3: Income from securities issued outside France and similar income

1. When an individual domiciled in France holds directly or indirectly at least 10% of the shares, units, financial rights or voting rights in a legal entity-a legal person, body, trust or comparable institution-established or incorporated outside France and subject to a privileged tax regime, the profits or positive income of this legal entity are deemed to constitute income from movable capital of this individual in the proportion of the shares, units or financial rights that he or she holds directly or indirectly when the assets or property of the legal person, body, trust or comparable institution consist mainly of transferable securities, receivables, deposits or current accounts.

For the purposes of the first paragraph, the privileged nature of a tax regime shall be determined in accordance with the provisions of article 238 A by comparison with the tax regime applicable to a company or collective entity mentioned in 1 of article 206.

2. The shares, units, financial rights or voting rights held indirectly by the individual referred to in 1 are understood to mean shares, units, financial rights or voting rights held through a chain of shares, units, financial rights or voting rights; the percentage of shares, units, financial rights or voting rights held in this way is determined by multiplying the percentage of shares or units, financial rights or voting rights held successively.

Indirect ownership also means shares, financial rights or voting rights held directly or indirectly by the individual's spouse, or their ascendants or descendants. However, these shares, units, financial rights or voting rights are not taken into account when calculating the individual's income from transferable capital referred to in 1.

3. The profits or positive income referred to in 1 are deemed to have been earned on the first day of the month following the close of the financial year of the legal entity established or incorporated outside France or, in the absence of a financial year closed during the course of a year, on 31 December. They are determined in accordance with the rules set out in this code as if the legal entity were subject to corporation tax in France. The tax paid locally on the profits or positive income in question by the legal entity is deductible from the income deemed to constitute income from transferable capital of the individual, in the proportion mentioned in 1, provided that it is comparable to corporation tax.

However, where the legal entity is established or incorporated in a State or territory that has not entered into an administrative assistance agreement with France, or which is non-cooperative within the meaning of article 238-0 A the taxable income of the individual may not be less than the product of the fraction of the net assets or the net value of the property of the legal entity, body, trust or comparable institution, calculated under the conditions set out in 1, by a rate equal to that mentioned in 3° of 1 of l'article 39.

4. Income distributed or paid to an individual referred to in 1 by a legal entity does not constitute taxable income within the meaning of article 120, except for the part that exceeds the taxable income referred to in 3.

4 bis. 1 shall not apply where the legal entity is established or incorporated in a Member State of the European Union or another State or territory which has concluded with France an administrative assistance agreement to combat tax fraud and tax evasion and a mutual assistance agreement on recovery with a scope similar to that provided for by Council Directive 2010/24/EU of 16 March 2010 on mutual assistance for the recovery of claims relating to taxes, taxes, duties and other measures and which is not an uncooperative State or territory within the meaning of Article 238-0 A, if the operation of the business or the holding of shares, stocks, financial rights or voting rights in that legal entity by the person domiciled in France cannot be regarded as constituting an artificial arrangement the purpose of which would be to circumvent French tax legislation.

Where the legal entity is established or incorporated in a State or territory that does not meet the conditions mentioned in the first paragraph of this 4 bis, 1 shall not apply if the person domiciled in France demonstrates that the operation of the business or the holding of the shares, financial rights or voting rights of this legal entity principally has a purpose and effect other than to enable the localisation of profits or income in a State or territory where it is subject to a privileged tax regime.

4 ter. The 10% holding requirement stipulated in 1 is presumed to be met:

a) By the settlor or the beneficiary deemed to be the settlor of a trust, within the meaning of Article 792-0 bis. Proof to the contrary may only result from the irrevocable nature of the trust and the discretionary management powers of its trustee;

b) Or by the individual who has transferred assets or rights to a legal entity located in an uncooperative State or territory, within the meaning of Article 238-0 A.

5. A Conseil d'Etat decree sets out the conditions for application of the foregoing provisions and in particular the reporting obligations of individuals.

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