1. Where an individual domiciled in France directly or indirectly holds at least 10% of shares, shares, financial rights or voting rights in a corporation, organization, trust or similar institution established or constituted outside France and subject to a preferential tax regime, profits or income benefits of this corporation, organization, trust or similar institution are deemed to be income from movable capital of that individual in the proportion of shares or financial rights it holds directly or indirectly when the asset or property of the corporation, organization, trust or comparable institution mainly consist of securities, receivables, deposits or current accounts.
For the purposes of the first paragraph, the privileged nature of a tax system is determined accordance with the provisions of section 238 A as compared with the tax system applicable to a company or authority mentioned in paragraph 1 of Article 206
2. Shares, stocks, financial rights or voting rights held indirectly by the person mentioned in 1, mean the stock, shares, financial rights or voting rights held through a chain of stocks, shares of financial rights or voting rights, the appreciation of the percentage of shares, shares, financial rights or voting rights held and operates by multiplying together the percentage holding of such shares or the rights or financial voting rights in succession.
Indirect holding includes shares, shares, financial rights or voting rights held directly or indirectly by the spouse of the person, or their ancestors or descendants. However, these shares, shares, financial rights or voting rights are not taken into account in computing the income from movable capital of the individual mentioned in 1.
3. Profits or income referred to in a positive shall be deemed earned on the first day of the month following the close of the fiscal year of the corporation, organization, trust or similar institution established or incorporated outside France or, in the absence of exercise ended a year, December 31. They are determined according to the rules laid down by this Code as if the corporations, organizations, trusts or comparable institutions were taxed at the corporate tax in France. The local tax paid on profits or revenue positive because by the corporation, organization, trust or similar institution is deductible from income deemed to be income from movable capital of the individual, in the proportion mentioned in 1, provided it is comparable to the corporate tax.
However, when the corporation, organization, trust or similar institution is incorporated or constituted in a State or Territory has not concluded a convention on administrative assistance with France, the taxable income of the individual may not be less than the product of the fraction of net assets or net assets of the corporation, organization, trust or comparable institution, calculated under the conditions set at 1, a rate equal from that mentioned in 1 of 3 of Article 39
4. Income distributed or paid to an individual referred to by a legal person, agency, trust or institution comparable do not constitute taxable income under section 120 except for the portion that exceeds the taxable income referred to in 3.
5. A decree in Conseil d'Etat determines the conditions of application of the foregoing, including the reporting obligations of individuals [See Rules 50 bis and 50 f of Annex II].
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