French General Tax Code
In forceI. Income tax is assessed under the conditions set out in articles 201 and 202 when companies or organisations placed under the partnership regime defined in articles
8 to 8 terwholly or partially require to be subject to this regime or if they change their corporate purpose or actual activity or when the legal entities mentioned in
articles 238 ter,
239 quater A, 239 quater B, 239 quater C, 239 quater D,
239 septiesand in paragraph I of articles
239 quaterand
239 quinquiesbecome liable for corporation tax.
However, in the absence of the creation of a new legal entity, profits subject to tax deferral, unrealised capital gains included in the company's assets and profits not yet taxed on stocks are not subject to immediate taxation on the twofold condition that no changes are made to the accounting entries and that taxation of the said profits, capital gains and profits remains possible under the new tax regime applicable to the company or organisation concerned.
II. If a company or organisation whose income is not in the nature of profits from an industrial, commercial, craft or mining business, an agricultural holding or a non-commercial activity ceases in whole or in part to be subject to one of the regimes defined in articles 8 to 8 ter, 238 ter, 239 quater A, 239 quater B, 239 quater C, 239 quater D, 239 septies and I of articles 239 quater and 239 quinquies, income tax is assessed in respect of the tax period immediately preceding the change of regime, on income and capital gains not yet taxed on the date of the change of regime, including those arising from income acquired and not yet received as well as unrealised capital gains included in the assets or corporate assets.
However, in the absence of the creation of a new legal entity, the latter capital gains are not taxed under the conditions provided for in the first paragraph of this II if all the assets and liabilities are included in the opening balance sheet for the first tax period or the first financial year in which the company is subject to corporation tax, showing separately, on the one hand, their original value and, on the other hand, the related depreciation and provisions that would have been allowed as a deduction if the company or organisation had been subject to corporation tax since its inception.
The company or organisation must, within sixty days of the occurrence of the event that led to the change of regime referred to in the first paragraph of this II, file with the tax department the declarations and other documents that it is normally required to file in respect of a tax year.
III. The companies and bodies defined in I and II must, within sixty days of the occurrence of the event which results in the change of regime or activity referred to in said I and II, produce the opening balance sheet for the first tax period or the first financial year in respect of which the change takes effect.
IV. A decree shall specify the procedures for the application of this article, in particular with a view to avoiding the non-recognition or double-recognition of income or expenses in the income or profit of the company or organisation.
