French General Tax Code
In forceI. - Insurance and reinsurance companies may set aside tax-free provisions to meet exceptional expenses relating to operations that cover risks due to natural elements, atomic risk, civil liability risks due to pollution and space risks. For financial years ending on or after 31 December 2001, the same applies to risks relating to terrorist attacks, terrorism and air transport.
The limits within which annual allocations to these provisions may be deducted from profits and those for the overall amount of each provision are set by decree (1), depending respectively on the size of underwriting profits and the amount of premiums or contributions, net of reinsurance, for the category of risks concerned.
Each provision is allocated, in the order of age of the annual allocations, to offsetting underwriting losses for the financial year, by corresponding risk category. Annual allocations that have not been used for this purpose within ten years are deducted from taxable profits in the eleventh year following the year in which they were recorded. Annual allocations to the provision covering the risks of attacks and terrorism which, within a period of twelve years, have not been used in accordance with this purpose are deducted from taxable profits in the thirteenth year following the year in which they were recorded. Annual allocations to the provision covering air transport risks which, within a period of fifteen years, could not be used in accordance with this purpose, are carried forward to the taxable profit of the sixteenth year following the year in which they were recorded.
The conditions for recording and declaring these provisions are set by decree (2).
II. - Captive reinsurance undertakings referred to in 3° of Article L. 350-2 of the Insurance Code owned by an undertaking other than a financial undertaking within the meaning of 12° of Article L. 310-3 of the same code and whose purpose is to provide reinsurance cover exclusively for the risks of undertakings other than financial undertakings referred to in the same Article L. 310-3 may set aside, free of tax, a provision to cover expenses relating to accepted reinsurance transactions whose insurance risks fall within the categories of damage to professional and agricultural property, natural catastrophes, general civil liability, pecuniary losses and damage and pecuniary losses resulting from attacks on information and communication systems and transport mentioned in article A. 344-2 of the said code, as it stands on 31 December 2022.
The limit within which annual allocations to this provision may be deducted from profits and that of the overall amount of the provision are set by decree, respectively on the basis of the size of technical profits and the average over the last three years of the minimum capital requirement within the meaning of article L. 352-5 of the same code.
This provision is allocated, in the order of age of the annual allocations, to the overall offsetting of the negative balance of the technical income statement for the financial year for all the corresponding risks. Annual allocations which, within a period of fifteen years, have not been used in accordance with this purpose are carried forward to the taxable profit of the sixteenth year following the year in which they were recorded.
Risks that have given rise to the establishment of a provision under the conditions provided for in the first paragraph of this II may not give rise to the recognition of a provision pursuant to I of this article.
The conditions for accounting for and declaring these provisions are set by decree.
(1) Annex II, art. 16 A and 16 B.
(2) Annex II, art. 16 C and 16 D.
