French General Tax Code
In force1° For the determination of their taxable income, undertakings which hold units or shares in undertakings for collective investment in transferable securities or collective investment schemes covered by paragraphs 1, 2 and 6 of sub-section 2, paragraph 2 or sub-paragraph 1 of paragraph 1 of sub-section 3 of Section 2 of Chapter IV of Title I of Book II of the Monetary and Financial Code, whether French or foreign, value these units or shares, at the close of each financial year, at their net asset value.
The difference between the net asset value at the beginning and at the end of the financial year recorded at the time of this valuation is included in the taxable income for the financial year in question. In the event of acquisition during the financial year, the difference is calculated on the basis of the net asset value on the date of acquisition.
The same applies when these units or shares are held by a person or organisation established outside France, of which the company directly or indirectly holds shares, units or rights, if the assets of this person or organisation are mainly made up of the units or shares mentioned in the first paragraph, or if its activity consists mainly of managing these units or shares on its own behalf. In this case, the taxable difference is that resulting from the valuation of the shares held by this person or organisation. This difference is retained in proportion to the shares, units or rights held by the taxable company in the person or body holding the shares, units or rights, and considered as affecting the value of these shares, units or rights.
The same applies when these shares or units are held by a specialised finance company mentioned in Article L. 214-190-2 of the Monetary and Financial Code.
The provisions of the first, second, third and fourth paragraphs do not apply to units or shares in undertakings for collective investment in transferable securities or collective investment schemes covered by paragraphs 1, 2 and 6 of sub-section 2, paragraph 2 or sub-paragraph 1 of paragraph 1 of sub-section 3 of Section 2 of Chapter IV of Title I of Book II of the Monetary and Financial Code, whether French or foreign, held by companies the majority of whose business is in the life insurance or capitalisation sector, the supplementary occupational pension funds referred to in Article L. 381-1 of the Insurance Code, the supplementary professional retirement mutuals or unions mentioned in Article L. 214-1 du code de la mutualité ou les institutions de retraite professionnelle supplémentaire mentionnées à l'article L. 942-1 of the Social Security Code.
The provisions of the first, second, third and fourth paragraphs do not apply to units or shares in undertakings for collective investment in transferable securities or collective investment schemes mentioned in the first paragraph, French or established in a Member State of the European Community which simultaneously meet the following conditions:
a.-at least 90% of the real value of the assets is represented on a consistent basis by shares, investment certificates and cooperative investment certificates issued by companies which have their registered office in the European Community and which are subject to corporation tax under the conditions of ordinary law or which are subject to a comparable tax. The 90% proportion is considered to have been met if, for each half calendar year, the daily average of the real value of the securities mentioned above is at least equal to 90% of the daily average of the real value of all the assets. For the purpose of calculating the 90% proportion, securities which are redeemed are not included in the numerator of the ratio;
b. securities whose value is used to calculate the proportion referred to in a are remunerated by distributions taken from profits. The income from the securities defined in the previous sentence is made up directly by these distributed profits and by the capital gains resulting from their disposal.
For units in a fonds commun de placement à risques or a fonds professionnel de capital investissement which meets the conditions laid down in II or III bis of article 163 quinquies B, companies may refrain from recognising the difference mentioned in the second paragraph provided that they undertake to keep them for a period of at least five years from their acquisition date. The undertaking is deemed to have been given if the difference is not spontaneously subject to tax. In the event of a breach of the undertaking, the company shall spontaneously pay a tax calculated by applying a rate of 0.75% to the tax that would have been paid in application of the second paragraph. 100% per month from the first day of the month following the month in which the tax was due until the last day of the month of payment. This tax is paid within three months of the end of the financial year. It is assessed, declared and collected in the same way as turnover tax and subject to the same guarantees and penalties. The tax is not deductible in determining taxable income.
2° The taxable income from the sale of these units, shares or rights is determined on the basis of the acquisition or subscription price of the securities, corrected by the amount of the valuation differences mentioned in 1° which were included in the taxable income.
Provisions set aside to deal with the depreciation of the securities or rights mentioned in the first paragraph of 1° are not deductible. For shares, units or rights subject to the provisions of the third paragraph of 1°, the provision made, under the conditions provided for in 5° of 1 of the article 39, is allowed as a deduction up to the amount of the depreciation recorded, which exceeds the negative differences, taken into account pursuant to 1°.
3° For each financial year, the net amount of the valuation differences referred to in 1° obtained after any offsetting between positive and negative differences is indicated in an appendix to the declaration provided for in article 53 A and is determined on the basis of a statement showing, for each category of securities of the same type, the net asset values of these units or shares used to determine the taxable difference pursuant to this article. This statement must be produced at the request of the administration.
4° (repealed).
5° (repealed).
