French General Tax Code
In forceI.-1. The parent company of the group shall subject to separate taxation at the rate provided for in the second paragraph of a of I of Article 219 the overall net income from the sale, concession or sub-concession of assets held or taken under concession by a member company of the group for which the option for the taxation regime provided for in Article 238 est exercée.
This option is exercised by the parent company under the conditions provided for in V of the same Article 238.
2. The overall net income from the sale, concession or sub-grant is determined by the parent company by making the algebraic sum of the net income determined by each company in the group, whether selling, granting or sub-granting, under the conditions provided for in II, VI and VII of the said Article 238.
3. Where the overall net income determined in 2 of this I, is negative, it is set off against the overall net income from the disposal, concession or sub-concession of the same asset, the same good or service or the same family of goods or services, realised during subsequent financial years for as long as the assets concerned are held or sub-conceded by a company that is a member of the group.
4. For the purposes of determining the overall net profit taxed pursuant to 1, the profit determined in 2 is multiplied by the ratio existing between, on the numerator, the research and development expenditure directly related to the creation and development of the intangible asset carried out directly by a member company of the group or by arm's length companies within the meaning of 12 of Article 39 with a company that is a member of the group and, in the denominator, all research and development or acquisition expenditure directly related to the creation, acquisition and development of that asset and carried out directly or indirectly by companies that are members of the group.
The expenditure taken into account for the calculation of this ratio means only the expenditure incurred by a company that is a member of the group during the period in which the asset or assets are held or sub-licensed by a company that is a member of the group.
The ratio referred to in the first paragraph of this 4 is calculated under the conditions provided for in 2 of III of Article 238. By way of derogation, this ratio may be calculated under the conditions provided for in 3 of the same III.
II.-The negative net result of the disposal, concession or sub-concession of an asset or group of assets realised by a company prior to its entry into the group is not chargeable against the overall net result of the disposal, concession or sub-concession realised subsequently by the group.
The market value of one or more assets held by a company on the date of its entry into the group constitutes an acquisition expense retained for the calculation of the net concession income for the first financial year in which the parent company exercises the option and taken into account in the denominator of the ratio determined under the conditions provided for in 4 of I.
III.-A company that is the grantor or sub-grantor of one or more assets that generated negative net income will only be able to offset this negative net income, after leaving the group, up to the amount of any negative net income generated prior to joining the group.
For the calculation of the ratio provided for in III of Article 238, the company leaving the group does not take into account the expenses incurred during the period it was part of the group when such expenses were taken into account during this period by the parent company of the group under the conditions provided for in I of this article. However, it may take into account expenditure incurred prior to its entry into the group, under the conditions defined in III of Article 238.
