I am selling my business to retire: the fixed allowance of €500,000 on the capital gain

Yes, a fixed allowance of €500,000 exists. It reduces the income tax due on the capital gain when a business owner sells shares in their SME upon retirement. It applies to sales completed up to December 31, 2031. It does not reduce social security contributions, which remain due on the full amount of the gain. The conditions are strict and must be verified before signing.

What dejection does, and what it doesn't do

He deducts €500,000 from the taxable income. At the flat rate (12.8% of income tax), this represents up to €64,000 less tax.

Four key points to remember:

• He only plays for income tax. Social security contributions (18.6 %) remain due on the gain before deduction.
• It applies with the flat-rate tax as well as with the tax scale. The choice of taxation method does not make it disappear.
• It cannot be combined with the allowance for length of ownership. This can be waived, in the case of opting for the scale, in favour of the standard or enhanced allowance, if the securities were acquired before 1 January 2018.
• It is individual. Each spouse or civil partner subject to joint taxation has their own share, based on their own securities. The remaining balance of one does not benefit the other.

Until when?

The tax allowance applies to sales and repurchases carried out between January 1, 2018, and December 31, 2031. The scheme was extended by Article 70 of the 2025 Finance Law (Law No. 2025-127 of February 14, 2025). This date is indicated on the tax administration's dedicated pages and on service-public.gouv.fr.

The conditions to be met

The tax administration pages distinguish between the company, the transfer, and the transferor.

The company

• It employs fewer than 250 people.
• Its turnover is less than €50 million, or its total balance sheet is less than €43 million.
• Its headquarters are located in the European Union, or in the European Economic Area (Iceland, Norway, Liechtenstein) subject to an administrative assistance agreement.
• It is subject to corporation tax.
• It carries out its activity continuously for the 5 years preceding the transfer.

The transfer

• It covers all securities or rights held by the transferor.
• If the buyer is a company, the seller must not hold any rights in that company.

The transferor

• He held management positions in the company continuously for the 5 years preceding the sale.
• He holds at least 25 % of voting rights or rights to company profits, continuously for 5 years. This holding can be done with his family group: spouse, civil partner, ascendants, descendants, brothers and sisters, according to the instructions for declaration 2074-DIR.
• He has held the transferred securities for at least 1 year at the date of the transfer.
• He ceases all functions within the company and claims his retirement rights within 2 years before or after the transfer.

The case where the securities are held through a holding company is not addressed on this page.

A higher amount for young farmers

The allowance is increased to €600,000 for transfers from January 1, 2025 onwards in favor of young farmers.

Pre-signing checklist

Seven questions need to be addressed before signing:

1. Is the company subject to corporation tax, is it headquartered in the European Union or the European Economic Area (subject to an administrative assistance agreement), and does it remain below the thresholds for employees, turnover or balance sheet?
2. Are you relinquishing all of your titles or rights?
3. Do you, alone or with your family group (spouse, civil partner, ascendants, descendants, brothers and sisters), hold at least 25 % of voting rights or rights to profits, continuously for 5 years?
4. Have you held the transferred securities for at least 1 year at the date of the transfer?
5. Have you held any management positions continuously for the 5 years preceding the sale?
6. Are you ceasing all functions and claiming your retirement rights within 2 years before or after the transfer?
7. If the buyer is a company, do you have no rights in that company?

A negative answer to any of these questions is enough to jeopardize the tax reduction. This should be prepared before the transfer.

Fixed allowance or allowance for holding period

The two cannot be combined. For securities acquired before January 1, 2018, the question arises: keep the fixed allowance, or opt for an allowance proportional to the holding period with the option of applying the progressive tax scale. The proportional allowance only applies when combined with the progressive tax scale. The calculation depends on the amount of the gain and the tax rate applied to your taxable base. A dedicated page details this comparison.

Numerical example (fictitious profile)

Situation. Patrick, 63, has run an industrial SME structured as a simplified joint-stock company (SAS), subject to corporate income tax, since its inception. The company employs 80 people and generates €12 million in revenue. He has held 100 shares (%) since 2009. He is retiring and will sell all of his shares in 2027 for €1,800,000. He had initially purchased them for €300,000. The profit is €1,500,000.

Issue. Without any allowance, the flat-rate income tax (PFU) is levied on €1,500,000. Patrick wants to know by how much the fixed allowance reduces his tax bill, and what remains due.

Strategy. Check each condition of the company, the transfer and the transferor before signing, then declare the allowance with the transfer.

Result.

The discount reduces the bill by €64,000. Social security contributions of €279,000 are due in both cases.

This profile is fictitious and assumes that all conditions are met and that no options for the pricing scale are selected. The figures illustrate the calculation. They do not reflect your specific situation.

What changes depending on your situation

• The detention facility : securities held directly or through another company.
• Your retirement timeline in relation to the date of transfer.
• The date of acquisition of your securities, which opens or closes the tax reduction for length of ownership.
• Your matrimonial property regime and the holding of securities between spouses or partners.
• The chosen method of taxation, PFU or scale.

The rule depends on your situation. No results are guaranteed.