Taxation of professional capital gains
Verified 01 January 2022 - Directorate for Legal and Administrative Information (Prime Minister)
When a company disposes of property voluntarily (e.g., sale, business) or involuntarily (e.g., expropriation, loss), it generates a taxable windfall profit (or loss). The capital gains tax differs depending on the property transferred, the length of its holding and the tax regime of the transferring company.
When the property is depreciable, that is, when it loses value over time, the gain or loss is equal to the difference between the disposal price of the property and the net book value of the property.
Where the property is non-depreciable, the gain or loss is equal to the difference between the disposal price of the property and its original value.
Where the transfer price is lower than the net book value (or the original value), a loss of value. And, when the transfer price exceeds the carrying amount (or the original value), there is a added value.
The sale price, paid by the buyer, is taken into account without the costs and taxes which have encumbered the transaction and strictly inherent to it (commission or fees of intermediaries for the sale in particular).
In the case of a contribution in business (money, movable property or labor), the transfer price is represented by the value of the contribution. In the case of an exchange, the transfer price is the difference between the present value of the property received in exchange and the book value of the property transferred.
In the case of a sale at an abnormally low price (not justified by the commercial interest of the company), the capital gain is determined by the administration in relation to its real value (sale to a member at a price lower than the real price).
The companies concerned by the capital gains and losses scheme (except in the case of exemption) are those subject to income tax in the category BIC: titleContent, NBC: titleContent or agricultural profits.
The tax regime differs depending on whether the capital gain is described as short-term or long-term (depending on how long the property is held and whether it is depreciable or not).
For example, the proceeds (concession fees and surrender value) of patentable patent or invention concessions are subject to the long-term regime.
Gains from the assignment of patents held for at least two years and proceeds from the grant of patents whether granted or held for more or less than two years shall be taxed at the reduced rate of 12.8%.
In general, gains and losses recorded in the same financial year are netted out and result in a short-term or long-term net gain.
The compensation for long-term gains and losses shall be effected after any reduction in real estate gains and losses.
The short-term net gain or loss is included in the income of the company, taxed as long as they are beneficiaries under the ordinary conditions of income tax.
Companies may request the taxation of capital gains to be spread equally over three years (current year + 2 years).
Where the company has incurred a shortterm loss of value, and where there is insufficient profit, the portion not deducted from the loss becomes a deferrable operating deficit.
The long-term net loss should be subtracted not from profit or loss for the year, but only from long-term capital gains realized during the subsequent 10 years (and not from profit). If certain losses could not be deducted during those 10 years, they are definitely lost.
The long-term net gain shall be reduced first by the long-term losses incurred during the preceding 10 financial years and then by the deficit for the subsequent financial year. The balance of the long-term capital gain is then taxed at 12.8% (the overall rate is 30% with the social security contributions) from capital gains realized in 2018 and subsequent years.
the real estate gains realized by a SCI are taxed at the rate of 19%.
Businesses recording a plus or minus value on the sale of a immobilization in the course of a fiscal year, classify it as long-term or short-term. They then offset short-term gains and losses against long-term gains and losses. Long-term net capital gains benefit from a reduced tax rate.
The scope of the long-term regime is, however, narrower: the length of holding and the depreciability or non-depreciability of the property are not taken into account for the general nature of the property.
Short-term capital gains are normally treated as ordinary profit or loss taxed at 31% beyond €500,000 for companies with a turnover of at least €250 million. For SMEs, capital gains are taxed at the reduced rate of 15% up to €38,120 of profits.
Capital gains can in principle benefit from the staggering measures in the event of claims or expropriation in particular.
The long-term regime applies only to the following situations:
- Disposal of shares held for at least 2 years. Net long-term net gains accruing on equity securities are exempt from SI except shares of 12%. Long-term net losses are not exempt from profit or loss or from capital gains in other classes of securities. The quota is calculated on the amount of capital gains realized before netting with the long-term losses of the financial year. It shall apply irrespective of whether or not there is a long-term net capital gain.
- Disposal of quoted majority real estate business securities: net long-term capital gains on quoted majority real estate business securities are taxed at the reduced rate of 19%. The long-term net loss of a period shall be net of the long-term net gain of the same class for 10 years or the gain on other classes of securities (excluding equity securities).
- Disposal of shares in venture capital mutual funds (VCFs), professional private equity funds (VCFs) and venture capital business shares (VCCs) held for at least 5 years
- Industrial property proceeds: capital gains from the assignment of patents held for at least two years and proceeds from the grant of patents which have been granted or held for more or less than two years shall be taxed at the reduced rate of 15%.
Capital gains realized on the sale of business premises for conversion into housing shall also be subject to a reduced rate of 19%. This rate applies in the following situations:
- Divestiture of industrial premises for housing from 1er January 2017 and until 31 December 2023 inclusive
- Promises of sale made by 1er January 2018 to 31 December 2020, but the sale has to be done before 2023
- Promises of sale made by 1er January 2021 to December 31, 2023, but the sale has to be done before 2025
- Sales and Promises of Building Land Entered Into by 1er january 2018 to december 31, 2022