2. OVERVIEW
Leasing in France is seen as a part of the banking system, mainly because
leasing with an option to buy falls within the scope of the banking regulations.
Leasing offers practical advantages to the lessee.
The lessor is entitled to a special guarantee through his right of ownership.
Cross border operations are not subject to stringent exchange control rules and
France is a country of legal ownership, which can provide opportunities for
double tip transactions with countries where economic ownership prevails
French tax legislation offers certain advantages, in particular, for domestic
transactions involving French partnership lessors (transfer of losses to
investors), cross border transactions (benefice network), or green business
financing (specific tax incentives)
5. LEGAL ISSUES
Under French law, a fundamental distinction is made between:
1. The mere lease of assets without an option to purchase granted to the
lessee(location simple)
2.The leasing of an asset with an option to purchase given to the lessee
within the leasing agreement
The mere lease of property is subject to the Civil Code’s Rules(Article 1709)
6. REGULATORY ISSUES
Credit institutions engaged in leasing operations are subject to the
banking and financial regulations applicable to their status and activity.
Companies engaged in mere operational leases have no regulatory
obligations in this respect
7. Rental income received by the French resident company is liable
to corporate tax at a flat rate of one third plus an additional tax of
1.10 percent called ‘contribution sociale’.
SPECIAL TAX TREATMENT OF LEASING COMPANIES: Gains
(or losses) realised by a lessor on the sale of leased equipment are
always treated as ordinary income (or losses), subject to
corporate taxes at the standard rate.
The new version of tax lease under Article 39C of the French Tax
Code applies to lease agreements signed on or after 1 January
2007.
The single investor tax lease :The single investor tax lease also
relies on the ability of the lessor to offset losses created by
accelerated tax depreciation in the early years of the lease against
profits of other companies in its consolidated tax group.
TAX ISSUES
8. INTERNATIONAL LEASING IN FRANCE
An International Lease is a cross-border lease i.e. where the lessor and the
lessee are situated in 2 different countries, so that the goods are held in
different legal system with respect to the system in which the title is held.
As from January 1, 2010, a new French transfer pricing documentation
requirement, codified as Article L13AA, has been made applicable for cross-
border transactions involving notably leasing transactions
9. The French leasing sector has shown a significant fall in
activity in the final quarter of 2012.
