Accounting services

Introduction Buying a Business in France The SAS 70 Standards in France. Primexis Using Shared Service Centers French Environmental Legislation Regarding Construction Vacations rights in France 40 measures to encourage foreign investment in France French social welfare system Hiring a French Representative Distribution of Goods sold by a Foreign company in France France: a paradise for holding companies? Summary of the accounting obligations in France The advantages of outsourcing the company's payrol Implementation of new regulations for assets Franchising, the main accounting issues Tax treatment for direct selling Common business forms in France Unstoppable French Real Estate New Regulations for Fixed Assets: Implications 2005 Finance Act

Buying a business in France

Buying a business can be done through either buying a goodwill or acquiring a stake in an existing company’s equity. Both cases have different accounting and tax consequences.

Buying a business entails payment of 5% registration fees applied to the part of purchase price exceeding €23 000. The business amount will appear as an Intangible Fixed Asset in the Balance Sheet. No amortization is allowed according to French tax regulations. In case of subsequent sale, the related capital gains will be taxed at a 33.33% rate if the company is liable to corporate income tax, or according to a complex tax computation in case of personal income tax. However, it should be noted that, since January 1^st, 2006, capital gains can be partly or fully exempt from taxation, depending on the following criteria: amount of sales, holding duration, value at transfer date and corporate or income taxation. Possibilities are various and complex, but we can give the following example: annual sales of €350 000, holding duration of 5 years, transfer value of €500 000.

Acquiring a stake in a company’s equity entails registration fees also. The rate is 1.10% limited to €4 000 euros for shares (public limited companies), and 5% for partner’s shares (limited liability companies, non-trading companies, etc.) with proportional deduction (maximum €23 000 for 100% of the partner’s shares). In case of subsequent sale, there is only one tax rate of 27% concerning income tax, plus a possible tax relief as regards holding duration. If the sale occurs through a company liable to corporate tax, the tax processing is different for Shares in Subsidiaries and Associated Companies (i.e. Financial Assets) and for Investments (i.e. Marketable Securities). This accounting definition is essential because it is now used by the tax authorities to determine the tax rate applicable to capital gains.

Since January 1^st, 2007, capital gains resulting from sales of Shares in Subsidiaries and Associated Companies are exempt from tax, whereas Investments are liable to the common 33.33% tax. “Shares in Subsidiaries and Associated Companies” must be precisely defined: this item refers to shares whose lasting ownership allows influence or control on the company and is therefore considered as useful for the company’s activities.

The latter tax measure, already included in the 2005 Finance Act, shows the French government willingness to attract foreign funds in France.

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