French General Tax Code
In forceCompanies that let a property under the conditions provided for in article L. 313-7 of the Monetary and Financial Code may set aside a tax-free provision to take into account the difference between, on the one hand, the value of the land and the residual value of the buildings and, on the other hand, the price agreed for the possible sale of the building at the end of the leasing contract.
This provision, determined for each building, is calculated at the end of each financial year. It is equal to the excess of the cumulative amount of the share of rents already acquired taken into account in setting the agreed sale price for any sale of the property at the end of the contract over the total depreciation applied under the conditions of 2° of 1 of Article 39 and the costs incurred by the lessor in acquiring the property.
These provisions also apply to companies that lease out capital goods or tooling under the conditions provided for in 1 of the aforementioned Article L. 313-7 or that carry out leasing transactions with a purchase option, and that have not opted for the depreciation method mentioned in the second paragraph of I of Article 39 C and to companies that have opted for this amortisation method, for contracts under which they assign their leasing receivables to debt pools. The provision is then equal to the excess of the cumulative amount of the share of rents already acquired, taken into account in setting the price agreed for the eventual sale of the asset or equipment at the end of the contract, over the total depreciation applied.
The provision is deducted in full from taxable income for the year in which the lessee exercises the option to purchase the asset. Where the option is not exercised, the provision is carried forward over the remaining depreciation period, at the rate of such depreciation, and, at the latest, to the taxable income for the financial year in which the asset is sold.
