French General Tax Code
In force1. a) Losses incurred by a group company in respect of financial years prior to its entry into the group may only be offset against its profits, subject to the limits and conditions set out in the third paragraph of I of Article 209 ;
b) The share of losses corresponding to the additional depreciation resulting from the revaluation of its fixed assets by a company in the group, is added back to the overall result, if this revaluation is carried out in the accounts of a financial year closed between 31 December 1986 and the opening date of a financial year during which the company became a member of the group ;
c) The undeducted net financial charges referred to in 1 of VIII of Articles 212 bis and 223 B bis and the unused deduction capacity referred to in 2 of the same VIII that a company has not used in respect of the financial years prior to its entry into the group may not be used as from its entry into the group. These amounts may be used again under the conditions set out in VIII of Article 212 bis after it leaves the group. For the purposes of this c, the period referred to in 2 of VIII of Article 212 bis is suspended from the date on which the company joins the group until the date on which it leaves the group.
2. Net long-term capital losses recognised by a group company in respect of financial years prior to its entry into the group may only be offset against its net long-term capital gains, in accordance with the conditions set out in Article 39 quindecies.
3. If a company in the group disposes of or contributes a revalued asset during the period defined in b of 1, the loss or net long-term capital loss incurred by this company in respect of the year of disposal is added back to the profit or loss or net long-term capital gain or loss for that year as a whole up to the amount of the revaluation gain relating to this asset, less the sums reintegrated in accordance with the procedures set out in the same b of 1.
If the asset referred to in the first paragraph is sold or transferred to another company in the group, the amount of the revaluation gain defined in the same paragraph is added back to the net profit for the financial year of the sale or transfer.
4. For the purposes of this article, the company's net long-term profit or capital gain is reduced, where applicable, by the amount of long-term profits or capital gains resulting from debt waivers or direct or indirect subsidies granted to it when they are deductible in calculating the net profit of the company granting them, from the disposals referred to in article 223 F as well as a free revaluation of the assets of this company and increased by the amount of long-term losses or capital losses resulting from the disposals referred to in article 223 F ; they are also reduced by the amount of capital gains on the disposal of non-depreciable fixed assets that were the subject of a contribution that benefited from the provisions of article 210 A as well as capital gains reintegrated pursuant to d of 3 of the same article. Similarly, the company's net long-term deficit or capital loss, mentioned in b of 1 and in 3, is increased by these profits or capital gains. For the purposes of applying the limit provided for in the third paragraph of I of Article 209, taxable profit means the company's profit determined in accordance with the procedures provided for in this 4.
5. In the situations referred to in c, d, e, f, i or j of 6 of article 223 L, and subject, where applicable, to obtaining the approval provided for in 6, the portion of the deficit that could not be carried forward in respect of a financial year under the conditions provided for in Article 223 S peut, insofar as this deficit corresponds to that of the absorbed parent company or to that of the member companies of the group which has ceased and which form part of the new group or to that of the member companies of the group which has ceased and which were absorbed by the aforementioned companies or split up in favour of the latter prior to the cessation of this group under the regime provided for in Article 210 A, be deducted from the results, determined in accordance with the procedures set out in section 4 and by way of derogation from paragraph a of section 1, of the aforementioned companies. This fraction of the deficit is deducted within the limits and conditions set out in the third paragraph of I of article 209.
The fraction of the deficit transferred pursuant to 7 may, insofar as this fraction corresponds to the deficit of the contributed companies that form part of the new group and to the deficit of the companies that have been absorbed by these contributed companies or demerged in favour of the latter under the regime provided for in Article 210 A, be deducted from the results, determined in accordance with the procedures provided for in 4 and by way of derogation from a of 1, of the companies mentioned above that form part of the new group.
6. In the situations referred to in c or e of 6 of article 223 L, the deficits of the absorbed or split company, determined under the conditions provided for in article 223 S, the non-deducted net financial charges referred to in 1 of VIII of article 223 B bis and the unused deduction capacity referred to in 2 of the same VIII are transferred to the benefit of the company or companies benefiting from the contributions subject to an approval issued under the conditions provided for in article 1649 nonies.
Authorisation is granted when:
a. The transaction is placed under the regime provided for in Article 210 A;
b. It is economically justified and has principal motivations other than tax;
c) The deficits, the net financial charges not deducted and the unused deduction capacity mentioned in the first paragraph come from the absorbed or split company, or from the member companies of the group which has been terminated which form part of the new group and for which the benefit of the provisions provided for in 5 is claimed, or from the member companies of the group which has been terminated and which have been absorbed by member companies of that group or split in favour of them, under the regime provided for in the same Article 210 A, prior to the entry into the new group of these companies and for which the benefit of the provisions provided for in 5 of this Article is claimed, subject to compliance, by these absorbed or split companies or which form part of the new group, with the conditions mentioned in b, c and d of 1 of II of Article 209.
Losses as well as undeducted net financial charges and unused deduction capacity may be used against subsequent profits under the conditions set out respectively in the third paragraph of I of Article 209 and in VIII of Article 223 B bis.
Authorisation is not required where the conditions set out in paragraph 2 of II of Article 209 are met and the deficits, non-deducted net financial charges and unused deduction capacity referred to in the first paragraph of this c originate from the absorbed company or from the member companies of the group which has been terminated, which form part of the new group and for which the benefit of the provisions set out in paragraph 5 is requested, or companies which are members of the group which has been terminated and which have been absorbed by companies which are members of this group or split off in favour of the latter, under the regime provided for in Article 210 A, prior to the entry into the new group of these companies and for which the benefit of the provisions provided for in 5 of this article is requested.
7. In the situation referred to in g of 6 of article 223 L, a fraction of the overall deficit of the group to which the contributed companies belonged may be transferred to the legal entity benefiting from the contribution subject to an approval issued under the conditions provided for in article 1649 nonies.
The approval is issued when:
a) The transaction is placed under the combined regime of article 210 B and 2 of Article 115 or, in the case of a contribution by a non-resident parent entity, the transaction meets the conditions set out in Article 210 B and 2 of Article 115;
b) These transactions are economically justified and meet principal motivations other than tax ;
c) The fraction of the overall deficit referred to in the first paragraph comes from the contributed companies which are members of the group formed by the aforementioned legal entity and for which the benefit of the provisions provided for in the second paragraph of 5 is claimed, as well as from the companies which were members of the group to which the contributed companies belonged and which were absorbed by the contributed companies or split off in favour of the latter under the regime provided for in Article 210 A, and for which the benefit of the provisions provided for in 5 of this article is requested, subject to compliance by these companies with the conditions mentioned in b, c and d of 1 of II of Article 209.
Losses transferred may be offset against subsequent profits under the conditions set out in the third paragraph of I of Article 209.
