Perfect Solutions for the Right tax Refunds
In principle, a change in the corporate purpose of a company entails the same tax consequences as a cessation of activity when it consists of a change in actual activity.
This change gives rise to the immediate taxation of all profits and capital gains not yet taxed, and the loss of losses not yet carried forward. However, a tax mitigation mechanism avoids the immediate taxation of several profits.
What are the tax consequences of a change of corporate purpose?
Some reminders concerning the change of corporate purpose
The corporate purpose of a company is determined in its articles of association, it is a mandatory mention. When establishing the articles of association, the drafting of the clause relating to the corporate purpose must be carried out with great care.
Any change of corporate purpose implies a collective decision by the partners. When the change is adopted, formalities must then be carried out: updating of the articles of association of the company, formalities of publication in the newspaper of legal announcements, declaration of modification of a legal person, etc. The change of corporate object must be declared to the business formalities center. A new K-Bis extract will be sent to the company. With proper tax refund estimate this is important.
The tax consequences of the change of corporate purpose
As we will see in the last part of the dossier, mitigation mechanisms are however provided for by law. The tax consequences of a change of corporate object are not the same depending on whether or not this results in a real change of activity.
What is a real change in activity?
Article 221 of the General Tax Code describes the actual change in activity. According to the texts, the change of real activity of a company includes in particular:
The addition of an activity resulting in, for the exercise of its occurrence or the following exercise, an increase of more than 50% compared to the fiscal year preceding that of the addition:
Either of the company’s turnover.
Either the average number of staff or the gross amount of the items of the company’s fixed assets.
The abandonment or transfer, even partial, of one or more activities resulting, for the exercise of its occurrence or the following year, a decrease of more than 50% compared to the previous year that of abandonment or transfer:
Either of the company’s turnover or the average number of staff and the gross amount of the elements of the company’s fixed assets.
Tax consequences of the change of corporate object leading to a change in actual activity
In principle, a change in the corporate object of a company subject to corporation tax or to the partnership regime causing a change in actual activity entails the same tax consequences as a business cessation, namely immediate taxation of profits and capital gains not yet taxed:
- The result of the current financial year,
- Capital gains and losses relating to items of fixed assets,
- Provisions not yet reported in taxable income,
And all other tax deferred profits. Deficits from previous years are taken into account for the tax calculation.