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Contribution-transfer: reinvestment and tax deferral | 150-0 B ter

The contribution-sale tax mechanism, provided for in Article 150-0 B ter of the CGI, is a particularly relevant solution for company directors and private investors. This mechanism allows the deferral of capital gains tax when securities are contributed to a holding company that the contributor controls, provided that they are reinvested in the real economy. In practice, contribution-sale favours productive investments in operational companies through specialised vehicles, such as Professional Private Equity Funds (PPEF).

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Article 150-0 B ter

The provisions of law 150-0 B TER consist of deferring the taxation of the capital gain recognised on the contribution of a company's securities to a holding company subject to corporation tax and controlled by the contributor. The taxation of the capital gain thus calculated on the day of the contribution is suspended until the realisation of a specific event that ends the deferral, such as:

  • the subsequent sale of the securities received in exchange,

- the sale of the securities contributed within a period of less than three years following their contribution.

An exception to this rule nevertheless makes it possible to retain the benefit of the tax deferral if at least 60% of the sums resulting from this sale are reinvested, within a period of two years, in economic activities clearly defined by law.

Why favour Professional Private Equity Funds (PPEF)?

PPEFs are an optimal choice for reinvestment under the 150-0 B ter acquisition-disposal scheme due to several specific advantages:

  • Access to diversified investments: PPEFs give investors access to innovative, high-growth or high-potential companies, while diversifying their risk exposure.

  • Easier compliance with the mandatory investment quota (75% quota): FPCIs must invest at least 75% of their assets in companies eligible for the scheme within a maximum period of five years from the initial subscription.

  • Administrative flexibility and regulatory compliance: FPCIs have dedicated professional teams that ensure continuous compliance with the legal and tax obligations of the scheme.

Eligibility of FPCI feeder funds

It is important to emphasise that FPCI feeder funds can also benefit from the contribution-sale scheme provided for in Article 150-0 B ter.

In concrete terms, these feeder funds make it possible to bring together several investors to invest indirectly in an eligible master private equity fund. These intermediate vehicles are expressly permitted by administrative doctrine (BOI-RPPM-PVBMI-30-10-60-20 n°200), which offers additional flexibility to investors wishing to benefit from the contribution-sale mechanism.

Specific conditions for maintaining the tax deferral

Maintaining the tax deferral involves several strict obligations to be respected:

  • Mandatory reinvestment within two years: at least 60% of the proceeds of the sale must be reinvested in FPCI units or FPCI feeder funds.

  • Holding commitment: formal obligation to hold FPCI units for at least five years.

  • Compliance with the 75% investment quota: FPCIs must invest at least 75% of their assets in eligible operational companies, a condition verified over a rolling five-year period.

Common mistakes to avoid

Common mistakes related to the use of the scheme include:

  • Failure to comply with the maximum two-year reinvestment period.

  • Insufficient management of administrative and reporting obligations to the tax authorities.

  • Failure to comply with the required investment quota, resulting in the loss of the scheme's benefits.

Reporting obligations

FPCI managers must provide the tax authorities with an annual detailed statement confirming continuous compliance with the 75% quota. This declaration must specify, in particular, the identity of the companies invested in, their sector of activity, their geographical location and the exact nature of the investments made.

Why favour FPCIs?

Choosing to invest via an FPCI allows for:

  • Professional management of the funds invested,

  • Privileged access to qualitative unlisted projects,

  • Rigorous and constant monitoring of compliance with the tax conditions required by the regulations.

Conclusion: Private Corner's response to the contribution-disposal scheme

At Private Corner, we have developed an offer specifically tailored to the needs expressed by financial advisors and their clients regarding the 150-0 B ter scheme. Our secure digital platform, dedicated exclusively to private assets and in particular to the FPCI eligible for the scheme, supports investors and their financial advisors in the strict compliance and efficient implementation of these conditions.

Frequently asked questions (Q&A)

  1. What is the maximum period for reinvesting in a private equity fund? The maximum period is two years following the sale of the securities contributed.

  2. Can the private equity fund units be sold before five years? No, the units must be held for at least five years to maintain the benefit of the scheme.

  3. Do FPCI feeder funds benefit from the scheme? Yes, the tax doctrine (BOI-RPPM-PVBMI-30-10-60-20 n°200) expressly provides that FPCI feeder funds are also eligible for the scheme.

  4. What happens if the reinvestment conditions are not met? A breach of the conditions will result in the immediate termination of the tax deferral and the immediate payment of the tax initially deferred.

  5. Are FPCI feeder funds subject to the same conditions as direct FPICs? Yes, feeder funds benefit from the scheme provided they comply with the same retention and investment conditions as the main funds.

To find out more about the contribution-sale mechanism and the reinvestment conditions provided for in Article 150-0 B ter, please contact us.

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