Taxation of professional capital gains

Verified 06 February 2026 - Entreprendre Service Public / (Prime Minister)

When a company disposes of a property, it generates a profit (or loss) of an exceptional taxable nature. The system of taxation of business capital gains differs depending on whether the company concerned is subject to theincome tax (IR) or atbusiness tax (IS).

Company to IR

The regime of professional capital gains shall apply where a fixed asset is affected by an event causing it to leave the company.

Most often, the realization of a surplus value results from a voluntary transfer (sale, business contribution).

Please note

Exceptionally, the added value may result from a involuntary assignment. For example, in the event of expropriation or loss (e.g. fire), compensation intended to compensate for the transfer of ownership or loss of an asset is treated as a sale price and is likely to generate a professional gain.

Thus, the system of professional capital gains is applicable to companies engaged in an activity commercial, industrial, artisanal, liberal or agricultural.

This regime does not apply to individuals which are taxed as follows: specific schemes :

Example :

The non-professional furnished rental company (LMNP) that realizes a capital gain on the sale of real estate is subject to the real estate capital gains of individuals. Conversely, the professional furnished rental company that realizes a capital gain on a building falls under the professional capital gains if the immovable is recorded as an asset in its operation.

Please note

The date of realization of the capital gain is that of the transfer of ownership. If the sale is accompanied by suspensive condition (e.g. obtaining financing), the capital gain is taxable only at the time of the fulfillment of the suspensive condition.

The added value or the reduced value, assessed element by element, corresponds to the difference between transfer price and net book value of each transferred element.

Where the sale price is lower than the net book value, a loss of value. On the contrary, when the sale price is higher than the net book value, a added value.

In case ofinput, the sale price of the items brought into business is equal to the real value of the company shares awarded as remuneration for the contribution.

When the assignment is made free of charge (donation, sharing), it's the market value of the property at the date of the transfer which is to be taken into account in calculating the capital gain.

Please note

The recorded disposal price may be questioned by the tax authorities if it appears to result from abnormal act of management.

The net carrying amount of the item sold is equal to cost price, i.e. the purchase price (or original value). For the depreciable items, this cost price is reduced by depreciation allowed as a deduction for the tax base.

The applicable tax system distinguishes between short-term capital gains and the long-term capital gains.

Presentation of short-term and long-term capital gains

Capital gains are said to be " short-term ’ where they arise from the transfer:

  • elements of any kind acquired or created by the company since less than 2 years.
  • ordepreciable items detained since at least 2 years, for the portion corresponding to the depreciation deducted for the tax base.

Please note

The period of 2 years is calculated day by day, from the date of entry into the asset company.

On the contrary, capital gains are said to be " long-term’ where they arise from the transfer:

  • non-depreciable items held since at least 2 years
  • ordepreciable items detained since at least 2 years to the extent that the capital gains exceed the total amount of depreciation deducted for the tax base.
Tableau - Distinction between short-term and long-term capital gains

Holding period of the property

Non-depreciable items

Depreciable items

Less than 2 years

Short-term capital gain

Short-term capital gain

2 years or more

Long-term capital gain

Short-term capital gain within the limit of deducted depreciation (then long-term beyond)

Example :

A depreciable item was purchased €1,000 and resulted in depreciation in the amount of €300.

Its book value is therefore 1,000 – 300 = €700.

If this item is sold €1,200 :

  • Less than 2 years after its entry into the asset, the resulting capital gain (i.e. 1,200 – 700 = €500) is a capital gain short-term.
  • At least 2 years after its entry into the asset, the capital gain of €500 shall be considered as:
    • short-term until €300 (amount of depreciation previously deducted from taxable profits)
    • and long-term for the surplus, i.e. 500 – 300 = €200.

However, if the same item was sold €900, the capital gain on disposal (900 – 700) would be €200 and therefore less than the amount of depreciation (€300) previously deducted from profits. In that case, that capital gain would, in its entirety, be a capital gain short-term.

Taxation of capital gains

Short-term capital gain

The sum of short-term capital gains and losses realized during the year shall constitute the short-term net gain.

Short-term net gain is added to taxable income under the conditions and at income tax rate (progressive scale of 0% à 45%).

Capital gains are also taxed to the extent of 18.6% under the social levies on income from assets.

Individual business (EI) may spread the tax over 3 years in equal parts (over the year of realization and the following 2 years).

Long-term capital gain

Long-term net gain is subject to Single flat-rate levy (PFU) at the overall rate of 31.4% which is broken down as follows:

  • 12.8% income tax (IR)
  • 18.6% social levies on income from assets.

Please note

The company can charge the long-term capital losses that have been incurred in the previous 10 years on the net long-term capital gain realized in respect of a financial year.

In case of death of the operator, recognized capital gains shall be subject to tax regime for long-term capital gains. A general offset is made between the gains and losses recorded, without taking into account the length of detention of elements of fixed assets Thus, when the compensation shows a net gain in the long term, it is taxed at the overall rate of 31.4%.

Taxation of long-term property gains

In addition, in the event of long-term real estate gain, the company benefits from abatement depending on the duration of ownership of the property. The allowance applies to capital gains realized on a building (built or unbuilt) assigned to the holding and entered in the balance sheet or in the fixed assets register.

The allowance also applies to capital gains realized on shares of Predominantly real estate businesses and on the rights relating to a contract of real estate leasing. On the other hand, the buildings intended to be demolished and the land to be built are excluded of the abatement.

The abatement shall be 10% by year of detention beyond the 5e (i.e. from the 6e year). The years of detention are assessed by 12-month period. Thus, the immovable property must be entered in the balance sheet for a period ofat least 60 months (5 × 12) to qualify for a rebate.

In practice, the capital gain realized on a property held for more than 15 years is therefore totally exempt.

Example :

The capital gain realized on a property held since 8 years is exempt up to 30%.

There are several tax exemption schemes professional capital gains.

Exemption according to the amount of revenue

Exemption according to amount of annual revenue applies to capital gains net of disposal of items offixed asset carried out by individual businesses or businesses of persons (SNC, SCScivil businesses) subject to income tax (IR).

The amount of annual revenue is the average of the tax-free revenue realized for the financial years ended (reduced to 12 months where applicable) in the preceding 2 calendar years the closing date of the capital gains realization year.

Please note

Whether the operator or business was practicing several activities, the revenue realized in all activities shall be taken into account.

In order to benefit from the exemption, the operator or business must carry out an activity commercial, industrial, artisanal, liberal or agricultural, in a professional capacity, since at least 5 years.

The capital gain shall be exempt in one of the following ways:

  • Exemption from totality capital gain, where the annual revenue is less than or equal to €250,000 (purchase-resale or supply of housing) or €90,000 (provision of services or non-commercial benefits)
  • Exemption partial capital gain, based on receipts and the activity of the company:
    • Purchase-resale or supply of housing activity. Where the revenue exceeds €250,000 and less than €350,000, the exemption rate is calculated as follows: (350 000 - Revenue) / 100 000.
    • Service provision or non-commercial benefits (BNC). Where the revenue exceeds €90,000 and less than €126,000, the exemption rate is calculated as follows: (126 000 - Revenue) / 36 000.

Beyond these thresholds, the added value is not exempt.

Example :

An operator who carries out an activity ofbuy-resell realized, in year N, a capital gain on the sale of €70,000. Its accounting year shall coincide with the calendar year and its revenue shall be:

  • Revenue N-2: €320,000
  • Revenue N-1: €240,000

The average revenue for 2020 and 2021 is equal to: (320 000 + 240 000) / 2 = €280,000.

The amount exempt from capital gain is equal to: 70 000 × (350 000 – 280 000 / 100 000) = €49,000.

The capital gain will therefore be taxed at a rate of 70,000 – 49,000 = €21,000.

FYI  

The exemption is not not cumulative with the transfer price exemption scheme (detailed below). On the other hand, it may be cumulative with the exemption of capital gains realized on retirement.

Exemption based on sale price

Exemption according to transfer price shall apply to capital gains realized in the event of the transfer for consideration or free of charge of an individual business or a full branch of activity.

To benefit from the exemption, the activity transmitted must be of a nature commercial, industrial, artisanal, liberal or agricultural and exercised for at least 5 years.

The capital gain shall be exempt in one of the following ways:

  • Exemption from totality capital gain, where the value of the items transferred (excluding immovable property) is less than €500,000.
  • Exemption partial capital gain, where the value of the items transferred (excluding immovable property) is between €500,000 and €1 000 000. The exemption rate is calculated as follows: (1 000 000 – Value of items transmitted) / 500 000.

Example :

An individual business is transferred for a price of €1.3 MILLION. Among the elements transmitted is a building whose sale price is €620,000. After deducting this amount, the envisaged transmission is therefore equal to €680,000.

The capital gain realized on the sale amounts to €110,000.

The amount exempt from capital gain is equal to: 110 000 x (1 000 000 – 680 000) / 500 000 = €70,400.

The capital gain will therefore be taxed at a rate of 110,000 - 70,400 = €39,600.

Exemption in case of retirement

Exemption in the event of retirement concerns the capital gain realized on the sale of either an individual business or all the securities held by a partner who carries on business in a business subject to income tax (IR).

Assignment of an individual business

The exemption shall apply if all following conditions are filled in:

  • The professional activity was carried out for at least 5 years. The activity may be commercial, industrial, artisanal, liberal or agricultural in nature.
  • The transferred company is a PME.
  • The transferor ceases any function in the transferred company, i.e. any management function as well as any salaried activity within the company.
  • The transferor asserts his pension rights either within 2 years of the transfer or within 2 years before the transfer.

Capital gains on real estate are excluded of the exemption.

Transfer of business securities to the RI

The exemption shall apply if all following conditions are filled in:

  • The professional activity was carried out for at least 5 years. The activity may be commercial, industrial, artisanal, liberal or agricultural in nature.
  • The business whose securities are sold is a PME subject to income tax (IR).
  • The sale covers all the shares held by the partner.
  • The transferor ceases any function in the business whose shares are transferred, that is to say any management function as well as any salaried activity.
  • The transferor asserts his pension rights either within 2 years of the transfer or within 2 years before the transfer.
  • The transferor shall not hold, directly or indirectly, more than 50% voting rights or rights in the social benefits of the transferee company (the acquirer). This condition is assessed at the time of the transfer but also within 3 years of the transfer.
  • The business whose shares are sold shall not be held, on a continuous basis during the sale year, at 25% or more by a company or by more than one company not covered by the PME.

Capital gains on real estate are excluded of the exemption.

Please note

In the event of retirement, the capital gains exemption only covers income tax, social security contributions and 17.20% remain due.

Company to the IS

The regime of professional capital gains shall apply where a fixed asset is affected by an event causing it to leave the company.

The realization of an added value is most often the result of voluntary transfer (sale, business contribution).

Please note

Exceptionally, the added value may result from a involuntary assignment. For example, in the event of expropriation or loss (e.g. fire), compensation intended to compensate for the transfer of ownership or loss of an asset is treated as a sale price and is likely to generate a professional gain.

Thus, the system of professional capital gains is applicable to companies engaged in an activity commercial, industrial, artisanal, liberal or agricultural.

The system of professional capital gains concerns businesses subject to IS, but most asset disposals (excluding portfolio securities) made by these businesses are taxable at the ordinary rate of 25% (15% for the PME).

On the other hand, the regime of professional capital gains does not apply to individuals which are taxed in accordance with specific schemes :

Example :

The non-professional furnished rental company (LMNP) that realizes a capital gain on the sale of real estate is subject to the real estate capital gains of individuals. Conversely, the professional furnished rental company that realizes a capital gain on a building falls under the professional capital gains if the immovable is recorded as an asset in its operation.

Please note

The date of realization of the capital gain is that of the transfer of ownership. If the sale is accompanied by suspensive condition (e.g. obtaining financing), the capital gain is taxable only at the time of the fulfillment of the suspensive condition.

The added value or the reduced value, assessed element by element, corresponds to the difference between transfer price and net book value of each transferred element.

Where the sale price is lower than the net book value, a loss of value. On the contrary, when the sale price is higher than the net book value, a added value.

In case ofinput, the sale price of the items brought into business is equal to the real value of the company shares awarded as remuneration for the contribution.

When the assignment is made free of charge (donation, sharing), it's the market value of the property at the date of the transfer which is to be taken into account in calculating the capital gain.

Please note

The recorded disposal price may be questioned by the tax authorities if it appears to result from abnormal act of management.

The net carrying amount of the item sold is equal to cost price, i.e. the purchase price (or original value). For the depreciable items, this cost price is reduced by depreciation allowed as a deduction for the tax base.

Most capital gains realized by companies subject to the IS are treated for tax purposes as ordinary income (system of ordinary law). On the other hand, certain capital gains are the subject of special tax regimes.

Ordinary law regime

Where the ordinary scheme applies, the capital gains realized are included in the ordinary result of the current financial year. They are therefore taxed at the normal rate of 25% (or at the reduced rate of 15% for the PME).

In the case of capital losses, these are charged to operating profit or contribute to the formation of a carry-forward deficit.

The ordinary law regime applies to subsequent capital gains :

  • Disposal of fixed assets tangible and intangible (e.g. goodwill, land, real estate or patents)
  • Disposal of titles of Predominantly real estate business (SPI) unlisted
  • Disposal of equity securities detained since less than 2 years or investment securities
  • Disposal of business securities established in a Non-cooperative state or territory.

Special schemes

Other capital gains benefit from a tax regime reduced rate :

  • Disposal of equity securities detained since at least 2 years. The rate is fixed at 0%, and the company shall bear a charge on a share of costs and charges assessed on a flat-rate basis 12% the gross amount of capital gains on disposal.
  • Disposal of titles of Predominantly real estate business (SPI) quoted. The rate is fixed at 19%.
  • Disposals of securities of risk mutual fund, of professional private equity fund or business of venture capital detained since at least 5 years. The rate is fixed at 15%.

In addition, a temporary device allows taxation at the reduced rate of 19% capital gains resulting from the disposal of immovable property. The benefit of this scheme is subject to compliance with following conditions :

  • The transferred building corresponds to premises for office or commercial use, premises for industrial use or a building land.
  • The transferred premises or land must be located in one of the geographical areas characterized by a particularly large imbalance between housing supply and demand.
  • The purchaser of the immovable is a legal person (e.g. a business) at arm's length from the beneficiary company of the device. In other words, one of the two companies must not directly or through an intermediary hold the majority of the share capital of the other or exercise decision-making power. Neither should the companies be placed under the control of the same third company.
  • The sale must be completed by December 31, 2026. However, if a promise to sell was entered into before December 31, 2026, the assignment can be completed within 2 years of the date of the promise.
  • The purchaser undertakes to convert the premises acquired (or to be built on the land) into residential premises within 4 years from the closing date of the financial year in which the acquisition took place. The deadline is increased to 6 years for development operations creating a footprint of at least 20,000 m². In either case, the purchaser may request an additional period of 1 year renewable to the administration, at the latest 3 months before the expiry of the initial period. The condition shall be deemed to be satisfied if the living space represents, after conversion, at least 75% of the total surface area.

Please note

The purchaser who fails to fulfill his commitment to transformation or construction incurs a fine equal to the amount of the tax saving recorded by the transferor company.

An exemption applies to capital gains realized in the event of a transfer as expensive or as free a full individual business or branch of activity.

To benefit from the exemption, the activity transmitted must be of a nature commercial, industrial, artisanal, liberal or agricultural and exercised for at least 5 years.

The capital gain is exempt, based on the sale price, as follows:

  • Exemption from totality capital gain, where the value of the items transferred (excluding immovable property) is less than €500,000.
  • Exemption partial capital gain, where the value of the items transferred (excluding immovable property) is between €500,000 and €1 000 000. The exemption rate is calculated as follows: (1 000 000 – Value of items transmitted) / 500 000.

Example :

A complete business line is sold for a price of €1.3 MILLION. Among the elements transmitted is a building whose sale price is €620,000. After deducting this amount, the envisaged transmission is therefore equal to €680,000.

The capital gain realized on the sale amounts to €110,000.

The amount exempt from capital gain is equal to: 110 000 x (1 000 000 – 680 000) / 500 000 = €70,400.

The capital gain will therefore be taxed at a rate of 110,000 - 70,400 = €39,600.

Who can help me?

The Public Service company Advisors

Do you have a project, a difficulty, a question of everyday life?
Simple and free: you are called back within 5 days by THE advisor who can help you.

Get a phone call with an advisor