Conditions : tax exemption for business capital gains

Exemption depending on revenue

Article 151 septies of the General Tax Code:  This system can be applied to capital gains on transfer, made within the framework of a commercial, industrial, craft, liberal or agricultural activity (sole proprietorships subject to income tax or partnerships).

Conditions of application of the exemption according to the receipts:

• Capital gains on the sale are exempt for their entire amount when annual revenues are less than or equal to 250,000€; or partially (between 250,000€ and 350,000€) for companies whose main trade is the sale of goods, objects, supplies and food to take away or to consume on site; provision of housing; or if the company carries out an agricultural activity.
• For other companies, the exemption is complete when the annual revenue is less than or equal to 90,000€ or partial between 90,000€ and 126,000€.
• The activity must be exercised for at least 5 years.

The exemption according to the value of the elements which are passed on

Article 238 quindecies of the General Tax Code:  This system can be applied to capital gains realized within the framework of a commercial, industrial, artisinal, liberal or agricultural activity (sole proprietorships are subject to income tax or partnerships). The exemption relates to capital gains carried out 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 complete if the transmission value is less than 300,000 € or partial between 300,000€ and 500,000€.
• If the transfer is made for valuable consideration, an additional condition is required: the absence of controlling concessionary undertaking by the transferor.
• ​​​​​​​The activity must have been carried out for at least 5 years.

Tax deferral in the event of a contribution to a company

Article 151 (8) of the General Tax Code: This system can be applied to capital gains realized by a natural person during a company transfer, which is subject to a current taxation system for a sole proprietorship or a complete branch of activity.

Conditions for applying the deferral:

• Taxation of capital gains related to non-depreciable fixed assets is deferred until the date of sale, repurchase or cancellation of social rights received in remuneration for the company transfer or until the transfer of these fixed assets by the company if it is earlier.
• The contribution must be remunerated through securities.

Tax deferral in case of free transfer of a sole proprietorship

Article 41 of the General Tax Code:  This system is applicable to natural persons during a free transfer of a sole proprietorship.

The taxation of capital gains related to fixed asset items recorded during this transfer is deferred until the date of sale or termination of the company or until the date of transfer of one of these element, if earlier. When the activity is continued for at least 5 five years after the date of transmission, capital gains which are deferred are definitively exempt..

Conditions for applying the deferral:

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

Exemption in the event of retirement

Article 151 septies of the General Tax Code: This system can be applied to capital gains which are carried out within the framework of a commercial, industrial, craft, liberal or agricultural activity (sole proprietorship subject to income tax or partnerships). The transfer must be made for consideration 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 carried out for at least 5 years.
• A total absence of control of the transferee company by the transferor is required. He must not hold, directly or indirectly, more than 50% of the voting rights or rights in the social benefits of the transferee company.
• ​​​​​​​The transferor must cease all functions in the company.

Long-term real estate capital reduction

Article 151 septies (B) of the General Tax Code: Long-term capital gains carried out within the context of a commercial, industrial, craft, liberal or agricultural activity, are taxed after applying a 10% reduction for each year of ownership expired for the year of realization, in terms of the capital gain beyond the fifth when these capital gains concern:

• Real estate which is assigned by the company for its own holding,
• Rights or shares in companies whose assets are mainly made up of real estate which are allocated by the company to its own exploitation or rights or shares in companies whose assets are mainly made up of the same assets, rights, or shares.