Abstract EN:

The application of merger's favourable tax regime to asset-for-stock transactions raises a certain number of questions, not only at the time of the reorganization itself but also for later operations (sale or distribution of shares received by the contributing company). A number of conditions are required for the application of this favourable regime : companies involved in the transaction must be subject to income tax, the activity transferred is deemed to be an autonomous division under french tax law, there is an obligation for the contributing company to hold the shares received in exchange for at least five years. . . The main consequence of this regime is the neutralization of taxation on capital gains derived from the transaction. The operation is considered as neutral : possibility of transferring the losses of the contributing company to the receiving company on prior ruling, capital gains on depreciable assets are recaptured by including the gains in the taxable profit of the receiving company, allowances concerning the assets received may be transferred to the receiving company. . . . . . The asset-for-stock transaction is subject to different kinds of taxations : corporation tax, contribution duties, vat, local taxes. The French favourable regime has evolved to meet the requirements of the ec merger directive of july 23, 1990. Companies may choose an asset-for-stock transaction for strategies of "external of internal growth", for tax optimization schemes or as a substitute to merger and demerger transactions. The provisions of international tax conventions and the way the ec merger directive was transposed in the different member states reveals the attitude of states towards transnational asset-for-stock transactions