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Capital gains tax on property disposals > Disposals of company shares

Disposal of shares of companies with a majority of real estate assets (Article 8 to 8ter of the CGI) Disposal of shares of companies with a minority of real estate assets


>Disposal of shares of companies with a majority of real estate assets (Article 8 to 8ter of the CGI )

Known in French as "société à prépondérance immobilière", which includes:

• any French or foreign company or public body;
• liable for income tax or company tax, (company tax only if the seller is non-resident);
• whose assets comprise, directly or indirectly, or more than 50% of property, property rights, leasing or shares in other companies with a majority of real estate assets;
• this applies from year one (before 2008, this period was calculated over the last three financial years).


How is the chargeable gain calculated when the shares in companies with a majority of real estate assets are disposed of ?

Disposal price
-
disposal costs (limited)
- acquisition price
- acquisition costs

= Gross chargeable gain

If the assignor is an individual, the gross chargeable gain is then reduced by:
- Allowance for length of ownership: see table opposites ;
• This gives the net chargeable gain, which is taxed at the rate of tax which depends on the assignor's country of domicile.

Particularity associated with disposals of shares of companies with a majority of real estate assets:

Only if the company whose shares are being assigned is not liable for corporation tax, the acquisition price has to be adjusted as follows (if the property is rented out) :
• reduced by the losses deducted from the taxable income and distibuted profits;
• and increased by the profits taxed in the name of the assignor and the losses made up for by the shareholder.

The acquisition costs are deducted at their actual cost (no 7.5% all-in allowance).

With disposals of company shares, the 15% all-in allowance for works does not apply.


In which cases must a tax representative be appointed?

• If the assignor is a private individual:
- if the shares have been owned for less than 30 years
- if the share of the total market value of the property assets of the company (reduced to the share held) is greater than € 150,000

• If the assignor is a company:
- In every case (whatever the disposal price or length of ownership)


The exemption for sales under 15,000 Euros does not apply.

Which tax rate is applicable ?

See summary table

• Individuals:
Domiciled in France 32.5 % :
Domiciled outside France domiciled in a Member State of the European Economic Area(1) 19% :
domiciled outside the EEA, not in an uncooperative country(2) 33.1/3%
domiciled in an uncooperative country(2) 50%
• Companies whose profits are taxable in the name of the shareholders (SCI):
- Companies established in France:
Individual shareholder domiciled in France 32.5 % :
domiciled in a Member State of the European Economic Area(1) 19% :
domiciled outside the EEA, not in an uncooperative country(2) 33.1/3%
domiciled in an uncooperative country(2) 50%
Corporate shareholder established in France 19% or income tax rate
or corporation tax rate
domiciled in a Member State of the European Economic Area(1) Corporation tax rate
domiciled outside the EEA, not in an uncooperative country(2) 33.1/3%
domiciled in an uncooperative country(2) 50%
- Companies established outside France:
Individual shareholder domiciled in France 32.50 %
domiciled in a Member State of the European Economic Area(1) 19%
domiciled outside the EEA, not in an uncooperative country(2) 33.1/3%
domiciled in an uncooperative country(2) 50%
Corporate shareholder domiciled in France Corporation tax rate
domiciled in a Member State of the European Economic Area(1) Corporation tax rate
Domiciled outside the EEA(1), not in an uncooperative country(2) 33.1/3%
domiciled in an uncooperative country(2) 50%
- Companies established outside France:
Domiciled in a Member State of the European Economic Area(1) Corporation tax rate
Domiciled outside the EEA(1), not in an uncooperative country(2) 33.1/3%
Domiciled in an uncooperative country(2) 50%

1) List of the EEA Member States
2) List of Uncooperative Countries



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> Disposal of shares of companies with a minority of real estate assets

In which cases are non residents liable for capital gains tax when disposing of shares in companies with a minority of real estate assets ?

Subject to the international treaties, all non residents whose rights to the profits of companies - with their spouse, ascendants and descendants, directly or indirectly - have exceeded 25% at any time during the five years prior to the disposal.

Residents of uncooperative countries pay the tax no matter what percentage stake they hold.


How is the chargeable gain calculated when the shares in companies with a minority of real estate assets are disposed of ?

Disposal price
-
disposal costs
- acquisition price
- acquisition costs

= Chargeable gain

No adjustment for length of ownership is applied.

Which tax rate is applicable ?

• The tax rate is : 45%
19% for the disposal of shares in quoted companies with a majority of real estate assets and SIIC by companies established in the EEA (except Liechtenstein)
75% for residents of uncooperative countries


In which cases must a tax representative be appointed?

If the assignor is an individual: no matter what the price is, subject to an international treaty between France and the assignor's country

If the assignor is a company: no matter what the price is, subject to an international treaty between France and the assignor's country



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