Roche & Cie

test of the exemption from capital gain business disposals related to retirement

In this particular case, the rectified taxpayer argued that during the relevant period he held the position of manager made the company whose shares were sold.

The Court considered that this function was not of a nature to look at the condition set by the provisions of Article 150-0 D ter as fulfilled, “as long as they retain the benefit of allowance that they contain to sellers who carry one of the exhaustively listed functions 1 of article 885 bis of the code O which he says are the functions performed by the manager appointed in accordance with the articles of association “

The Court concluded that the administration was right to question the right of the taxpayer for the benefit of the tax deduction provided by the provisions of Article 150-0 D ter on the grounds that it did not fulfill all conditions to which it is subject.

In a recent decision the Administrative Court of Appeal of Paris has just ruled that the administration was entitled to challenge the exemption of a capital gain under Article 150-0 D ter CGI which is prevalent taxpayers because of non-compliance with the condition relating to the function.

In case the taxpayers had applied the provisions of Article 150-0 D ter in the version applicable in 2009.

As it stands, the article cited above, provided that the transferor should have exercised within the company whose shares are sold “continuously during the five years preceding the sale and as provided in item 1 of the Article 885 bis O, one of the functions mentioned in the same 1 “

The management functions mentioned in point 1 of Article 885 bis of the CGI O, to be performed by the Transferor in the company whose securities or rights are transferred to the latter can benefit from the device must simultaneously fulfill the three conditions following

  • The function must be effectively carried out;
  • The function must result in a normal return; 
  • Compensation function must represent more than half of the professional income of the transferor.

The management functions performed are those exhaustively listed in point 1 of Article 885 bis of the CGI O. For more information on these functions, it should refer to I-A § 30 et seq BOI-PAT-ISF-30-30-30-10.

For the record, according to the provisions of subparagraph 1 of Article 885 bis of the CGI O, units or shares of companies subject to corporation tax can not be regarded as professional property exempt under the solidarity tax wealth if their owner is either:

  • Manager, appointed according to the statutes, a limited liability company or limited by shares;
  • Associate name of a partnership;
  • President, CEO, Chairman of the supervisory board or board member of a corporation or deputy CEO of a public company.

In this particular case, the rectified taxpayer argued that during the relevant period he held the position of manager made the company whose shares were sold.