Doing Business in France - RSM International

4.2.8 Capital gains taxation on the sale of shares
4.2.8.1.1 Participation exemption
Long-term capital gains derived from disposals of substantial shareholdings are taxexempt,
except for a 10% share of expenses, leading to an effective tax rate of 3,33%.
4.2.8.1.2 Reduced capital gains taxation
Long-term capital gains derived from the disposal of substantial shareholdings in listed
French predominantly real estate companies are taxed at 19%.
Other long-term capital gains are taxed at 15.5% (notably gains deriving from disposals
of patents as well as royalty fees on patents).
Capital gains on shares in non-listed real estate companies are taxed at the rate of
33.33%.
4.2.9 Thin capitalization rules
From January 1, 2007, all loans that French companies receive from “associated
companies” are subject to thin-capitalization rules.
Two companies are “associated companies” if (a) one of them has a direct or indirect
minimum holding of 50% in the capital of the other or controls the other company de
facto or (b) a third company has a direct or indirect minimum holding of 50% in the
capital of the two companies or exercise a control de facto over the two companies.
The thin-capitalization mechanism provides for two limits to the tax deductibility of intragroup
interest.
Firstly, interest paid to another company of the same group is tax-deductible at a rate
limited to the annual average effective rate that credit institutions offer companies for
variable interest rate loans with an initial term of at least two years (based on average
quarterly rates published in the Journal Officiel). For calendar year 2011, the maximum
tax deductible rate was 3.99% (for 2010, 3.82%).
Nevertheless, a higher rate is accepted if it corresponds to that which the borrowing
company could have obtained from unrelated financial institutions in similar
circumstances.
34 | DOING BUSINESS IN FRANCE