Taxation

Business Transmission Taxation
Taxation

When he sells his company, the business owner’s professional assets are transferred to his private assets. This event, which often coincides with an abundance of cash, must be an opportunity for the seller to review his finances and organize the future. It is the moment for him to assess his projects, evaluate his possible needs for additional income for retirement, rethink the protection of his spouse and his family, or organize the transmission of his assets or at least to measure the financial consequences.
A new system with increased deductions

But that’s not all. While some retirees want to stay in Europe, Middle East & Africa, others want to go abroad. Moreover, “entrepreneurship is a state of mind,” and that is why, while some often reinvest part of their prize money in one or more other businesses, others will invest their funds and time in philanthropic activities. Taking into account all of these parameters, which differ from one person to another, it will be necessary to find arrangements or strategies which, as the icing on the cake, can minimize the tax on the sale of your business.
For business owners who are preparing to sell their company this year, the tax situation regarding capital gains tax on securities has just changed. Since January 1, 2014, two regimes coexist. First, there is the common law regime. The latter gives the right to deductions of 50% and 65% before taxation, depending on the length of time the securities have been held.
Then there is the so-called “derogatory” or incentive regime, which applies in three cases: the executive liquidates his or her retirement rights at the same time as the sale of his or her company, he or she sells his or her shares within the family group, or sells to a third party shares subscribed during the first 10 years of the company’s creation.

The 8-year milestone

Provided that one of these three scenarios is met, the law provides for increased proportional deductions ranging from 50% to 85%, depending on the length of time the shares are held.
Deductions provided for on capital gains from sales under the incentive scheme*
From year to less than 4 years: 50 %
From 4 years old to less than 8 years old: 65 %
After 8 years: 85 %
*Shares in SMEs created less than 10 years ago or sold on the occasion of the retirement of the manager or sold within the family group when the latter holds more than 25% of the capital.
These two scales grant a bonus to those who have kept their shares beyond eight years. It should be noted that in the event of retirement, the selling manager also benefits from a fixed deduction of 500,000 euros.
Thanks to this provision, which acts as a sort of deductible, the owners of small and medium-sized companies can get away with little or no taxation. The fact remains that the tax impact of either of these regimes is not neutral for the taxpayer. In the case of a sale in 2014 of company shares held for more than eight years, the overall tax rate of the seller (at a TMI of 45%) amounts to 32.75% under the general regime against 23.96% for the incentive regime. This is after taking into account authorized deductions, social security contributions, deductible CSG, and the exceptional contribution on high incomes.

Small business capital gains regime

It should be noted that the law provides for a special regime for the sales of small companies taxed at the IR whose receipts do not exceed 350,000 euros.
In the case of the sale of a VSE, whose activity is commercial, liberal, or artisanal, a total exemption of the capital gain of the transfer is envisaged for up to 250,000 euros of turnover. Between 250,000 and 350,000 euros of turnover, the exemption is partial.