FRANCE LAW AND PRACTICE Contributed by: Michael Doumet, François-Xavier Naime, Guillaume Nataf, Léna Sersiron, Eléonore d’Anthonay, Nella Picou, Pauline Celeyron and Magalie Dansac Le Clerc, Baker McKenzie Paris
Disposal of Shares Capital gains from the sale of shares by foreign inves - tors are typically not taxable in France, except for the following operations (see 9.5 Anti-Evasion Regimes ). • Capital gains from the disposal of shares in French real estate-oriented companies are taxed at the following rates: • Real estate-oriented companies are those with French real estate assets or rights not assigned to their business making up at least 50% of their fair market value. • Capital gains realised on the sale of shares by a foreign investor in a French company where the seller holds a substantial shareholding (non-real estate-oriented companies) are taxed at the follow - ing rates: (a) 25% for foreign corporations; and (b) 12.8% for foreign individuals. (a) 25% for foreign companies; and (b) 19% for non-resident individuals. • Foreign corporations may apply for a partial reim - bursement of tax, allowing such disposal to be taxed at an ETR of ≃ 3.1% if certain conditions are met. Disposal of Real Property Capital gains on disposals of French real estate assets or rights by non-resident companies are taxed at 25% and by non-resident individuals at 19%. Disposal of Other Assets Disposal of certain other French assets (eg, French- registered IP, businesses, activities or client bases) by non-residents is exempt from capital gains taxes if those assets are not part of a French permanent establishment. In the latter case, the disposal of these assets is taxed at the normal CIT rate (ie, 25%). Use of French Blocker Capital gains may be taxed at ≃ 3.1% CIT ETR under the participation exemption regime (two years’ hold - ing required, in particular) or approximately ≃ 25.8%, depending on the circumstances. The blocker may allow tax consolidation. Anti-abuse rules may apply (see 9.5 Anti-Evasion Regimes ).
erations. Interest deductions may be limited by other rules such as the 30% EBITDA earnings-stripping rule. Other French tax regimes can be used to mitigate a French resident’s or French permanent establish - ment’s taxation, as follows. • Tax losses can be carried forward indefinitely (up to EUR1 million plus 50% of the taxable profit per financial year) or carried back one year (up to EUR1 million). • The parent-subsidiary regime allows for an ETR of ≃ 1.3% or ≃ 0.3% (consolidated tax group) on eligi - ble dividend payments. • The tax consolidation group regime allows, notably, a consolidation of the taxable profits and losses of member companies and for the neutralisation of certain intragroup asset transfers. • The long-term capital gains regime allows to limit taxation of capital gains on certain disposals of shares to ≃ 3.1%. • The R&D tax credit allows companies to claim up to 30% of eligible R&D expenses as a tax credit. • The IP box regime taxes at a reduced 10% rate the qualifying net income derived from the licensing, sublicensing or transfer of certain IP assets (mainly patents and copyrighted software). 9.4 Tax on Sale or Other Dispositions of FDI Territoriality Rules Foreign investors’ disposals not assigned to a French permanent establishment are generally not taxable in France, except for the following: • sales of French company shares where the seller holds a substantial shareholding (greater than 25%); • shares in French real estate-oriented companies; and • real estate assets or assimilated rights located in France. Moreover, treaties usually allow France to tax gains from the disposal of real estate assets, shares of real estate-oriented companies, and sometimes of sub - stantial shareholdings in French companies.
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