Corporate restructuring or reorganization operations can have a significant impact on the tax bases used to calculate local taxes. To avoid a sharp drop in tax revenues during these operations, the General Tax Code (CGI) provides for two mechanisms known as minimum rental value.
The first is defined in Article 1518 B of the CGI; the second in Article 1499-0 A. These two measures have a common objective: to prevent legal or financial transactions from leading to an artificial reduction in the rental value of industrial properties.
The minimum rental value under Article 1518 B of the French General Tax Code
Definition and purpose of the system
Created by the law of January 10, 1980, Article 1518 B aims to guarantee the stability of local authorities' resources during operations involving external growth carried out by industrial companies.
In concrete terms, it imposes a minimum threshold: after the transfer of fixed assets, the rental value used for taxation purposes cannot fall below a certain percentage of the rental value recorded before the transaction.
Operations concerned
The scope of the text has gradually expanded. Article 1518 B now covers:
1. Operations initially planned:
- contributions,
- spin-offs,
- company mergers,
- business transfers.
2. Subsequent extensions:
- takeovers of companies in difficulty (safeguard, receivership, or liquidation proceedings),
- universal inheritance transfers (TUP) since 2010,
- isolated transfers of tangible fixed assets between related companies (since 2011).
For the latter, two conditions must be met:
- Fixed assets must remain attached to the same establishment.,
- Companies must be linked in the sense of direct or indirect control.
The five applicable floor rates
Article 1518 B sets different rates depending on the nature and date of the transaction:
Location | Minimum rate |
|---|---|
Operations prior to 1992 | 66% |
Operating since 1992 + TUP since 2010 | 80% |
Companies in difficulty (year of proceedings + 2 years) | 50% |
Transactions between companies within the same integrated group between 2006 and 2010 | 90% |
Transactions since 2011 between related companies and isolated disposals | 100% |
Calculation example
Company A has owned an establishment since 2001. In 2024, this establishment is transferred to an unrelated company B.
For the 2025 property tax, two values must be compared:
- the rental value derived from the contribution value,
- the historical rental value (revalued original cost price) × 80 %.
The highest value becomes the taxable base.
Variations exist: rate increased to 100 % for related companies, or lowered to 50 % in the event of collective proceedings.
What are the essential practices to adopt during an inspection?
- Verify that the transaction falls within the scope of Article 1518 B.
Case law, in particular the ruling Council of State, Saint-Jacques company, reminds that a simple transfer of bare premises does not constitute a transfer of an establishment. - Check the rate retained by the administration
The ruling EC, Kem One company confirms that a series of operations may constitute a single transfer, avoiding the application of the 100% rate. - Review the complete history of the site
A cumulative application of the floor is possible: for example, two successive transfers at 80% result in an overall rate of 64 %.
Is your operation affected?
The minimum rental value under Article 1499-0 A of the French General Tax Code
A newer device
Introduced by the amended finance law for 2008, Article 1499-0 A targets three specific transactions:
- the real estate leasing,
- the sale-leaseback (lease-back),
- the sale-lease.
Definition of the operations concerned
Real estate leasing
Financing agreement: a credit company purchases or builds a building, leases it to a business, and may transfer ownership to the business at the end of the term.
Sale-leaseback
A company sells its building to a financial institution and immediately leases it back in order to improve its cash flow while continuing to use the building.
Sale and leaseback
The building is sold and then leased back under a «standard» lease. A repurchase agreement may be included in the contract.
Purpose of Article 1499-0 A
The industrial rental value is calculated on the basis of the cost price, a sale may result in an artificial decrease in this value (if the purchaser records the asset at a lower amount).
To prevent this decline, Article 1499-0 A imposes a minimum threshold:
- 1er paragraph: in the event of acquisition by the borrower, the rental value for subsequent years may not be less than that for the year of acquisition.
- 2th paragraph: In the event of a sale-leaseback or sale-lease, the rental value for the years following the sale may not be less than that for the year of sale.
In both situations, the rental value used in year N therefore becomes a minimum level for future taxation.
Concrete example: the decision of the Council of State, SAS Rousseau
To illustrate the practical application of Article 1499-0 A, our tax experts and partner attorneys assisted Rousseau in a dispute concerning the minimum rental value of real estate acquired through a lease.
We have, in particular:
- advised the company throughout the proceedings by analyzing the legal situation and developing a defense strategy; ;
- contributed our expertise in local taxation to challenge the minimum rental value set by the Administration,
- represented the company before the Administration and various courts, with the support of our partner lawyers.
Thanks to this support, the tax authorities recognized the validity of Rousseau's arguments and made the necessary adjustments. This specific case illustrates the importance of expert advice to secure the tax basis in complex transactions.
Need similar support to secure your tax bases?
Conclusion
The articles 1518 B and 1499-0 A of the French General Tax Code are two essential tools for securing the tax bases of local authorities during restructuring or real estate financing operations. Their implementation requires a detailed analysis of the legal history of the assets, the nature of the transaction, and the conditions of control between companies.
In a context where restructuring operations and financial arrangements are becoming increasingly common, it remains essential to have a good understanding of these issues in order to accurately anticipate the tax implications and limit the risk of reassessment.
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