Arsene Taxand - Real Estate
No SIICness in time of crisis
November 18 2008
Three amendments to the Finance Bill for 2009 related to SIICs have been drafted by Senator Philippe Marini last Wednesday for the Finance Commission of the Senate.

Subject to any change – which remains possible during the discussion of the Finance Bill – these amendments would be the following:

SIIC IV: deferment until 1/1/2010

  • The 60% cap of interest held by a single shareholder in a SIIC would be postponed for one year, i.e. the application of the 60% cap would only be effective as from January 1st 2010;

  • In case of a continued disrespect of the 60% cap at the end of the fiscal year following the year the cap is not met, or if the 60% cap is breached more than once over a 10 year period, the SIIC company would lose the benefit of the SIIC regime.

  • The tax consequences of the exit would be:
- The SIIC company and its subsidiaries would be liable to CIT at the rate of 34.43% on their undistributed profits and reserves which previously benefited from the tax exemption. We believe that the calculation of future capital gains on the disposal of the real estate assets would be based on their net book value. However, in such a case the capital gains generated by the SIIC company would be reduced by the depreciation allowances accounted during the application of the SIIC regime.
- Finally, in case of a temporary exit from the SIIC regime, the unrealized capital gains on the real estate assets related to this period would be subject to an exit tax (16.5%) when the company reenters the SIIC regime.


SIIC III: 3 YEARS EXTENSION AND INCREASE OF THE RATE TO 19%

  • The « SIIC III » regime (i.e. article 210 E of the French tax code) would benefit from a 3 year extension (until December 31th, 2011). In return, the applicable rate on the taxation of the capital gains would increase from 16.5% to 19%.
  • In addition, commitment to keep the assets during a five year period with respect to the SIIC 3 regime would benefit from more leniency in case of a real estate financial lease agreement and refurbishment.

We will carefully follow the discussions of these amendments and their final adoption.


François Lugand
Partner

No SIICness in time of crisis

Arsene Taxand - Real Estate



No SIICness in time of crisis
Three amendments to the Finance Bill for 2009 related to SIICs have been drafted by Senator Philippe Marini last Wednesday for the Finance Commission of the Senate.

Subject to any change – which remains possible during the discussion of the Finance Bill – these amendments would be the following:

SIIC IV: deferment until 1/1/2010

  • The 60% cap of interest held by a single shareholder in a SIIC would be postponed for one year, i.e. the application of the 60% cap would only be effective as from January 1st 2010;

  • In case of a continued disrespect of the 60% cap at the end of the fiscal year following the year the cap is not met, or if the 60% cap is breached more than once over a 10 year period, the SIIC company would lose the benefit of the SIIC regime.

  • The tax consequences of the exit would be:
- The SIIC company and its subsidiaries would be liable to CIT at the rate of 34.43% on their undistributed profits and reserves which previously benefited from the tax exemption. We believe that the calculation of future capital gains on the disposal of the real estate assets would be based on their net book value. However, in such a case the capital gains generated by the SIIC company would be reduced by the depreciation allowances accounted during the application of the SIIC regime.
- Finally, in case of a temporary exit from the SIIC regime, the unrealized capital gains on the real estate assets related to this period would be subject to an exit tax (16.5%) when the company reenters the SIIC regime.


SIIC III: 3 YEARS EXTENSION AND INCREASE OF THE RATE TO 19%

  • The « SIIC III » regime (i.e. article 210 E of the French tax code) would benefit from a 3 year extension (until December 31th, 2011). In return, the applicable rate on the taxation of the capital gains would increase from 16.5% to 19%.
  • In addition, commitment to keep the assets during a five year period with respect to the SIIC 3 regime would benefit from more leniency in case of a real estate financial lease agreement and refurbishment.

We will carefully follow the discussions of these amendments and their final adoption.


François Lugand
Partner
Arsene Taxand 2009 - France - Legal information