French Economy Minister Moves to Soften Hit on Business Transmission Tax Benefits

The French government, through Minister of Economy Roland Lescure, is set to amend a contentious budget provision targeting tax deferrals on capital gains during business transmissions. Originally designed to curb abuses, the provision under Article 150-0 B ter allows entrepreneurs to defer taxes when transferring company shares to a controlled holding, instead of selling outright. Between 2021 and 2023, the capital gains held under such deferrals doubled to €34 billion, mostly benefiting the top 0.01% wealthiest individuals. The proposed changes would now enforce immediate income tax liabilities for donations or inheritances of shares, raising concerns about increasing transmission costs for family businesses and forcing potential sales.

Lescure stressed the need to "toilette ça" or clean up the rule to balance abuse prevention while ensuring smooth business transmissions remain viable for heirs. The Meti (Mouvement des entreprises de taille intermédiaire) warned the reform could significantly hike transmission costs, threatening the continuity of family-owned enterprises. According to a Bpifrance survey, with up to 370,000 small and medium enterprises (TPEs, PMEs, ETIs) expected to be transmitted by 2030, the policy's impact is far-reaching. An EY report also highlighted that the reform could compel many family businesses to reconsider their transmission strategies. This development comes as the government seeks to strike a delicate balance between fiscal justice and the economic stability of business inheritance in France.