Mr Richard Gaudet
Bayet & Associés law firm – www.bayetetassocies.com
Some commercial companies subject to corporation tax have a real property on their balance sheet. This is usually a property used for the actual operation of the company (factory, workshops, offices etc.) although, sometimes, it is rental property.
The acquisition made directly by the company could be imposed by the lending institution or laid down by a property depreciation approach. The entry of a real property on the balance sheet may also result from the termination of a financial lease.
However, the presence of such property has several limitations:
it inflates the price or the value of the company within the framework of a sale, a succession or a gift;
it does not allow the company head to directly collect the proceeds of the sale of the real property;
moreover, it does not allow him to collect additional income in the form of rent.
Envisaging the sale of the property to the company head is a financially and fiscally costly transaction. Firstly, it is necessary to find funding because, pursuant to articles L 223-21, L 225-43 and L 227-12 of the Commercial Code, it is out of the question for the company head to be agreed a loan by his company. If funding is found, it is also necessary that the rent payments invoiced to the commercial company are sufficient to repay the loan, without these rent payments being considered excessive. If these terms and conditions are met, the company head shall pay income tax to the amount of the capital borrowed, while the rent payments shall be used to repay the loan. In tax terms, the company shall pay capital gains tax, at the rate of 33.33%, usually from a cost price corresponding to a symbolic net accounting value. As for the buyer, it shall pay registration taxes at the rate of 5.09%.
All these limitations explain why the removal of a real property remains a real headache for the company head and his advisors.
However, two techniques may be considered, depending on whether the removal of the real property is envisaged over quite a long period or not.