lorem

Conditions: tax exemption for business capital gains

Capital gains are exceptional products made by the company as part of an agricultural, artisanal, commercial, industrial or liberal activity, on the sale of an asset. They are in principle taxable. There are several exemption devices.


Capital gains for business: exemption on the basis of receipts

Article 151 septies of the French Tax Code:  this system is applicable to capital gains realized from commercial, industrial, artisanal, liberal or agricultural activities (sole proprietors subject to income tax or partnerships).

Conditions of application of the exemption according to the receipts:

  • Capital gains from sale are exempt for the entire amount when the annual income is less than or equal to €250,000; or partially (between €250,000 and €350,000) for companies whose main business is the sale of goods, objects, supplies and goods to be taken away or consumed locally; the provision of housing; or if the enterprise carries on an agricultural activity;
  • For the other companies, the exemption is total when the annual receipts are lower or equal to €90,000 or partial between €90,000 and €126,000;
  • The activity must have been exercised for at least 5 years.

Capital gains for business: exemption assessed by reference to the value of the items disposed of

Article 238 (15) of the French Tax Codethis system is applicable to capital gains realized in the course of a commercial, industrial, artisanal, liberal or agricultural activity (individual enterprises subject to income tax or partnerships). The exemption relates to capital gains realized on the sale of a sole proprietorship or a complete branch of activity.

Conditions of application of the exemption according to the value of the elements transmitted:

  • The exemption is total if the value of transmission is less than €300,000 or partial between €300,000 and €500,000;
  • If the assignment is made in return for payment, an additional condition is required: the absence of control of the transferee undertaking by the assignor;
  • The activity must have been exercised for at least 5 years.

Capital gains for business: tax deferral in the event of contribution to a company

Article 151 (8) of the French Tax Codethis system is applicable to the capital gains realized by a natural person when contributing to a company subject to a real tax regime of a sole proprietorship or a complete branch of activity.

Conditions of application of tax deferral in case of contribution to a company :

  • The taxation of capital gains on non-depreciable fixed assets is deferred until the date of the sale, redemption or cancellation of the Company's rights received as remuneration for the contribution of the company or until the transfer of such fixed assets by the corporation if it is earlier;
  • The contribution must be remunerated by delivery of securities.

Capital gains for business: tax deferral in case of free transfer of a sole proprietorship

Article 41 of the French Tax Codethis system is applicable to natural persons in connection with the free transfer of a sole proprietorship.

Taxation of capital gains on items of fixed assets recognized in connection with this transfer is deferred until the date of transfer or termination of the business or until date of transfer of one of these elements if it is earlier. When the activity is continued for at least 5 years from the date of transmission, the capital gains remaining in the balance sheet are definitively exempted.

Conditions of application of tax deferral in case of free transmission of a sole proprietorship:

  • Transmission of all items of fixed assets;
  • Continuation of the activity by one or more beneficiaries of the transmission.

Capital gains for business: exemption in the event of retirement

Article 151 (7) of the French Tax Code: this system is applicable to capital gains realized in the course of a commercial, industrial, artisanal, liberal or agricultural activity (sole proprietorship subject to income tax or partnerships). The assignment must be carried out for a fee and relate to a sole proprietorship or to all the rights or shares held by a taxpayer.

Conditions of application of the exemption in case of retirement:

  • The activity must have been exercised for at least 5 years; A total absence of control of the transferee undertaking by the transferor is required. It must not hold, directly or indirectly, more than 50% of the voting rights or rights in the corporate profits of the transferee company;
  • The transferor must cease all functions in the company.

Capital gains for business: tax allowance for long-term real estate capital gains

Article 151 (7) (B) of the French Tax Code: Long-term capital gains realized in the course of a commercial, industrial, artisanal, liberal or agricultural activity. They are taxed after the application of a 10% tax allowance for each year of detention due for the financial year of realization of the gain beyond the fifth when these gains concern:

  • Real estate that is affected by the business to its own operation;
  • Rights or shares in companies whose assets consist mainly of immovable property that is affected by the business to its own operation or rights or shares of companies whose assets are mainly made up of the same property, rights or shares.
Frequently asked questions