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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.
 Professional assets may be exempt from wealth tax e.g. industrial or commercial assets necessary to exercise an activity or company shares.
In order to benefit from the exemptions, these assets should meet certain conditions. Tax exemption is granted only if the tax payer owns at least 25% of the capital or voting rights of the company and the management of this company represents his main activity.
When shareholders/partner(s) who holds at least 34% (20% if listed on an exchange market) together with at least one managing partner (Chairman, manager, directors …) enter in a joint commitment to keep their shares for a minimum of 6 years, wealth tax is due only on 75% (50% until 2005) of the value of these shares. This tax relief applied the first time to the wealth tax owed for 2004 when the commitment was filed before April 1st, 2004.
During the 6 years period, the shares may be sold without restriction between the parties to the agreement and/or may be also donated for no consideration to a third party.
This agreement is of particular interest for the manager benefiting of exemption of wealth tax on their professional assets and who plan to leave their managing position while keeping their shares. If they agree to lock their shares as explained above they will keep a 50% wealth tax exemption on the value of these shares.
As of 2004 shares received in remuneration of 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. SME are companies with less than 250 employees, a yearly balance sheet not exceeding 40 millions euros or annual sales not exceeding 40 millions euros, and not more than 25% owned by other companies not meeting the definition of a SME (2 exceptions apply).
As of 2004 the minority active partners of SARL who did not elect for the personal income tax regime, the managers of SA and the managers of SAS, holding shares of the company they manage, are wealth tax exempt with respect of these shares, when their value is more than 50% of the growth value of their taxable estate.
For the SAS "Simplified corporation", the chairman of the supervisory board and members of the steering committee may benefit of the wealth tax exemption on their shares in the SAS only if their responsibilities are equivalent of the responsibilities of their counterparts in the SA "Corporation" (Rep. Muselier - 3 novembre 2000).
General managers and deputy general managers of a SAS "Simplified corporation" may benefit of the wealth tax exemption on their shares in the SAS only if the by-law of the SAS empowers them to represent the company and that this power is published at the Commercial Register (Rep. de Luart, Sénat 17 juillet 2003 p.2296).
Shares of a holding company are considered as professional assets and therefore wealth tax exempt if the holding manages and controls the subsidiaries, for example when when it establishes the general policy of the group that the management of the subsidiaries must follow.
However the fact that the managers of the holding are also managers of the subsidiaries is not sufficient. Similarly the holding of all the shares of the subsidiaries is not sufficient to establish the active management of the holding.
To circumvent this issue it is possible to incorporate the subsidiaries as SAS "Simplified corporation". As a consequence it will be legally possible to appoint the holding as chairman of the SAS. The qualification of the shares of the holding as professional assets will no longer be challenged on the ground of the "managed and control" test.
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