French General Tax Code
In forceI.-The debts, existing on 1st January of the tax year, contracted by one of the persons mentioned in 1° of article 965 and actually borne by it, relating to taxable assets and, where applicable, in proportion to the fraction of their taxable value :
1° Relating to expenditure on the acquisition of property or property rights;
2° Relating to repair and maintenance expenditure actually borne by the owner or borne on behalf of the tenant by the owner for which the latter has been unable to obtain reimbursement, on 31 December of the year in which the tenant left;
3° Relating to expenditure on improvement, construction, reconstruction or extension;
4° Relating to taxes, other than those normally payable by the occupier, due in respect of the said properties. This category does not include taxes due on income generated by the said properties;
5° Relating to expenditure on the acquisition of the shares mentioned in 2° of article 965 in proportion to the value of the assets mentioned in 1° of the same article 965.
II.-The debts mentioned in I corresponding to loans providing for the repayment of the capital at the end of the contract taken out for the purchase of a taxable asset are deductible each year up to the total amount of the loan reduced by a sum equal to this same amount multiplied by the number of years elapsed since the payment of the loan and divided by the total number of years of the loan.
The debts mentioned in the same I corresponding to loans with no term for repayment of the capital, contracted for the purchase of a taxable asset, are deductible each year up to the total amount of the loan reduced by a sum equal to one twentieth of this amount per year elapsed since payment of the loan.
III.The debts mentioned in I and II corresponding to loans are not deductible:
1° Contracted directly, or indirectly via one or more interposed companies or organisations, with the taxpayer, their spouse, partner linked by a civil solidarity pact or notorious cohabitee mentioned in article 964, the minor children of these persons when they have the legal administration of their property;
2° Contracted directly, or indirectly through one or more interposed companies or organisations, with an ascendant, descendant other than that mentioned in 1°, brother or sister of one of the natural persons mentioned in the same 1°, unless the taxpayer can justify the normal nature of the loan conditions, in particular compliance with the due dates, the amount and the actual nature of the repayments;
3° Contracted by one of the persons mentioned in 1° with a company or organisation that, alone or jointly with their spouse, partner linked by a civil solidarity pact or notorious cohabitee mentioned in article 964, their ascendants or descendants or their brothers and sisters, they control within the meaning of 2° of III of article 150-0 B ter, directly or through the intermediary of one or more interposed companies or organisations, unless the taxpayer can prove that the terms of the loan are normal, in particular that the repayments are made on time, for the right amount and in the right amount.
IV.-When the market value of the property or property rights and taxable shares exceeds 5 million euros and the total amount of debts deductible under I, II and III in respect of the same tax year exceeds 60% of this value, the amount of debts exceeding this threshold is only deductible up to 50% of this excess.
Debts which the taxpayer can prove were not incurred primarily for tax purposes are not deducted for the application of the first paragraph of this IV.
