The contribution-assession is a tax-advantaged mechanism enabling managers and partners to sell their company shares while benefiting from a substantial deferral ofcapital gains tax. Thisasset optimization technique is part of an overall business transfer strategy, and requires in-depth legal expertise to master its subtleties.

What is a contribution-cession?

The “contribution-cession” is a two-stage operation provided for under Article 150-0 B ter of the French General Tax Code, introduced by the 2000 Finance Act. It enables a taxpayer to contribute his or her shares to a holding company, then to sell these shares within a specified period, while deferring taxation of the capital gain on the contribution. The contributor must hold the shares received in return for a minimum period of three years.

In practical terms, the transfer of shares to a company subject to corporation tax generates a theoretical capital gain that is not immediately taxed. The shares are then transferred to the holding company, enabling reinvestment without any immediate tax impact. This technique is primarily aimed at company directors wishing to restructure their business assets prior to a transfer or diversification of their assets, although strict conditions must be met in order to benefit from the preferential tax treatment.

Conditions for application of the tax deferral regime

To benefit from the tax deferral provided for under the 150-0 B ter scheme, a number of cumulative conditions must be met, and these are rigorously checked by the tax authorities.

Conditions relating to the transferee company

The holding company receiving the contribution must be subject to corporate income tax in France, and may take a variety of legal forms (SA, SAS, SARL). The contributor must hold the shares received as consideration for the contribution for a minimum period of three years, while the holding company undertakes to hold the contributed shares until they are sold.

Reporting and monitoring obligations

The taxpayer must expressly mention the transfer transaction in his tax return for the year of the transfer, notably by completing form 2074 for capital gains on securities, and attach an annual follow-up statement until expiry of the tax deferral. Failure to comply with these reporting obligations will result in the immediate cancellation of the tax deferral, and the application of the initially deferred capital gains tax, together with late payment interest and penalties of up to 40% in the event of deliberate failure to comply.

Calculation and deferral of capital gains on contribution

The capital gain on the contribution is calculated as the difference between the actual value of the securities contributed and their cost price for tax purposes. This capital gain is tax-deferred until the occurrence of certain triggering events.

Calculation of capital gains

The capital gain on contribution is calculated as the difference between the actual value of the shares at the date of contribution (their market value) and their cost for tax purposes (initial acquisition price, plus acquisition costs ). For example, for shares valued at €1,000,000 and initially acquired for €200,000, the capital gain carried forward amounts to €800,000. This calculation basis determines the extent of the tax deferral available to the contributor.

Duration and conditions of tax deferral

The 150-0 B ter tax deferral expires in three triggering events: the transfer of the securities received as consideration for the contribution by the contributor, the transfer of the securities contributed by the holding company, or their transfer free of charge. On the occurrence of one of these events, the initially deferred capital gain is taxed in accordance with the current capital gains tax regime, i.e. the 30% single-rate flat-rate withholding tax (PFU) including social security contributions, unless you opt for the progressive income tax scale with deductions for length of ownership where applicable.

The strategic advantages of contribution-cession

In addition to simply deferring taxation, the transfer of assets offers a number of strategic advantages in the context of a business transfer or asset restructuring.

Optimizing family succession

Contribution-cession can be combined with other favorable tax arrangements, such as pre-sale donations or the Dutreil pact, to maximize the tax benefits of a family transfer. The holding company thus becomes a long-term asset management tool, facilitating the gradual transfer of shares to heirs while maintaining centralized control over assets. This strategic combination can generate substantial tax savings, particularly when the Dutreil tax allowance (75% of the value) is combined with the tax deferral of the transfer.

Diversification and reinvestment

Cash generated by the sale of contributed shares remains within the holding company, enabling it to be reinvested without immediate taxation to diversify business assets or finance new entrepreneurial projects. The holding structure also benefits from the mother-daughter regime for dividends received from subsidiaries, with an exemption of 95% reducing the group’s overall tax burden.

Risks and limits of the system

Despite its undeniable advantages, the contribution-asset sale involves risks that should be anticipated with the help of a specialized tax advisor.

The risk of tax requalification

The tax authorities rigorously examine the economic substance of transfer transactions. A transaction that lacks any real economic justification, or is of an artificial nature, may be reclassified as a direct sale on the grounds ofabuse of rights, leading to immediate taxation of the capital gain initially deferred. The financial consequences are far-reaching: in addition to the payment of tax and social security contributions, the taxpayer is exposed to surcharges of 40% in the case of deliberate failure to comply, and even 80% in the case of fraudulent maneuvers. Recent case law confirms the increased vigilance of the courts in the face of schemes motivated exclusively by tax optimization, with no real economic or asset management rationale.

Administrative complexity and associated costs

Setting up a contribution-asset deal generates significant costs (legal and tax fees, registration duties, setting up the holding company), generally representing between 2% and 5% of the value of the transaction. These costs need to be weighed against the expected tax benefit, making the scheme relevant from a minimum amount of around 500,000 euros. Administrative monitoring of the tax deferral also requires constant rigor in terms of reporting obligations, as any failure to comply will result in the preferential treatment being called into question and substantial penalties being applied.

Alternative and complementary strategies

Asset transfer is part of a wider range of wealth optimization techniques. Holding period allowances (50%, 65% or 85%, depending on the length of the holding period) are an attractive alternative for retiring managers, enabling them to reduce the tax base without creating a holding structure. Depending on the situation, these measures can be combined with other transfer mechanisms to optimize overall taxation.

Securing your contribution-asset deal

The technical complexity and financial stakes involved in a contribution-assignment require high-quality legal and tax support. An experienced tax lawyer will analyze your asset situation, structure the transaction in a secure manner, and anticipate legislative changes likely to impact the applicable tax regime. Legal documentation is of paramount importance: precisely drafted deeds, solid economic justification and rigorous monitoring of reporting obligations are the best guarantees against challenges from the tax authorities.

In the event of a tax audit, which can extend over 12 to 18 months for this type of complex operation, the quality of your file will determine the outcome of the procedure. The initial investment in specialized advice and rigorous structuring is always less costly than a tax reassessment accompanied by penalties. By securing your contribution-asset sale from the outset, you can ensure that the tax advantages you gain will last, and that you can pass on your assets with peace of mind.