I. How does the provision of article 150-0 B ter of the General Tax Code (CGI) from which the contribution transfer scheme originates?
If you wish to sell the securities of your company soon, the contribution-transfer, a regime governed by thearticle 150-0 B ter of the CGI can be very interesting since it allows you to place the capital gain on tax deferral carried out.
In principle, when you realize a capital gain on the sale of your securities, you are subject to one of the following two tax regimes:
- Single flat-rate direct debit (PFU) : 30% (rate of 12,8% + social contributions at 17,2%)
- Progressive income tax scale : 0%, 11%, 30%, 41% or 45% + social security contributions of 17,2%
Ainsi, le weight of tax levy on capital gains may be important. When you wish to sell the shares of your company, the taxation to which you are subject is therefore an element to take into account and to to anticipate.
To benefit from the Contribution Transfer regime, you must contribute the shares of your company to a holding company (a deposit) that you control.
A holding company is a company whose purpose is to hold shares in other companies in order to ensure unity of management. Generally, the holding company is created specifically for the Contribution Transfer operation.
Having control of a company means, for example, that you own the majority of the voting rights or profits of the company, or that you actually have decision-making power over the company. Even with only 20% of the voting rights of a company, you can have control over it, as Serge Braudo explains in his definition of control.
The holding company may subsequently sell these shares to a buyer (la disposal).
The contribution-transfer thus allows the entrepreneur to benefit from a tax deferral of the capital gain on the contribution. (capital gain noted when the securities are contributed to the holding company), subject to compliance with certain conditions.
The Contribution Transfer tax regime therefore makes it possible to optimize the tax impact of the sale of your shares.
II. How to benefit from the Contribution Transfer regime and therefore from the tax deferral provided for by article 150-0 B ter of the CGI?
STEP 1 : THE CONTRIBUTION OF SHARES TO A HOLDING
has. The company benefiting from the contribution (the holding company) must be a company:
- Subject to Corporate Tax (IS);
- in France;
- in a member state of the European Union; Or
- in a State having concluded a tax convention with France containing an administrative assistance clause with a view to combating fraud and tax evasion.
- Controlled by the contributor (the manager).
b. The entrepreneur contributes his securities to the holding company and realizes a capital gain.
vs. The added value noted during the contribution is determined and frozen on the date of the contribution operation. However, the imposition of this capital gain on income tax and social security contributions is deferred to a later event.
STEP 2: THE ASSIGNMENT OF SHARES BY THE HOLDING:
The holding company sells the shares contributed to a buyer:
has. More than 3 years after the contribution:
No obligation to reinvest the sale proceeds (i.e. the sale price of the securities sold) to continue to benefit from the tax deferral; Or
b. Less than 3 years after intake:
The holding company must reinvest at least 60% of the proceeds from the sale within 2 years following the sale in activities qualified as “economic”.
In practice, it is complicated for a business manager to anticipate the sale of his shares and the price at which he will sell them.. However, the sale price determines the amount of the contribution to be made.
It is for this reason that the contribution and the transfer are regularly carried out at the same time.. In this case, the holding company must reinvest at least 60% of the sale price of the shares within 2 years of the sale. This operation is called "re-use of proceeds of sale".
STEP 3: REUSE OF THE SALE PROCEEDS
If the holding company sold the shares less than 3 years after the contribution (case b), it will have to carry out a re-use operation of at least 60% of the proceeds of sale within 2 years of the transfer.
Initially, reuse was to be carried out directly in SMEs eligible for article 150-0 B ter of the CGI. Since January 1, 2019, entrepreneurs' holding companies can also invest in a private equity fund, thus expanding investment options. This approach can have the effects not only of reducing the tax burden, but also of supporting the growth of other businesses and maintaining a significant entrepreneurial impact.
CONDITIONS OF REUSE:
has. Acquiring control of one (or more) company:
- Having its head office in France (or in the EU or the EEA having concluded a tax treaty with France),
- Pursuing an economic activity (i.e. a commercial, industrial, craft, liberal, agricultural or financial activity (exclusion: management activities of one's own movable or immovable assets);
- Subject to IS (or would be subject to it if the activity was carried out in France);
b. Subscribe to the initial capital or the capital increase of one or more companies (under the same conditions as above);
vs. Subscribe to units or shares of investment funds
FPCI: professional private equity funds ;
FCPR: risky mutual fund of funds;
SLP: free partnership company)
or SCR: venture capital companies. (funds")
These Funds must respect, at a minimum, from the fifth anniversary of the signing of the first subscription form to the fifth anniversary of the signing of the last subscription form, certain conditions concerning the composition of their assets. The assets of these Funds must therefore consist of at least 75% of securities of operational companies (under the same conditions as above).
Furthermore, the units or shares of the Fund must, at a minimum, be kept by the holding company until the expiration of a period of 5 years from the date of signature of the subscription commitment by the holding company. units or shares of the Fund.
Investing in these Funds presents a risk of capital loss (total or partial). For further information on the risks, we recommend that you consult your usual financial advisor.
III. When does the deferral of tax on capital gains, permitted by system 150-0 b ter of the CGI, end?
The tax deferral ends, in particular, in the following cases:
- The holding company sold the securities contributed less than 3 years after the date of completion of the contribution and did not re-use a minimum of 60% of the proceeds from the sale within a period of 2 years from the sale.
- The entrepreneur transfers his tax domicile outside France.
In the event of transfer, repurchase, reimbursement or cancellation of shares of the holding company received by the entrepreneur as remuneration for his contribution.
- The holding company has sold the securities contributed within 3 years of the date of completion of the contribution, has reinvested at least 60% of the proceeds from the sale within 2 years from the sale in a fund eligible for reinvestment but not has not retained the units or shares of the fund until the expiration of a period of 5 years from his subscription commitment.
IV. In what cases can the deferral of tax on capital gains, permitted by system 150-0 b ter of the CGI, be transformed into an exemption from taxation?
Tax deferral can be transformed into tax exemption in certain limited cases and under certain conditions:
– If the entrepreneur performs a donation of the shares of the holding company that he received as remuneration for the contribution, it will be definitively exempt from income tax and social security contributions in respect of the capital gain placed in tax deferral, which will be transferred to the donee if the latter controls the holding company at the end of the donation. The donee may himself be definitively exempt from this tax charge if he keeps the securities of the holding company received by donation for 5 or 10 years.
- If the entrepreneur dies, the transfer due to death “purges” the capital gain carried forward which is definitively exempt from all taxation. The capital gain placed in deferral will therefore not be taxed at the level of the heirs or legatees.
Contact Nextstage AM to get more information about our investment solutions eligible for 150-0 b ter.
Disclaimer : The information presented in this document constitutes a promotional communication and does not constitute investment advice. Before making any investment decision and in order to correctly evaluate the tax regime described in this document as well as the risks incurred by this type of investment, it is recommended to consult your usual legal, tax or financial advisor and to contact the management company for more information.
V. Frequently Asked Questions:
1. How to declare a capital gain as a tax deferral?
You must complete declaration no. 2074-I, declare the value of the capital gain in your income tax declaration (Cerfa form no. 2042) and provide a certificate from the holding company in which it acknowledges having full awareness that the capital gain realized on the contributed securities benefits from a tax deferral.
2. How can I benefit from a tax deferral on the capital gain realized as part of the sale of my business?
You must comply with the conditions set out in article 150-0 B ter of the CGI which governs the contribution-transfer system. You thus bring the securities of your company to a holding company that you control. The holding company must retain the securities contributed for 3 years. If it sells the securities before the expiry of this period, it is possible to maintain the tax deferral by reinvesting, within 2 years following the sale, 60% of the proceeds from the sale in companies or investment funds. investments eligible for the 150-0 b ter system of the CGI.
3. Which areas of activity are eligible for transfer reuse?
Areas of commercial, industrial, craft, liberal, agricultural or financial activity are eligible for re-use of transfer, with the exception of movable or immovable asset management activities.
4. How long is the tax deferral?
The tax deferral may end in the following cases: the holding company has sold the contributed securities within 3 years of the date of completion of the contribution without having reused at least 60% of the proceeds of sale within 2 years running from the transfer; the holding company has sold the securities contributed within 3 years of the date of completion of the contribution, has reinvested at least 60% of the proceeds of sale within a period of 2 years from the sale in an investment fund eligible for reinvestment but has not retained the units or shares of the fund until the expiration of a period of 5 years from its subscription commitment; the entrepreneur carries out a transfer of tax domicile out of rancidity; or in the event of transfer, repurchase, reimbursement or cancellation of the shares of the holding company received by the entrepreneur in exchange for his contribution.
5. How to transform a tax deferral into a definitive exemption?
The use of donations allows, subject to compliance with certain conditions, to definitively exempt the capital gain placed in tax deferral. Indeed, when the entrepreneur transfers free of charge the securities of the holding company received as remuneration for his contribution (and therefore encumbered with the capital gain carried over), he is definitively exempt from income tax and social security contributions. title of the capital gain placed in tax deferral. Concerning the situation of the donee, it is appropriate to distinguish the following two situations:
- when the donee does not control the holding company at the end of the donation:
The transmission “purges” the carried-over capital gain which is definitively exempt from all taxation and, consequently, the carried-over capital gain is not transferred to the donee. However, this situation is rarely encountered in practice since the notion of control is understood broadly and, consequently, the donee will most often be considered as controlling the holding company following the donation. Indeed, to determine whether the donee controls the holding company, account must be taken of the securities that he holds directly or indirectly, as well as through his family group (spouse or partner bound by a civil solidarity pact [ PACS], ascendants, descendants and brothers and sisters).
- when the donee controls the holding company following the donation:
The capital gain placed on tax deferral is transferred to the donee. The donee may himself be definitively exempt from this tax charge if he keeps the securities of the holding company received by donation for 5 or 10 years (the 10-year period applies when the securities initially contributed by the entrepreneur have been sold by the holding company and that the latter has reinvested at least 60% of the proceeds from the sale of the securities in the subscription of units or shares of an eligible investment fund).
You have been warned! : Before making any investment decision and in order to correctly evaluate the tax regime described in this document as well as the risks incurred by this type of investment, it is recommended to consult your usual legal, tax or financial advisor and to contact the management company for more information.