French General Tax Code
In forceI. Individuals who are members of a professional non-trading company may benefit from the provisions of Article 151 octies for net capital gains on contributions, on which they are personally taxable pursuant to l'article 8 ter, realised by this company on the occasion of a merger, a partial contribution of assets relating to a complete branch of activity or a demerger, where each of the companies benefiting from the demerger receives one or more complete branches of activity and the securities remunerating the demerger are distributed in proportion to the rights of each shareholder in the capital of the demerged company.
The first paragraph of this I also applies to natural persons who are members of a non-trading agricultural company as a result of a merger, partial contribution of assets relating to a complete branch of activity or demerger mentioned in the same first paragraph for the benefit of a non-trading agricultural company. For the purposes of this paragraph, non-trading agricultural companies are deemed to be non-trading agricultural companies whose profits fall exclusively within the category of agricultural profits, including income from ancillary activities taxed in this category pursuant to Article 75.
The deferral of taxation on net capital gains relating to non-depreciable fixed assets is terminated:
1° In its entirety, in the event of total loss of ownership of these fixed assets, of the securities received as consideration for the merger, demerger or partial contribution of assets or of the securities of the company having carried out such a contribution;
2° Up to the amount of the capital gain relating to the fixed asset sold, in the event of partial loss of ownership of the non-depreciable fixed assets; in the event of a capital loss, this capital loss increases the amount of the net capital gain still being carried forward ;
3° In proportion to the securities sold, in the event of partial loss of ownership of the securities received as consideration for the merger, demerger or partial contribution of assets or of the securities of the company that made such a contribution; in this case, the fraction thus taxed is allocated to each non-depreciable fixed asset in the proportion between the value of that fixed asset on the date of the merger, demerger or partial contribution of assets and the value, determined on that same date, of all the non-depreciable fixed assets retained.
II. In the event of an option for the mechanism provided for in I, taxation of the capital gain on the exchange of securities recorded by the member of the civil company being absorbed or demerged is deferred until the loss of ownership of the securities received as consideration for the merger or demerger.
In the event of an exchange with a balancing payment, the capital gain realised is, up to the amount of the balancing payment received, included in the profit for the financial year during which the exchange takes place. The taxable amount may be subject to the long-term capital gains regime provided for in Article 39 duodecies, up to the limit of the capital gain realised on the securities held for at least two years.
These provisions do not apply if the balance exceeds 10% of the nominal value of the shares allocated or if the balance exceeds the capital gain realised. They exclude the application of the mechanism referred to in V of Article 93 quater.
III. In the event of a free transfer to an individual of the securities received as consideration for the merger, demerger or the securities of the company that carried out the partial contribution of assets, the deferral of taxation referred to in I and II may be maintained if the beneficiary of the transfer undertakes to pay capital gains tax on the date on which one of the events referred to in 1°, 2° and 3° of I and II occurs again.
III bis.-The deferral of taxation referred to in I and II is maintained in the event of an exchange of company rights received as remuneration for the merger, demerger or partial contribution of assets referred to in the first paragraph of I and resulting from a merger, demerger of the company that remitted these rights or of the company that carried out the partial contribution of assets until the date on which one of the events referred to in 1°, 2° and 3° of I and II occurs.
IV. The individuals mentioned in I are subject to the provisions of the sixth paragraph of II of Article 151 octies.
V.-Article 151 septies does not apply in the event of the exercise of the option provided for in I.
