Key points
- Holding shares through a personal holding company is often relevant for founders who anticipate a sale, thanks to the tax deferral and the reinvestment opportunities.
- Direct ownership subjects the capital gain on sale to the 31.4% flat tax (PFU) and gives access to the €500,000 fixed allowance under Article 150-0 D ter of the French Tax Code (CGI) for retiring company directors, subject to strict conditions.
- The contribution-and-sale scheme (apport-cession) under Article 150-0 B ter of the CGI places the contribution gain under a tax deferral when the founder contributes their shares to a holding company subject to corporate income tax (IS) that they control.
- If the holding company sells the shares within three years of the contribution, the deferral is maintained only if it reinvests at least 70% of the sale proceeds in an eligible activity within three years of the sale.
- The long-term capital gains regime (Article 219 of the CGI) exempts the gain on participating interests held for at least two years, subject to a 12% add-back, and the parent-subsidiary regime of Article 145 makes it easier to upstream dividends.
- A holding company involves set-up costs and annual running costs, as well as rigorous monitoring of the tax conditions of the deferral.
Holding shares through a personal holding company is often relevant for start-up founders who anticipate a sale. It allows the tax on the contribution gain to be deferred (contribution-and-sale), makes it easier to reinvest in other projects and can facilitate the transfer of wealth. Direct ownership remains relevant for very small projects or for founders who only want immediate dividend income.
See also: taxation of company directors.
Direct ownership: simplicity versus tax rigidity
The founder personally holds the shares of the start-up. It is the simplest structure, but with heavy tax consequences on a sale.
Advantages:
- No structure or running costs.
- Direct application of the flat tax (prélèvement forfaitaire unique, PFU) on the sale: 12.8% income tax (Article 200 A of the French Tax Code) and 18.6% social levies, i.e. 31.4% since the 2026 Social Security Financing Act (loi de financement de la sécurité sociale), or the progressive scale on election.
- Possibility of benefiting from the €500,000 fixed allowance for retiring company directors provided for in Article 150-0 D ter of the French Tax Code (in French), subject to strict conditions (management functions held during the five years preceding the sale, ownership of at least 25% of the voting rights or rights to profits, cessation of all functions and retirement within the two years before or after the sale, the company must be an SME, etc.).
Limitations:
- Immediate taxation of the entire capital gain on the sale (except with the retirement allowance).
- No possibility of reinvesting the sale proceeds tax-free.
- Dividends paid out of the start-up’s profits are taxed immediately in the founder’s hands.
- Less flexible estate planning.
Using a holding company: the tax leverage effect
The founder sets up a holding company (often an SAS or SARL subject to corporate income tax) that holds the shares of the operating start-up. The structure is more complex to set up, but offers substantial tax and wealth-planning benefits.
To find out more: tax planning lawyer for company directors.
How the contribution-and-sale scheme works (150-0 B ter)
Article 150-0 B ter of the French Tax Code (in French) places the contribution gain under a tax deferral when an individual contributes their shares to a company subject to corporate income tax that they control. The mechanism:
- The founder contributes their start-up shares to their personal holding company.
- The contribution gain is calculated but deferred (not taxed immediately).
- The holding company then sells the shares to a third party: the sale price is received by the holding company, not by the founder.
- If the holding company sells the shares within three years of the contribution, it must reinvest at least 70% of the sale proceeds in an eligible economic activity within three years of the sale, then keep those investments for at least five years; otherwise the deferral ends.
Practical effect: the holding company has the sale proceeds available to reinvest without immediate taxation of the contribution gain, whereas direct ownership would have triggered immediate taxation of the capital gain.
The long-term capital gains regime (participating interests)
Article 219, I-a quinquies of the French Tax Code (in French) exempts the net long-term capital gain on the sale of participating interests (titres de participation) held for at least two years. A share of costs and expenses equal to 12% of the gross amount of the gains is subject to corporate income tax, i.e. an effective tax rate of around 3% at the standard corporate income tax rate of 25%.
This regime covers participating interests in the accounting sense, as well as shares eligible for the parent-subsidiary regime (at least 5% of the voting rights) when they are recorded in the participating interests account or in a special sub-account.
The parent-subsidiary regime for dividends
Article 145 of the French Tax Code (in French) allows a holding company subject to corporate income tax that holds at least 5% of the start-up’s share capital, and keeps those shares for at least two years, to benefit from the parent-subsidiary regime: dividends are upstreamed almost exempt from corporate income tax, after adding back a 5% share of costs and expenses.
This regime makes it easier to upstream cash to the holding company for reinvestment.
The constraints of the holding structure
- Set-up costs: drafting the articles of association, formalities and advice for creating the holding company.
- Running costs: corporate income tax accounting, filing of accounts, annual tax returns.
- Reinvestment of at least 70% if the sale takes place within three years of the contribution: a strict constraint on managing cash after the sale, with the investments to be kept for five years.
- Difficulty in extracting funds to the individual: dividend distributions or share buy-backs by the holding company in favour of the individual are taxable.
- Tax vigilance: the 150-0 B ter scheme relies on precise conditions. The reinvestment and its retention must be documented.
How to choose
When direct ownership is preferable
- Project with a low or uncertain valuation.
- Founder planning a single sale, without reinvestment.
- Planned retirement with the €500,000 allowance (150-0 D ter).
- Wish for simplicity and no intermediate structure.
When a holding company is preferable
- A significant sale is anticipated.
- Intention to reinvest the proceeds in other projects or vehicles.
- Several founders wanting personalised wealth-planning rules.
- Preparation of a family transfer or a Dutreil pact (pacte Dutreil).
- Several shareholdings to be organised within a single structure.
When to set up the holding company
Three possible moments to consider:
- When the start-up is created: the founder subscribes for the shares directly through their holding company. No capital gain since it is an initial creation, and no contribution-and-sale to regularise.
- Before the first significant funding round: the shares, still at a low valuation, are contributed to the holding company without a substantial gain, which simplifies the calculation.
- Before an imminent sale: the contribution may take place at a high valuation. The calculated gain will be large, but deferred. If the holding company sells the shares within three years of the contribution, it must reinvest at least 70% of the proceeds to maintain the deferral. The structure must also pursue purposes other than merely reducing tax (abuse of law, Article L. 64 of the French Tax Procedures Code (Livre des procédures fiscales)).
Structures with several founders
With several founders, there are two options:
- Individual holding companies: each founder sets up their own personal holding company. Complete independence. No dilution through collective decisions.
- Joint holding company: the founders hold the shares together through a single structure. Advantage: presenting a majority block to investors. Drawback: collective decisions on wealth-planning choices and a joint exit.
Individual holding companies are often preferred, unless the founders are perfectly aligned or share a common family wealth strategy.
Pitfalls to avoid
- Holding company set up too late: a contribution just before the sale requires, if the holding company sells within three years, a reinvestment of at least 70% of the proceeds, and a purely tax-driven structure remains exposed to abuse of law.
- Insufficient reinvestment: if less than 70% of the proceeds is reinvested within three years, the deferral ends; the gain is then taxed, with late-payment interest running from the date of the contribution.
- Ineligible reinvestment activities: purely financial investments or the management of one’s own real estate assets do not allow the deferral to be maintained, subject to the subscriptions in private equity funds provided for by the article. Check the list of eligible uses in Article 150-0 B ter.
- Premature distribution to the individual: dividends paid by the holding company to the founder remain taxable at the 31.4% flat tax or, on election, at the progressive scale. The tax leverage works on long-term holding, not on immediate consumption.
- Unsuitable holding company articles: a poorly calibrated clause on capital changes, transfers or governance can block future transactions.
The choice between direct ownership and a holding company weighs heavily on the founder’s wealth trajectory. Ideally, it should be decided before the first funding round, together with a tax lawyer. Every situation is different and calls for a case-by-case analysis.
Before setting up the holding company, have the tax consequences of the structure quantified: parent-subsidiary regime, tax consolidation, contribution-and-sale on exit. Our tax lawyer handles these choices together with the firm’s corporate team.
To find out more
Our full guide: Deeptech lawyer.
