The French parliament is currently reviewing a bill for the “digital Republic” that is in the process of extending the temporary additional depreciation mechanism applicable to certain assets for another year – this will allow more assets to benefit from the enhanced deduction.
Originally enacted as part of the Growth and Economic Activity Law in July 2015, the mechanism allows corporate income taxpayers to deduct an additional amount equal to 40% of the original cost (excluding financing expenses) of eligible assets used for the company’s business and that were acquired or manufactured by the company during the period between 15 April 2015 and 14 April 2016. The extra deduction is spread (on a straight-line basis) over the normal useful life of the assets. For assets to be eligible for the deduction, they must be depreciable under the declining-balance method (according to the French tax code) and must fall within one of the following categories (the last three of which were added by the amended finance law for 2015 and the finance law for 2016):
- Equipment and tools used for industrial manufacturing or processing operations
- Facilities used for water purification and air quality improvement
- Handling equipment
- Equipment used for the production of steam, heat or energy (except for facilities for the production of electrical energy subject to regulated tariffs)
- Materials and tools used for scientific or technical research activity
- Optic fiber installations and equipment
- Natural gas or bio-methane functioning heavy trucks
- Ski lift installations
According to the French tax authorities, the bill would provide for a one-year extension of the 40% additional depreciation mechanism, so that it would apply to assets acquired or manufactured until 14 April 2017 (and until 31 December 2017 for natural gas or bio-methane functioning heavy trucks).
In addition, certain computer equipment to be used for a computer “rack” would qualify for the enhanced deduction as well as machines for intensive computing (“ supercomputers “), and the bill would extend the benefit to co-investments in optic fiber installations and allow the owner and the holder of the right to use such equipment to split the deduction.