss is subject to the long-term capital losses regime within the limit of the capital gain on the disposal which was considered as a long-term capital gain.
When the sale which gave rise to the recognition of a long-term capital loss is cancelled or resolved, the resulting profit is taxable under the long-term capital gains regime.
These provisions are applicable for the determination of results for financial years ending on or after 31 December 1992.
10. When a company or organisation ceases to be subject to one of the regimes mentioned in the first paragraph of II of article 202 ter disposes of fixed assets included in the opening balance sheet of the first financial year or the first tax period whose results are subject to corporation tax, the two-year period provided for in 2 and 4 is assessed from the opening date of this financial year or this tax period. The portion of the capital gain corresponding to the depreciation referred to in the second paragraph of II of the same article is considered as short-term for the application of b of 2.
11. The capital gains referred to in 1 are reduced by the amount resulting from the sharing commitment due pursuant to articles L. 23-11-1 to L. 23-11-4 of the French Commercial Code.
12. The capital gains or losses tax regime provided for in this article applies to disposals of securities of a company resulting from a merger or demerger without exchange of securities within the meaning of 3° of II of Article L. 236-3 of the French Commercial Code.
Where the capital gain or loss referred to in the first paragraph of this 12 falls under the long-term capital gains or losses regime, but the securities of the absorbed or demerged company have been acquired for less than two years on the date of the disposal, the capital gain or loss corresponding to the proportion of the value of these securities added to that of the securities of the company receiving the contributions made at the time of the merger or demerger, is calculated separately. The capital gain or loss calculated in this way is considered to be a short-term capital gain or loss.
Where the capital gain or loss referred to in the first paragraph of this section 12 falls under the short-term capital gains or losses regime, but the securities of the absorbed or demerged company, which are eligible for the long-term capital gains or losses regime, have been acquired for more than two years on the date of the disposal, the capital gain or loss corresponding to the proportion of the value of these securities added to that of the securities of the company receiving the contributions made at the time of the merger or demerger is calculated separately. The capital gain or loss calculated in this way is considered to be a long-term capital gain or loss.
The capital gain or loss corresponding to the share of the value of the securities of the absorbed or demerged company mentioned in the second and third paragraphs of this 12 is equal to the difference between, on the one hand, the fraction of the sale price of the securities mentioned in the first paragraph of this 12 obtained after applying the ratio between the market value of the securities of the absorbed or split company and the sum of that same value and the market value of the securities of the absorbing or beneficiary company on the day of the merger or split and, on the other hand, the cost price of the securities of the absorbed or split company.
