Some specifications were recently provided by the Tax Authorities concerning the exchange of shares and the spin-off (answer to a written question of the Ministry of the Budget, to a Member of Parliament, July 31, 1995).
Article 38-7 bis of the French General Tax Code provides that the profit realized for an exchange of social rights resulting from the spin-off of a company benefiting from the tax regime provided for by Article 210 B of the latter Tax Code may be included in the result of the tax year during which the sale of shares received in exchange occurred. In this case, the possible profit resulting from the latter sale of shares may be determined depending on the value that the social rights received at the time of the exchange had from a tax standpoint.
Should the social rights thus received have previously been booked in the assets of the company after the merger of another company in the case of a merger realised with the benefit of the favourable tax regime provided for by Article 210 A of the French General Tax Code, this tax value is the same as the one which appears in the accounts of the absorbed company and from which the absorbing company engaged itself, in application of 3.c) of the latter Article, to compute the capital gain of sale of the shares involved.
According to the provisions of the second alinea of Article 38-7 bis of the French General Tax Code, the tax value of the shares received following the spin-off is equal to the income of the tax value of the shares of the spin-off company duplicated by a particular ratio:
real value of the shares of each company benefiting
from the contribution in the case of an spin-off operation
real value of the shares of the spin-off company
Therefore, the exchange operation does not trigger any immediate taxation.
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