French General Tax Code
In forceI. - Net capital gains generated on the disposal of premises for office, commercial or industrial use or building land by a legal entity subject to corporation tax under the conditions of ordinary law are subject to corporation tax at the rate mentioned in IV of article 219 when the transfer is made to a legal entity.
For the application of the first paragraph, the office premises or commercial or industrial premises or the building plots must be located in communes situated in geographical areas characterised by a particularly significant imbalance between housing supply and demand. Office premises include, on the one hand, the offices themselves and their immediate and essential outbuildings intended for the exercise of an activity of any kind whatsoever and, on the other hand, professional premises intended for the exercise of liberal activities or used by associations or private bodies, whether profit-making or not. Business premises are premises used for retail or wholesale activities and the provision of commercial or craft services. Building plots are those defined in 1° of 2 of I of article 257 of this code.
This I does not apply to transfers made between a transferor and a transferee who are related to each other within the meaning of 12 of l'article 39.
II. - The application of I is subject to the condition that the transferee company undertakes either to convert the premises acquired into residential premises within four years of the end of the financial year in which the acquisition took place, or, in the case of the acquisition of building land, to build residential premises thereon within the same period. For the purposes of applying this condition, the conversion or construction commitment is deemed to have been fulfilled if the conversion or construction work is completed before the end of the four-year period.
The completion date corresponds to the date mentioned on the declaration provided for in Article L. 462-1 of the town planning code.
In the event of a merger of companies, the conversion or construction commitment entered into by the absorbed company is not broken when the absorbing company undertakes, in the merger deed, to substitute itself for the absorbed company for compliance with the conversion or construction commitment within the remaining period.
Failure to comply with the conversion or construction commitment by the transferee company or the absorbing company that has substituted itself for it results in the application of the fine provided for in III of Article 1764. By way of derogation, this fine is not due if the transferee company or the acquiring company does not comply with the conversion or construction undertaking due to exceptional circumstances beyond its control.
III. - At the request of the purchaser, an extension of the four-year period set out in II may be granted by the competent authority of the State in which the property is located for a period not exceeding one year. This extension may be renewed once under the same conditions. Failure by the administration to notify a reasoned refusal within two months of receipt of the application shall be deemed to constitute acceptance.
