Current Tax Developments - Depreciation Of Intangible Fixed Assets

In a very important decision dated December 5, 1995, the Paris Administrative Court of Appeal acknowledged that intangible assets of an on-going business can be amortised. According to the authorities, the intangible assets of an on-going business cannot be amortised in accordance with Article 38 sexies of Annexe 3 of the French Tax Code, with any depreciation only being recorded by means of a provision.

In this particular case, a company acting as a property manager acquired a portfolio of management contracts on several buildings. This portfolio, which was an element of its on-going business, constituted an intangible fixed asset of said company. The company amortised 20% of this amount as it considered that it would depreciate in value. During an audit, the tax authorities challenged the deductibility of such depreciation and this view was upheld by the Paris Administrative Court in a decision dated January 3, 1993.