Current Tax Developments - Capital Losses On Capital Ownership

Instruction 5-B-7-95 issued by the French Tax Authorities has recently specified the way in which the taxpayers, as concerns personal income tax, may offset a capital loss against a capital gain after the sale or exchange of capital ownership over 25% in companies subject to French corporate income tax (Article 160 of the French General Tax Code).

As concerns capital losses realised inside a family group, such losses may not offset against taxable capital gains, except if the buyer of such capital ownership transfers it to a third party within five years of the first sale. If the taxation of a capital gain can be deferred after a reorganisation (merger, split or contribution), it may, at the end of the deferred period, be offset against a capital loss realised during the five years preceding the expiration of the mentioned deferred taxation delay.