Focus on Wealth Planning #1: Divesting your business
DIVESTING YOUR BUSINESS: THE CHALLENGES AND BEST PRACTICES
Capital Taxation’ gains on the sale of securities
Divestiture of corporate securities often results in taxable capital gains, which are currently taxed under the applicable tax rules:
Capital gains are taxed at a single rate of 30% is applied, no other taxes or social charges are applicable.
Taxpayers can also opt for the progressive income tax schedule. This makes it possible, subject to conditions, to benefit from a deduction depending upon the length of the holding period, up to 85% for founding shareholders.
Limit taxation with donation before transfer of shares
Depending on your objectives, it is possible to limit capital gains tax exposure on the transfer of shares through donations. If you plan to divest your business and start transferring your wealth, donating shares before the sale may be a good idea. This allows shares to be passed on to your heirs while reducing the taxable base of the capital gain.
Benefits of donation
Depending on the family relationship, some tax allowances are applicable for the calculation of the tax applicable to donations. For example, €100,000 every 15 years between parents and children.
Donees will transfer the shares received. If the donation and the disposal are made on similar values, the capital gain will be close to zero. This operation therefore makes it possible to transmit to your heirs while limiting the weight of taxation.
One point of attention, however, is that the donation must be made sufficiently in advance of the transfer and be sufficiently supervised to avoid a reclassification on the tax administration in the area of anti-avoidance.
Tax deferral through the provision of shares to a holding company
An alternative to reducing the amount of tax, if you are considering developing a new economic activity after the sale, is to bring the shares you want to sell to a holding company, benefiting from the tax deferral.
The holding company must be a corporation that is subject to corporate tax (corporate tax) that you control.
If the securities contributed are sold within 3 years of the contribution, 60% of the proceeds of sale must be reinvested within 24 months in an eligible economic activity
Otherwise, the capital gains carried forward become taxable.
Our support
Divestiture of corporate securities presents significant tax issues; strategies can be put in place to meet your projects and objectives.
At Societe Generale Private Banking, our heritage engineers, and private bankers, along with your usual advice, are at your disposal to accompany you in your projects.
Would you like to discuss this subject further with us?
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