Section 1: General provisions

The costs referred to in article L. 1614-1 are compensated by the transfer of State taxes, by the resources of the Fonds de compensation de la fiscalité transférée and, for the balance, by the allocation of a general decentralisation grant. The beneficiary local authorities are free to use the general decentralisation grant and the resources from the Fonds de compensation de la fiscalité transférée, which are entered in the operating section of the budget.

From 1 January 2016, when a region is formed by grouping together several regions, in accordance with Article 1 of Law no. 2015-29 of 16 January 2015 on the delimitation of regions, regional and departmental elections and amending the electoral calendar, the amount of the general decentralisation allowance paid to it corresponds to the sum of the amounts paid to the regions to which it succeeds under the conditions applicable prior to the grouping.

In the event that, in the year of a transfer of powers, the revenue from the taxes allocated to this compensation, calculated at the rates in force on the date of the transfer of powers, is greater, for a given local authority, than the amount of costs resulting from the transfer of powers, as recorded in the interministerial order mentioned in article L. 1614-3, the necessary adjustments are made the same year.

To this end, the tax revenue accruing to the local authority concerned is reduced, for the benefit of the tax transfer compensation fund, by the difference between the revenue calculated on the basis of the rates in force on the date of the transfer and the amount of the charges referred to above, as well as half of the additional tax revenue resulting from the provisions of article 14 of the 1984 Finance Act (n° 83-1179 of 29 December 1983).

From the year of transfer and for subsequent years, the amount of this adjustment changes in line with the general decentralisation grant under the conditions provided for in article L. 1614-1. It is modified, as necessary, to take into account increases in charges resulting from new transfers of responsibilities.

As from 1997, a Fonds de compensation de la fiscalité transférée (compensation fund for transferred taxation) is created, which has as resources the reduction in tax revenues defined in the fourth paragraph of this article.

Those territorial authorities for which the transfer of State tax was insufficient to fully compensate for the net increase in charges resulting from the transfer of powers between the State and these territorial authorities are eligible for this fund.

This fund is distributed among the eligible territorial authorities in proportion to their share of the aforementioned net increase in charges, less the proceeds of the transferred State taxes allocated, in application of the first paragraph, to compensate for these charges.