IR-PME: What happens if you sell before 5 years or if the reduction exceeds the ceiling?

To retain the IR-PME tax reduction, you must keep your shares until December 31st of the fifth year following the year of subscription. If you sell them before then, the reduction will generally be reclaimed for the year of the sale. There are two separate carry-forwards: one for payments exceeding the annual limit, which can be carried forward for four years, and another for the reduction exceeding the overall limit of €10,000, which can be carried forward until the fifth year.

This page covers the standard tax regime for SMEs. It does not address enhanced tax rates, ESUS, SFS, JEI, or JEIR status, the situation of a non-resident, or the financial details of a takeover. For the principles, rates, and ceilings, please see our page on tax reductions for subscribing to the capital of an SME.

The conservation rule

The BOFiP in force since 27/08/2026 comments on article 199 terdecies-0 A in its wording resulting from the finance law for 2026. It retains the same retention, until December 31 of the fifth year.

If you sell before the term

When the deadline is not met, "the tax reduction is subject to recapture." In principle, the benefit obtained is called into question. Three points to note:

• The year. The recovery takes place for the year in which the condition ceases to be met, therefore the year of the sale.
• The partial sale. If you only sell part of the securities, the reduction is only partially recovered, "up to the number of securities sold or redeemed".
• The statement. You enter the amount of the refund in the box provided for this purpose on your income tax return (BOI-IR-RICI-90-40, § 200). The number of this box can be verified on the tax return for the year of the event.

The takeover is not the only event to monitor. The discount may also be revoked if the company reimburses your initial investment before December 31st of the seventh year following the year of subscription.

Cases where the reduction is not called into question

The "three years and reinvestment" exception«

The two official sources I read describe the same idea using different words. I quote each of them for what it says.

• service-public.gouv.fr : no challenge if you have kept the securities "for at least 3 years" after subscription, reinvested "the entire sale price of the transferred securities (less taxes and duties generated by this transfer)" within a maximum period of 12 months from the transfer, and kept the new securities until the end of the initial period of 5 years.
• BOFiP (§ 120): sale "more than three years" after subscription, reinvestment within a maximum period of twelve months from the sale, in eligible companies, of the sale price less taxes and duties generated by the sale.

Regarding reinvestment, both sources refer to the sale price minus taxes and duties generated by the sale. A difference in wording remains: "at least 3 years" on one hand, "more than three years" on the other. This page does not resolve the issue. If your sale falls close to the third anniversary, have your situation reviewed before selling.

Two reports that are not the same

The SME income tax reduction falls under the overall tax cap (BOI-IR-LIQ-20-20-10-10, § 75). Among the numerical examples in the BOFiP (§ 190), there is a reduction of €18,000, of which €10,000 is deductible, meaning €8,000 is carried forward from year N+1 to year N+5, and a reduction of €9,000, below the cap, which does not result in any carry-forward.

For the reduction, the BOFiP (§ 190) writes "up to and including the fifth year", and its example carries forward the surplus from N+1 to N+5. service-public.gouv.fr and impots.gouv.fr describe the same carry-forward up to the fifth year.

A tax reduction does not become a refund: the portion that cannot be offset against income tax does not give rise to a refund (BOFiP, § 180). The reduction is applied to progressive income tax, not to taxes at a flat rate (§ 170).

Numerical example (fictitious profile)

Situation. Marc is single. In 2026, he pays €60,000 into the capital of a standard SME. Assumptions for this profile: the tax rate is assumed to be 18% in both 2026 and 2027 for the deferred portion (the BOFiP, § 160, indicates a rate of 18%), his tax before reduction is €15,000 in both 2026 and 2027, he has no other benefits subject to the overall cap, and he makes no further payments in 2027.

Issue. His contribution limit is €50,000. What happens to the €10,000 portion exceeding that limit? And how long must he hold onto his securities?

Strategy. Set three dates before signing: the release date, the year of use of the surplus, the holding period.

Result.

If Marc sells his shares in 2029, before 31/12/2031 and barring exceptional circumstances, the reduction is in principle subject to a reversal for 2029. If he only sells half of his shares, the reversal is limited to the shares sold.

Alternative: if Marc's tax liability before the reduction was only €5,000 in 2026, the €5,000 reduction would be applied, and €4,000 would not. This €4,000 would not be refunded.

This profile is fictitious. The amounts illustrate the mechanism and do not indicate any outcome for your situation.

What changes depending on your situation

• The release date of your subscription, which sets the end of the 5-year period.
• Your family situation: payment limit of €50,000 or €100,000.
• The amount of your tax, because an unused tax credit is not refunded.
• Your other benefits are subject to the overall cap.
• The nature of your exit: sale, public offering, liquidation, gift.
• A subscription made directly or through a holding company.

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

Risk of capital loss. Investing in the capital of a non-listed SME exposes you to the risk of losing all or part of your invested capital. The tax reduction does not protect this capital.