Contribution-sale and Article 150-0 B ter of the French General Tax Code: definition, mechanism and practical case

The mechanism of the’contribution-sale in four steps

Step 1 — The contribution.

The manager contributes their operating shares (stocks or units in their operating company) to a holding company that they control. Control is assessed as defined in Article 150-0 B ter II of the French General Tax Code (CGI): majority of voting rights, majority of profits, or exercise of decision-making power. The holding company may be pre-existing or created specifically for this transaction.

Step 2 — Tax deferral

The unrealized capital gain on the contributed securities (the difference between the contribution value and the initial acquisition price) is calculated but not taxed immediately. It is deferred. The manager reports the transaction on form 2074-I, which is attached to their income tax return.

Step 3 — The sale by the holding company

When the holding company sells the shares it received, two regimes apply depending on the time frame. If the sale occurs within three years: the deferral is maintained only if the holding company reinvests at least 60% of the proceeds in an eligible activity (industrial, commercial, craft, agricultural, or professional) within two years. If the sale occurs after three years: the deferral is maintained automatically, without any conditions.

Step 4 — The Resolution

The deferral period ends and the capital gain becomes taxable in three events: the sale of shares in the holding company by the executive, the transfer of their tax residence outside of France (triggering exit tax on the deferred capital gain), or the dissolution of the holding company. Upon the executive's death, the deferred capital gain is eliminated and is not owed by the heirs.

The "Double Leverage": Gift before Sale of Holding Company Shares

This is the central pivot of the "zero tax cost" transfer. The contribution-sale freezes the taxation, but the gift eliminates it.

• The Mechanism: Once the shares of the operating company have been contributed to the holding company (with tax deferral), the manager proceeds to make a gift (in full ownership or split of ownership) of the shares of this holding company to his heirs.
• The Balmont Effect: This operation permanent purge The tax deferral under Article 150-0 B ter. The unrealized capital gain of €8 million (in our case study) legally disappears. The donees receive the securities with a new base value (the value on the date of the gift).
• Strategic Arbitration: By combining the contribution-sale and the gift, you transform a deferred payment into a actual exemption. This is the preferred tool for executives who wish to transfer their capital before moving abroad, thus neutralizing any risk of Exit Tax on that portion.

Activities eligible for reinvestment of 60 %

The reinvestment must be made in an economic activity as defined for tax purposes. Eligible activities include: subscription to the capital of SMEs eligible for corporate income tax, acquisition of business assets or branches of activity, financing of permanent operating resources, subscription to units or shares of venture capital funds (FCPR), professional private equity funds (FPCI), or venture capital companies (SCR).

Excluded are: financial investments liabilities (assurance-vie, securities accounts, SCPI), non-professional rental real estate, enjoyment assets (second homes, art, vehicles).

The "Balmont-Compatible" reinvestment«

The 60 % reinvestment requirement (in case of disposal before 3 years) should not be suffered as a tax punishment, but managed as an asset allocation.

• Exiting the "Single Signature Risk": Rather than acquiring a single operational company — which concentrates your risk — we favor reinvestment through Professional Private Equity Funds (FPCI) or SCR.
• Advantages of intermediated reinvestment:
  1. Compliance : Automatic validation of the quota of 60 % by the administration if the fund meets the eligibility criteria.
  2. Delegation: You entrust the management to specialist managers while you organize your life abroad.
  3. Decorrelation: Your assets are invested in a diversified portfolio of companies, protecting your capital from the failure of a single target.

Numerical case study: Contribution-sale for an expatriate executive from France to Portugal

Typical case: founding manager of an industrial SME, plan to sell to a fund in 2027 followed by expatriation to Portugal.

Benefit of the operation: The executive paid no capital gains tax at the time of the sale. The cash is held in the holding company, which can reinvest it, distribute dividends to the executive (with withholding tax applicable according to their tax residence), or retain it. The tax outcome is deferred until the sale of the holding company's shares or the executive's change of residence.

Interaction with International Conventions (The case of departure)

Tax expatriation is the triggering event that puts an end to the comfort of deferring domestic taxation.

• The Risk of Breakdown: According to Article 167 bis of the French General Tax Code (CGI), transferring one's residence outside of France makes the deferred tax payable. The "frozen" capital gain then becomes subject to taxation.«Exit Tax.
• Analysis of the Convention: The security of your departure depends on the interaction between French law and the tax treaty of your target country (Portugal, Italy, UAE).
  • If the payment deferral is automatic (EU/EEA), the charge remains theoretical.
  • If you leave the EU, the tax authorities may require real guarantees on a capital gain for which you have not yet received the cash.
• The Balmont Conseil: We model the "flow and stock" impact: ensuring that the host country does not tax a second time during the actual transfer, by relying on the "step-up clause" (revaluation of the entry value) provided for by certain conventions.

Managing the "Equalization Payment"«

The cash payment is the payment in cash made by the holding company to the manager at the time of the contribution, often used to clear personal debts or build up a cash reserve before departure.

• The Rule of 10 %: For the tax deferral (150-0 B ter) to remain total, the cash payment must not exceed 10 % of the nominal value of the securities contributed.
• Immediate Friction: Unlike the rest of the capital gain, the equalization payment is taxable immediately at the PFU (30 %) the year of the contribution.
• Balmont Arbitration: We calculate the break-even point. Sometimes, it is mathematically preferable to pay 30 % on a settlement of 10 % to secure "clean" liquidity before the«expatriation, rather than depending solely on future dividends from the holding company, which will be subject to international withholding taxes. It's a matter of transition cash flow management.

Conclusion

The contribution-sale is the most powerful tool of the’wealth engineering French for managers. Misused, it becomes a trap: the condition of reinvesting 60 % within three years is rarely compatible with a short-term expatriation project.

The practice that secures the transaction is to contribute capital at least 36 months before the planned sale. Three years in advance means that the decision is made in 2026 for a sale-exile in 2029-2030. The 2026 window remains relevant only for transactions that do not plan a sale before 2029 or for schemes combining a contribution-sale with a prior gift of the holding company's shares.

Sources

• Tax Deferral Mechanism: Article 150-0 B ter of the General Tax Code (CGI)
• Administrative details: BOI-RPPM-PVBMI-30-10-60
• Exit Tax and Tax Deferral: Article 167 bis of the CGI, II-2
• Capital Gains on Disposal Treatment: OECD Model Tax Convention (Article 13)