Real Estate Leasing Contracts

Article 57 of the Law Concerning the Development Plan of the Territory, loi d'orientation pour l'aménagement du territoire, modifies the tax regime for real estate leasing contracts.This law will come into effect on 1 January 1996. In respect of direct taxes, the modifications concern in the first place the lessor, who will be able to deduct a provision from taxable profits to compensate for a predictible loss arising from the exercise of the option. Secondly, they concern, the lessee who, depending on his circumstances, could be subject to three different tax regimes : a general regime, which requires him to add back to his taxable income the part of the lease payments relating to non depreciable elements (land), a stricter regime for the offices building in the Paris area (lease payments are treated as if the lessee were the owner of the building), and a more lenient regime for buildings in particular areas. As for registration duties, the rate of the departmental tax for