Since the Finance Law for 1994, it had been possible to maintain the application of the tax consolidation regime in the case of takeover of the parent company of a consolidated group by another company. This advantage has just been extended, by the law providing several economical and financial provisions (Journal Officiel dated April 13, 1996) for the splits-off of parent companies realized in conformity with article 210B of the French General Tax Code and introduced as of April 1st, 1996.

Each company to which the shares of the split-off company are contributed, may now set up a new group with effect as of the opening of the tax year of the split-off. In this respect, the new parent companies should not be held at more than 95% by another company liable for corporate income tax. They must, in addition, notify to the relevant tax centre their option for the group regime.

The split-off of the parent company inevitably leads to the split-off of the group and the adding-back of the sums deducted from the global result (subsidies granted between companies of the group, capital gains in tax deferment ... etc). But these addings-back are, under certain conditions, charged on the global loss of the split-off group. In addition, the new parent companies of the French tax consolidated group may, upon agreement of the Tax Authorities, obtain the transfer of a part of the loss of the former dissolved group. It will then be possible that this loss be charged on their own profit, and even, under certain conditions, on the profits of the dissolved companies of the group, which have become members of the new group thus created.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be brought about your specific circumstances.

For additional information contact Claire Acard on 33/(1)/55 61 10 10, Lionel Benant on 33/, Joel Fischer on 33/, or Laurent Borey on 33/(1)/55 61 10 10 or enter text search: "ARCHIBALD ANDERSEN Profile".

The members of ARCHIBALD ANDERSEN Association d'Avocats (S.G.Archibald and Arthur Andersen International) are registered with the Hauts-de-Seine Bar and the Lyon Bar.