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 received, two regimes apply depending on timing. If the sale takes place within three years: the deferral is maintained only if the holding company reinvests at least 70% of the proceeds in an eligible activity (industrial, commercial, craft, agricultural or professional) within three years. If the sale takes place after three years: the deferral is maintained automatically, with no conditions.

Step 4 — The Resolution

The deferral ends and the gain becomes taxable on three events: the sale by the business owner of the holding company’s shares, the transfer of their tax residence outside France (triggering the exit tax on the deferred gain), or the dissolution of the holding company. Under current law, on the business owner’s death, the deferred gain is extinguished and is not owed by the heirs. The 2027 Finance Bill proposes to end this.

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

It is a central lever in succession planning. Contribution and sale defers the tax; a gift can wipe it out, subject to conditions.

• 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 effect under current law: This transaction can clear The deferral of taxation under Article 150-0 B ter is subject to conditions, including the requirement that the donees retain the securities. The donees receive the securities with a new base value (the value on the date of the gift).
• Strategic trade-off: under current law, combining a contribution and sale with a gift can turn a deferred payment into an exemption, subject to conditions. The 2027 Finance Bill proposes to remove this effect for transfers made since 1 October 2026.

Activities eligible for the 70% reinvestment

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 of a passive nature (assurance-vie, securities accounts, SCPI), non-professional rental property, assets for personal enjoyment (second homes, art, vehicles). For disposals completed since 21 February 2026, financial, banking and insurance activities, property development for sale, property dealing and property management or letting are also excluded.

The "Balmont-Compatible" reinvestment«

The 70% reinvestment constraint (in the event of a sale within 3 years) should not be endured as a tax penalty, 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 : The fund must meet the eligibility criteria of Article 150-0 B ter for the reinvestment to count towards the 70% quota.
  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 (31.4 %) the year of the contribution.
• Balmont Arbitration: We calculate the break-even point. Sometimes it is mathematically preferable to pay 31.4% on a 10% balancing payment to secure “clean” liquidity beforeexpatriation, 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

A contribution and sale is a central tool of thewealth engineering for business owners. Misused, it becomes a trap: the requirement to reinvest 70 % within three years is rarely compatible with a short-term expatriation plan.

The practice that secures the file is to make the contribution at least 36 months before the planned sale. Planning three years ahead means the decision is taken in 2026 for a sale and departure in 2029-2030. The 2026 window remains relevant only for files with no sale planned before 2029, or for structures combining a contribution and sale with a prior gift of the holding company’s shares, subject to the 2027 Finance Bill.

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)

To learn more: The sale-exile process explained: how to sell your business before expatriation?.