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This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.
 Subscription to the capital of SME
Partial exemption of shares held by employees and directors
Extension of the partial exemption to pensioned employees and executives
 Subscription to the capital of SME
Shares received for the subscription to the capital of SME operating an industrial, commercial, cottage industry or farming business are not subject to wealth tax whatever the value.
French tax authorities indicate that the beneficiary must subscribe directly to the share capital of the SME to benefit from the wealth tax exemption. Subscriptions through another legal entity or a fund do not benefit of the exemption.
French Revenue also stated that contributions both for shares and for cash are eligible up to the portion paid in shares.
If after the subscription, the company no longer comply with the EU definition of SME, it will not jeopardize the wealth tax exemption.
When the investor pays his equity infusion in a PME, with money jointly owned with her (his) spouse, the surviving spouse keeps the benefit of the wealth tax exemption up to the value of the shares she (he) keeps in full property or in usufruct.
This wealth tax exemption may cumulate with the personal income tax exemption for subscription to the capital of a SME.
Partial exemption of shares held by employees and directors
Employees and directors benefit from a 75% exemption on their value of the shares owned in the company where the have their main activity when they hold theses shares for a minimum of 6 years.
This exemption applies to employees and directors who cannot benefit of the full exemption applicable to managing shareholders owning at least 25% of the shares of the company.
Similarly, the exemption threshold increases from 50% to 75% for shares included in a joint holding commitment.
These provisions apply to wealth tax due in 2006.
Extension of the partial exemption to pensioned employees and executives
75% wealth tax exemption on the value of the shares is extended to retired employees and executives. These employees and executives must have held the shares for at least 3 years at the time of the retirement and must keep them for 6 years.
These rules apply to wealth tax due in 2006.
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