French investment illustration: stylized SPV tax impact

1 Purpose

This vignette illustrates how tax_run_spv() can be used on a French office investment case.

It is intentionally a stylized French-like SPV illustration, not a legal or tax opinion. As of April 1, 2026, the normal French corporate income-tax rate is 25%, following the official French tax administration’s published corporate-tax guidance consulted for this vignette.

The rest of the tax assumptions below are simulated package inputs chosen to remain within the current scope of tax_run_spv():

• straight-line depreciation only,
• simple interest deductibility,
• simple loss carryforwards,
• no investor-level taxes,
• no withholding taxes,
• no treaty logic,
• no attempt to encode the full French interest-limitation regime.

The point of the vignette is therefore methodological: show how a French case can be parameterized in the current generic engine without pretending to replicate the full French tax code.

2 Start from a French operating case

We use the package’s preset_core.yml, which already describes a stylized Paris 8e office investment.

cfg_path <- system.file("extdata", "preset_core.yml", package = "cre.dcf")
cfg <- yaml::read_yaml(cfg_path)
case <- run_case(cfg)

bullet_summary <- case$comparison$summary |>
  filter(scenario == "debt_bullet") |>
  transmute(
    scenario,
    irr_project,
    irr_equity,
    min_dscr,
    max_ltv_forward,
    ops_share,
    tv_share
  )

knitr::kable(
  bullet_summary,
  digits = 3,
  caption = "Before-tax baseline for the stylized French core-office case"
)

At this stage, the core DCF is still entirely before tax. The tax layer comes next and consumes the consolidated cash-flow table.

3 Translate the French-like SPV into tax inputs

The current tax engine needs two objects:

• a tax basis extracted from the pre-tax case,
• a tax specification describing the stylized SPV rules.

tax_basis <- tax_basis_spv(case)

tax_assumptions <- tibble::tribble(
  ~item, ~value, ~comment,
  "Corporate income tax", "25%", "Official French normal CIT rate as of April 1, 2026",
  "Land share", "20%", "Stylized non-depreciable portion",
  "Building share", "65%", "Stylized depreciable structure",
  "Fit-out share", "15%", "Stylized depreciable tenant-improvement bucket",
  "Building life", "30 years", "Stylized straight-line life",
  "Fit-out life", "10 years", "Stylized straight-line life",
  "Interest deductibility", "full", "Current engine scope, not full French law",
  "Loss carryforward", "on", "Stylized carryforward allowed",
  "Offset cap", "50%", "Stylized cap used to keep the rule conservative"
)

knitr::kable(
  tax_assumptions,
  caption = "French-like tax assumptions used in this vignette"
)

tax_spec <- tax_spec_spv(
  corp_tax_rate = 0.25,
  depreciation_spec = depreciation_spec(
    acquisition_split = tibble::tribble(
      ~bucket,    ~share, ~life_years, ~method,          ~depreciable,
      "land",      0.20,        NA,    "none",           FALSE,
      "building",  0.65,        30,    "straight_line",  TRUE,
      "fitout",    0.15,        10,    "straight_line",  TRUE
    ),
    capex_bucket = "fitout",
    start_rule = "full_year"
  ),
  interest_rule = interest_rule(mode = "full"),
  loss_rule = loss_rule(
    carryforward = TRUE,
    carryforward_years = Inf,
    offset_cap_pct = 0.50
  )
)

tax_res <- tax_run_spv(tax_basis, tax_spec)

4 Read the yearly tax table

The yearly table below is the main output of tax_run_spv().

tax_view <- tax_res$tax_table |>
  select(
    year,
    noi,
    tax_depreciation,
    deductible_interest,
    taxable_income_pre_losses,
    loss_cf_open,
    loss_cf_used,
    cash_is,
    after_tax_equity_cf
  )

knitr::kable(
  tax_view,
  digits = 0,
  caption = "Stylized French SPV tax table"
)

This is the main reading grid:

• tax_depreciation transforms acquisition basis and capex into fiscal charges,
• deductible_interest removes the debt cost that is deductible under the simplified rule,
• taxable_income_pre_losses is the taxable base before using prior losses,
• loss_cf_open and loss_cf_used show how prior tax losses are mobilized,
• cash_is is the annual corporate income tax paid by the SPV,
• after_tax_equity_cf is the equity cash flow net of that annual tax.

5 Compare pre-tax and after-tax equity cash flows

The generic engine does not yet build a complete French investor-level valuation. It does, however, let us measure the tax drag at the SPV level.

equity_bridge <- tax_res$tax_table |>
  select(year, pre_tax_equity_cf, cash_is, after_tax_equity_cf)

knitr::kable(
  equity_bridge,
  digits = 0,
  caption = "Bridge from pre-tax to after-tax equity cash flows"
)

We can also compare the before-tax leveraged IRR with a stylized after-tax SPV equity IRR computed on after_tax_equity_cf.

pre_tax_equity_irr <- case$leveraged$irr_equity
after_tax_equity_irr <- irr_safe(tax_res$tax_table$after_tax_equity_cf)

tax_highlights <- tibble(
  pre_tax_equity_irr = pre_tax_equity_irr,
  after_tax_spv_equity_irr = after_tax_equity_irr,
  total_cash_is = tax_res$summary$total_cash_is,
  total_tax_depreciation = tax_res$summary$total_tax_depreciation,
  exit_year_cash_is = tax_res$tax_table$cash_is[
    tax_res$tax_table$year == max(tax_res$tax_table$year)
  ]
)

knitr::kable(
  tax_highlights,
  digits = 3,
  caption = "Stylized before-tax versus after-tax SPV reading"
)

In this example:

• the pre-tax DCF remains the economic backbone of the case,
• the stylized French tax layer reduces equity cash flows through annual cash_is,
• depreciation materially shapes the taxable base,
• and the exit year remains a critical point because the final tax charge can be large.

6 What this vignette captures and what it does not

This French illustration is useful because it shows a coherent workflow:

1. build the investment case,
2. extract a tax basis,
3. define a country-like SPV parameterization,
4. read the yearly tax consequences.

But it still has clear limits.

Captured:

• a French office investment setting,
• a normal-CIT-rate scenario,
• non-depreciable land,
• depreciable building and fit-out buckets,
• simple loss carryforwards,
• a visible bridge from pre-tax to after-tax equity cash flows.

Not captured:

• the full French interest-limitation regime,
• the exact French loss-carryforward formula,
• shareholder taxation,
• transfer-tax mechanics beyond the acquisition-cost block already embedded in the DCF,
• exit-structuring choices,
• treaty and cross-border effects.

7 Summary

This vignette shows how cre.dcf can already support a realistic French-style teaching case without hard-coding French tax law into the package core.

• The before-tax DCF remains the common economic layer.
• tax_run_spv() adds a stylized SPV tax reading on top of it.
• The result is useful for scenario analysis and methodology, but should not be read as legal advice or as a complete French tax model.