French General Tax Code
In forceI.-The immovable property or rights mentioned in 1° of article 965 and the units or shares mentioned in 2° of the same article 965 representing these same properties or rights, when these properties or real estate rights are allocated to the main industrial, commercial, craft, agricultural or liberal activity of the persons mentioned in 1° of the said article 965.
The property or rights mentioned in the first paragraph of this I allocated to different activities for which the taxpayer fulfils the conditions set out in the same first paragraph are also exempt when the different professional activities carried out are either similar or related and complementary. However, for the application of this paragraph, the main activity condition is assessed with regard to all of the aforementioned activities.
II.- The real estate assets or rights mentioned in 1° of article 965 and the shares mentioned in 2° of the same article 965 representing these same assets or rights are also exempt, when these real estate assets and rights are allocated to the industrial, commercial, craft, agricultural or liberal activity of a partnership subject to income tax mentioned in articles 8 and 8 ter in which the persons mentioned in the first paragraph of I of this article carry out their main activity.
The assets or rights mentioned in the first paragraph of this II allocated to the industrial, commercial, craft, agricultural or liberal activity of several partnerships in which the taxpayer fulfils the conditions provided for in the same first paragraph are also exempt when the companies have activities that are either similar or related and complementary. However, for the application of this paragraph, the main activity condition is assessed with regard to all of the aforementioned companies.
III.-1. The real estate assets or rights mentioned in 1° of article 965 and the shares mentioned in 2° of the same article 965 representing these same assets or rights are also exempt, when these real estate assets and rights are allocated to the industrial, commercial, craft, agricultural or liberal activity of a company subject, by law or by option, to corporation tax, provided that the taxpayer :
1° Holds the position of manager in the company, appointed in accordance with the articles of association of a limited liability company or a partnership limited by shares, of partner in name of a partnership or of chairman, managing director, chairman of the supervisory board or member of the management board of a joint stock company.
The duties referred to in the first paragraph of this 1° must be actually performed and give rise to normal remuneration, in the taxable income categories of salaries and wages, industrial and commercial profits, agricultural profits, non-commercial profits and income of managers and partners referred to in Article 62, with regard to remuneration of the same type paid for similar functions in the company or in similar companies established in France. This remuneration must represent more than half of the income on the basis of which the person concerned is subject to income tax in the same categories, excluding non-professional income;
2° Holds at least 25% of the voting rights attached to the securities issued by the company, directly or through his or her spouse, their ascendants or descendants or their brothers and sisters.
Securities held under the same conditions in a company holding a stake in the company in which the taxpayer holds office are taken into account in proportion to that stake.
Compliance with the condition of holding at least 25% of the voting rights attached to the securities issued by the company provided for in the first paragraph of 2° is not required after a capital increase if, as from the date of the latter, the taxpayer meets the following three conditions:
a) He has complied with this condition over the five years preceding the capital increase;
b) He holds at least 12.5% of the voting rights attached to the securities issued by the company, either directly or through his spouse, their ascendants or descendants or their brothers and sisters;
c) He or she is a party to an agreement entered into with other partners or shareholders representing in total at least 25% of the voting rights and exercising a power of direction in the company.
By way of derogation from the first paragraph of 2°, the condition of holding at least 25% of the voting rights attached to the securities issued by the company is not required of the managers and partners mentioned in article 62.
2. The immovable property or rights referred to in 1 are also exempt if they are allocated to the industrial, commercial, craft, agricultural or liberal profession activity of a company subject, by law or by option, to corporation tax, the shares of which are held directly by the manager, appointed in accordance with the articles of association of a limited liability company or a partnership limited by shares, the chairman, the managing director, the chairman of the supervisory board or the member of the management board of a joint stock company, who fulfils the conditions set out in 1° of the same 1, where the value of the shares he or she holds in this company exceeds 50% of the gross value of the taxpayer's total assets, including the aforementioned property or property rights.
IV.-1. The real estate assets or rights mentioned in 1° of article 965 and the shares mentioned in 2° of the same article 965 representing these same assets or rights are also exempt, when these real estate assets and rights are allocated to the industrial, commercial, craft, agricultural or liberal activity of several companies subject, by right or by option, to corporation tax when each holding, taken individually, satisfies the conditions stipulated in III. However, the remuneration condition provided for in the second sentence of the second paragraph of 1° of 1 of the same III is met if the sum of the remuneration received for the functions listed in the first paragraph of the same 1° in the companies of which the taxpayer owns shares represents more than half of the income mentioned in the same sentence.
Where the companies mentioned in the first paragraph of this 1 have activities that are either similar or related and complementary, the condition of normal remuneration is assessed with regard to the functions exercised in all the companies whose shares or stocks meet the conditions of III.
2. The real estate assets or rights referred to in 1 of this IV are also exempt if they are allocated by the taxpayer referred to in I or II in one or more companies subject to corporation tax when each holding, taken separately, satisfies the conditions laid down in III.
V.-For the purposes of this article, commercial activities are those defined in article 966.
By way of exception to the first paragraph of this V, the following is considered to be a commercial activity for the application of I to IV:
1° The letting of residential premises rented furnished or intended to be rented furnished, by a person mentioned in 1° of article 965 or by a company or organisation, provided that, in the case of the persons mentioned in the same 1°, they have annual receipts of more than €23,000 and derive from this activity more than 50% of the income on the basis of which the tax household to which they belong is subject to income tax in the categories of salaries and wages, industrial and commercial profits, agricultural profits, non-commercial profits and the income of managers and partners referred to in article 62 ;
2° The letting, by a person mentioned in 1° of article 965 or by a company or organisation, of commercial or industrial premises equipped with the furniture or equipment necessary for their operation.
VI.-Property or real estate rights allocated to companies mentioned in II to IV that do not own them are exempt to the extent of the taxpayer's shareholding in the companies to which they are allocated.
