A company director (owner) located in France who plans to sell his company in the near future will be confronted with the tax treatment of the capital gain on the sale. How can he be assisted in this operation? There is a solution: the transfer to a holding company. Thanks to this mechanism, the company manager has the opportunity to reinvest in many sectors, including real estate development.
The advantages of the contribution-assignment (150-OB TER)
What does this scheme consist of? It allows a company director domiciled in France to benefit from the deferral of taxation on capital gains if he or she reuses his or her liquid assets under certain conditions described in article 150-0 B ter of the French General Tax Code (CGI).
In concrete terms, how does it work? Prior to the sale, the company director must have contributed his shares to a holding company which he controls and which is subject to corporate income tax. It is the holding company that will be in charge of the sale of the shares. It must sell them within three years of the contribution and reinvest a minimum of 60% of the proceeds of the sale in an eligible economic activity, the remaining 40% can be invested or distributed freely. This reinvestment must be made within 24 months. Depending on the nature of the assets, the minimum holding period may vary: from 12 months for direct subscriptions in the capital of a company to 5 years for investments via funds or private equity companies. Once the period is over, the shares can be sold and the proceeds freely invested or distributed.
What economic activities are considered eligible for reinvestment of proceeds? They are limited to the commercial, industrial, craft, agricultural and financial sectors, to the liberal professions as well as to real estate development. The reinvestment can take 4 forms. Either the holding company invests directly in a company whose activity is eligible. Either it acquires the shares of a company whose activity is eligible in order to take control of it. Or it subscribes to the capital of a company active in an eligible sector and subject to corporate tax (IS). Since the 2019 Finance Act, the holding company can also invest in specific investment funds. These must be established in France or in another Member State of the European Economic Area (grouping the 27 countries of the European Union, Liechtenstein, Norway and Iceland) and their capital must consist of at least 75% of shares of operational SMEs.
An eligible and value-creating solution (real estate)
This measure undoubtedly makes the contribution-assignment scheme more attractive. It now makes it possible to look for more relevant solutions for the proceeds of the transfer and to better diversify the reinvestment rather than betting everything on a single company. The solution proposed by Unik Capital Solutions meets all the eligibility criteria required by Article 150-0 B Ter. Its exclusive purpose is the activity of real estate development or the activity of property dealers such as the acquisition of land and property to be renovated with the aim of creating value. It is intended only for professional investors, is located in a European country, in this case the Grand Duchy of Luxembourg, and is subject to taxation (IRC or Impôt sur le revenu des collectivités). As for the shares, they are blocked for 5 years.
By choosing this solution, the entrepreneur not only meets all the conditions of the contribution-assignment scheme, but can also invest in carefully selected real estate assets in Luxembourg with a high value creation potential.
It is important to note that none of the information contained in this text should be construed as investment, legal, tax, regulatory, financial, accounting or other advice. The reader is invited to contact his or her advisor if necessary.
The solutions presented by Unik Capital Solutions* are strictly reserved for professional investors within the meaning of the 2014/65/EU "MiFID II" directive.
*TPM : Third Party Marketer