Article 150-0 B ter of the French General Tax Code is a key provision in the area of restructuring taxation. It allows taxpayers to benefit from a tax deferral when shares are transferred to a company, thereby deferringtax on capital gains. This mechanism facilitates corporate transactions without generating an immediate tax burden. However, its application is strictly governed by precise conditions that you must respect.

What is article 150-0 B ter?

Article 150-0 B ter of the French General Tax Code introduces a tax deferral system applicable to capital gains realized on contributions of securities. This system is designed to ensure the tax neutrality of corporate restructurings. Its aim is to avoid penalizing transfers that do not generate immediate cash for the transferor.

Tax deferral means that the capital gain recognized at the time of the contribution is not immediately taxed. Taxation is deferred until a triggering event occurs, generally the sale of the securities received as consideration. In concrete terms, if you contribute shares valued at €500,000 that you had acquired for €100,000, the €400,000 capital gain remains deferred. In this way, you avoid immediate taxation, which would have amounted to €120,000 under the 30% flat tax (or more under the progressive income tax scale plus the 17.2% social security levy).

This mechanism differs from the tax deferral provided for in article 150-0 B of the CGI. Whereas the deferral applies mainly to exchanges of shares resulting from mergers or demergers, the deferral provided for under Article 150-0 B ter specifically concerns outright contributions of shares. This distinction is fundamental, as the conditions of application and the events putting an end to the tax deferral differ significantly between the two regimes.

The tax advantage is twofold: you preserve your cash flow by avoiding an immediate tax disbursement, and you defer taxation to a later, potentially more favorable date. This immediate cash saving is an essential lever for wealth and business restructuring strategies, enabling you to reinvest cash in developing your business rather than devoting it to paying tax.

Conditions relating to the contributor

The contributor must be an individual domiciled in France for tax purposes at the time of the contribution. This condition of tax residence is decisive for the application of the scheme. Non-residents are generally not eligible for this preferential regime. However, certain international tax treaties, such as the Franco-Belgian treaty, may allow foreign residents to benefit from tax deferral under specific conditions.

The contributor must hold the contributed securities in his private or business assets. The nature of the holding influences the application of the deferral. Private assets are those held directly by the individual, while business assets are those held by a sole proprietorship. You must provide proof of beneficial ownership of the shares at the time of the transfer, which may require the involvement of professional services to secure the transaction.

There is no minimum holding period for the contributed securities. However, the tax authorities may requalify the transaction as a sale followed by reinvestment if the holding period is less than a few months. Case law considers that a contribution of securities held for less than six months presents an increased risk of requalification, particularly if the transaction lacks economic substance.

In the case of joint ownership, it is generally the usufructuary who makes the contribution and benefits from the tax deferral, as the usufruct confers most of the economic rights attached to the shares. In the case of jointly-held shares, each joint owner may benefit from the deferral for his or her share, provided that each of them individually meets the conditions for application of the scheme. These special situations call for in-depth analysis to ensure that you benefit from the preferential regime.

Conditions relating to the securities contributed

The securities contributed must be shares in companies subject to corporate income tax. This means that shares in SAs, SASs and SARLs subject to corporation tax are eligible. On the other hand, shares in partnerships subject to income tax are expressly excluded: shares in SCIs not subject to corporation tax, shares in SNCs subject to income tax, or shares in professional non-trading companies. This distinction is based on the tax status of the issuing company: only shares in companies whose net taxable income is subject to corporation tax are eligible for the scheme.

The securities may represent a majority or minority interest in the company whose securities are contributed. No minimum tax threshold is required. You can therefore contribute even a modest stake and still benefit from tax deferral.

The securities contributed must be valued at their actual value on the date of contribution. This valuation determines the amount of the capital gain carried forward. Several valuation methods are recognized by the tax authorities: discounted cash flow, the comparable stock market or transaction method, or the revalued net asset method. You must be able to justify the chosen valuation with a detailed valuation report, and the services of a contribution auditor may be required, depending on the applicable legal thresholds.

An under-valuation of the securities transferred leads to an increase in the initial capital gain by the tax authorities, with the associated penalties and interest for late payment. Conversely, a manifest overvaluation may constitute an abuse of rights if its purpose is to artificially minimize the future capital gain on the subsequent sale of the securities received. The tax authorities generally tolerate a difference in valuation of less than 10% in relation to the actual value, beyond which detailed justification becomes essential.

Conditions relating to the beneficiary company

The transferee company must be subject tocorporate income tax. It may be formed at the time of the contribution or pre-exist the transaction. Companies subject to income tax cannot receive the shares under this tax deferral regime.

The recipient company may carry on any commercial, industrial or civil activity. However, contributions of shares in companies with a preponderance of real estate assets (SPI) are subject to the separate regime of article 150-0 B (tax deferral) and not to the deferral of article 150-0 B ter. A company is considered to have a majority of real estate assets when more than 50% of its assets are made up of real estate or rights over real estate. Holding companies, whether active or passive, are perfectly able to receive contributions of securities under this regime, making them an ideal tool for asset restructuring, provided that they are not preponderantly real estate in nature.

The location of the beneficiary company is decisive. It must be established in France, in a member state of the European Union, or in a state of the European Economic Area that has signed an administrative assistance agreement with France (Iceland, Norway, Liechtenstein). Contributions to companies located in other non-EU countries are not eligible for tax deferral.

Conditions relating to the contribution transaction

The contribution must be remunerated exclusively by shares in the beneficiary company. Any cash consideration compromises the application of the deferral regime. You must receive only shares in exchange for your contribution.

However, a balancing payment may be made up to a maximum of 10% of the nominal value of the securities received. If the balance exceeds 10% of the nominal value of the securities received, the corresponding capital gain is immediately taxable, in proportion to the ratio between the balance and the total value of the contribution. The question of acontribution with a balancing payment therefore calls for particular vigilance in calculating this critical threshold.

You must comply with strict reporting requirements. You must declare the capital gain carried forward on form no. 2074 attached to your tax return (form no. 2042), by the statutory deadline for declarations in the year of the contribution, i.e. by mid-May of the following year. If you fail to file your declaration within the prescribed timeframe, you will lose your right to benefit from the scheme, and the capital gain will be taxed immediately.

The transaction must have real economic substance. Artificial arrangements that have no economic justification other than tax are liable to be reclassified asabuse of rights. Examples of valid economic motivations: grouping of shareholdings for better governance, preparation of a family transfer, pooling of financial or human resources. Conversely, the tax authorities systematically reject contribution-sale schemes (contribution followed by a rapid sale of the shares by the beneficiary company) or contributions followed by an immediate distribution of dividends, as illustrated by the Conseil d’Etat’s 2019 case law. The BOI-RPPM-PVBMI-30-10 administrative doctrine sets out the details of these conditions.

Exclusions and limitations

Certain transactions are expressly excluded from the tax deferral provisions of article 150-0 B ter. Contributions of shares in companies with a preponderance of real estate assets (SPI) are not covered by article 150-0 B ter, but by article 150-0 B of the CGI, which provides for a deferral of taxation. A company is considered to have a majority of real estate assets when more than 50% of its assets consist of real estate or real estate rights. The tax deferral differs fundamentally from the deferral: it ends when the securities received as consideration or the securities contributed are sold, whereas the deferral only ends when the securities received are sold.

The tax authorities keep a particularly close eye on arrangements that could constitute an abuse of rights. A transaction motivated exclusively by tax considerations may be challenged. Case law has clarified the boundaries of abuse of rights in the case of share contributions. A contribution followed by a sale within three years is presumed to constitute an abusive arrangement, unless there is convincing economic justification.

The tax deferral expires on the occurrence of a number of interceptive events. These events are as follows: (1) the sale for valuable consideration of the securities received as consideration for the contribution; (2) the repurchase or cancellation of these securities by the transferee company; (3) the contribution-sale carried out within three years of the initial contribution; (4) the dissolution of the transferee company; (5) the donation of the securities received without a commitment by the donee to comply with the conditions of the deferral. When one of these events occurs, the capital gain initially carried forward becomes taxable according to the system applicable at the time of the interceptive event.

Particular attention should be paid to the regime applicable to gratuitous transfers. In the event of a gift of the shares received in remuneration, the deferral may continue in the hands of the donee if the latter undertakes to comply with the conditions of the scheme and to declare the deferred capital gain at the time of the subsequent sale. On the other hand, in the event of the contributor’s death, the deferral expires and the deferred capital gain is definitively exempted. This exemption is a major difference from the deferral regime applicable to SPIs.

You must also take into account the tax authorities’ recovery period. The tax authorities have three years from the year of declaration to check compliance with the conditions for deferral. Mastering the conditions of application of article 150-0 B ter and its exclusions is a key factor in the success of your restructurings. This measure is part of an overall tax optimization strategy that requires the support of specialized professionals. You need to assess your situation accurately before initiating any transfer of shares, to secure the benefit of the tax deferral.

Calculating and declaring deferred capital gains

The deferred capital gain is calculated according to a precise formula: actual value of the securities contributed – acquisition price. In the case of securities received by inheritance or gift, it is the registration value that is taken into account. It is important to note that deductions for length of ownership do not apply at the time of contribution, but at the time of subsequent taxation. Let’s take a detailed numerical example: you acquired shares for c100,000 in 2015, and in 2024, you contribute them to a holding company valued at c500,000 . As a result, you realize a deferred capital gain of 400,000 c.

When you file your tax return, you must complete form 074 appended to your tax return (042) for the year of the contribution, expressly mentioning the option to defer taxation. Without this mention, taxation is immediate. It is also crucial to keep a record of the amount of the deferred capital gain for future taxation, based on the historical acquisition price of the contributed shares.

Deferral tracking and tracing procedures

Accurate management of capital gains carried forward is a key factor for taxpayers taking advantage of the 150-0 B ter scheme. It is essential to keep track of this capital gain year after year in your tax returns. A deferral does not mean an oversight: the tax authorities retain a right of reversal for three years from the date of the declaration. Rigorous management includes keeping all relevant supporting documents, such as the contribution deed, the valuation report, tax returns and certificates from the beneficiary company.

When the securities received are subsequently sold, the overall capital gain must be calculated accurately. This is done by adding the initial capital gain carried forward to the difference between the sale price and the value of the securities received. In addition, deductions for holding periods apply from the initial acquisition of the securities transferred. For example, shares acquired in 2015, contributed in 2024 and sold in 2027 would benefit from an allowance calculated on the basis of a 12-year holding period. Constant vigilance and careful documentation are required to optimize the use of this tax system.