The concept of free re-evaluation allows businesses to adjust the value of their fixed assets to reflect their current market value, as opposed to their depreciated historical cost. This practice, governed by article L 123-18 of the Commercial Code, enables companies to present a more accurate picture of their financial standing by increasing both assets and liabilities on their balance sheets. The difference between the market value and the net book value is known as the free re-evaluation surplus, which is then incorporated into the company’s equity.

While this approach can enhance a company’s perceived value by boosting its equity, the re-evaluation surplus is treated as a deferred gain for tax purposes and is promptly subject to corporate income tax. however, for companies with significant tax losses, this mechanism can be used as a tool for managing those deficits.

COVID-19 relief: Spreading Taxation

In response to the economic challenges posed by the COVID-19 pandemic, the finance law for 2021, specifically article 31, introduced an option to spread the taxation of capital gains resulting from free re-evaluations conducted between December 31, 2020, and December 31, 2022. This measure aimed to support the rebuilding of equity during the crisis. Companies were given the flexibility to spread the tax burden over a period of 5 to 15 years or until the assets were sold for non-depreciable items.

Companies were given the flexibility to spread the tax burden over a period of 5 to 15 years.

Finance Law for 2025: Enhanced Declarative Obligations

the finance law for 2025, through its article 15 (law n ° 2025-127 of February 14, 2025), refines the free re-evaluation system by imposing stricter declarative obligations on companies.

Moving forward, businesses must disclose the amount of any re-evaluation surplus that has not yet been included in the profit for the closing financial year. This data must be reported on a monitoring form, as detailed in the last paragraph of article 238 bis JB of the general tax code.

The tax authorities will provide a specific monitoring model for reporting this re-evaluation difference.

Furthermore, failure to declare the re-evaluation surplus on the monitoring form may result in a penalty of 5% of the undeclared amount, as stipulated in article 1763 of the CGI. These new regulations will apply to financial years ending on or after December 31, 2025.

Source: Bofip news of June 11, 2025