2: Determination of taxable profits

1. PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED UP TO 31 DECEMBER 1995.

The capital gain realised on the transfer of a leasing contract entered into under the conditions provided for in 1 and 2 of

Article L. 313-7

of the Monetary and Financial Code is subject to the regime defined in

articles 39 duodecies et seq

. It is considered as a short-term capital gain up to the fraction of the rental payments that corresponds to the depreciation that the transferring company would have been able to apply on a straight-line basis if it had owned the asset that is the subject of the contract; this depreciation is calculated on the basis of the acquisition price of the asset by the lessor less the price provided for in the contract for the acceptance of the unilateral undertaking to sell, using a useful life equal to that of the contract.

PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED FROM JANUARY 1, 1996.

Capital gains realised on the disposal of a leasing contract entered into under the conditions set out in 1 and 2 of Article L. 313-7 of the Monetary and Financial Code are subject to the regime defined in Articles 39 duodecies et seq. Where the contract has been entered into under the conditions of 1 of the aforementioned article L. 313-7, it is considered as a short-term capital gain up to the fraction of the lease payments that corresponds to the depreciation that the transferring company would have been able to apply on a straight-line basis if it had owned the asset that is the subject of the contract; this depreciation is calculated on the basis of the acquisition price of the asset by the lessor less the price stipulated in the contract for acceptance of the unilateral undertaking to sell, using a useful life equal to that of the contract. When the contract has been entered into under the conditions of 2 of the aforementioned article L. 313-7, the capital gain is considered to be a short-term capital gain up to the fraction deducted, for the tax base, from the share of rents taken into account in setting the sale price agreed for the possible sale of the property at the end of the contract less the amount of the acquisition costs included in these rents.

2. The acquisition price of the rights referred to in 1 reduced, where applicable, by the fraction defined in 6, is depreciated on a straight-line basis over the normal useful life of the asset at that date. If these rights are sold again, the fraction of the capital gain realised that corresponds to the depreciation thus applied is also considered as a short-term capital gain.

3. When the unilateral undertaking to sell is accepted by the holder of the rights mentioned in 1, the cost price of the property acquired is increased by the purchase price of these same rights. This asset is deemed to be depreciated up to the amount of the sums deducted under 2. Where applicable, the provisions of Article

239 sexies C

.

4. PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED UNTIL 31 DECEMBER 1995.

In the event of the subsequent sale of an asset acquired at the end of a leasing contract, the capital gain realised is considered to be a short-term capital gain to the extent of the depreciation applied to the cost price of the asset plus the depreciation that the company could have applied as indicated in 1 during the period in which it held the contract.

For the application of the first paragraph, the depreciation that the company could have applied as indicated in 1 is reduced by the amount of the sums reintegrated pursuant to

articles 239 sexies

and

239 sexies B

.

PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED AS FROM 1 JANUARY 1996.

In the event of the subsequent sale of an asset acquired at the end of a leasing contract, the capital gain realised is considered to be a short-term capital gain to the extent of the depreciation applied to the cost price plus, as the case may be, the depreciation that the company could have applied as indicated in 1 during the period in which it held the contract, or the fraction deducted during the same period from the share of rent taken into account in setting the agreed sale price for any sale of the property at the end of the contract.

For the application of the first paragraph, the fraction deducted from the share of rents taken into account for the determination of the sale price agreed for the possible sale of the property at the end of the contract is reduced by the amount of the sums reintegrated pursuant to articles 239 sexies and 239 sexies B and the amount of the acquisition costs included in these rents.

5. The provisions of the first paragraph of 4 (contracts concluded until 31 December 1995) apply to transfers of property occurring on or after 1 October 1989.

6. PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED UP TO 31 DECEMBER 1995.

For the application of the provisions of this article, the rights relating to a property leasing contract are treated as non-depreciable fixed asset items for a fraction of the price at which the leasing contract was acquired by the new holder equal to the ratio that exists, on the date of the transfer of the contract, between the real value of the land and that of the property complex.

PROVISIONS APPLICABLE TO CONTRACTS CONCLUDED AS FROM 1 JANUARY 1996.

The rights relating to a property leasing contract are treated as non-depreciable fixed asset items for the portion of the price at which they were acquired equal to the sum of the actual value of the land and the portions of the rents not deducted pursuant to the provisions of article 10 of article 39 in respect of non-depreciable items, at the date of the transfer of the contract, less the value of the land when the contract was signed with the lessor.

7. The provisions of 1 to 5 apply to duties relating to leasing contracts concerning depreciable intangible elements of a business or a craft business.

A decree sets out the terms and conditions for the application of this article and the reporting obligations.