Once the final deed of sale has been signed, the procedure is far from over, and a number of formalities still need to be completed. These formalities must be completed so that the funds, sequestered in the secure account of one of the lawyers, can be released.
1. Registration of the assignment and payment of registration fees
The transferee must register the deed of transfer with the registration office of the tax department (SIE) in the area where the business is located. This formality must be carried out within one month of the date of the deed of sale, or the date on which the transferee takes possession of the property, whichever is earlier. Failure to meet this deadline will render the advertisement null and void.
Please note: in practice, the registration deadline is reduced to fifteen days, as the sale must be announced in a legal gazette within fifteen days of signing the deed, and registration must precede publication in the legal gazette. As the SIE is not always very reactive, it is important to follow up the file carefully, and even to follow them up with perseverance.
At the time of registration, unless the deed of transfer provides for costs to be shared or borne by the transferor, the transferee must pay transfer duties.
The transfer tax rates are as follows:
- 3% of the sale price of the business for the portion of the price between 23,000 and 200,000 euros;
- 5% for the portion of the price exceeding 200,000 euros.
Since January 1, 2016, an additional tax of 0.6% has been applied to transfers for valuable consideration of office, commercial and storage premises located in the Île-de-France region.
2. Publication in a legal gazette
Within 15 days of the sale, the transferee must publish the business sale in a legal gazette in the département where the business is located. The announcement must include the following information:
- The date of the sale of the business ;
- The identities and addresses of the previous and new owners of the business;
- The nature and address of the business
- The price at which the business was sold, broken down into tangible and intangible elements;
- Information relating to the registration of the deed with the SIE ;
- An election of domicile (within the jurisdiction of the commercial court of the transferred establishment);
- Deadline for creditor objections.
3. Publication in BODACC
Three days after publication of the announcement in the legal gazette, the transferee must ask the clerk of the Commercial Court where the business is located to publish a notice in the BODACC.
Creditors of the business have 10 days from publication in the BODACC to object to the sale price.
4. Expiry of opposition period
The lawyers responsible for receiving objections must receive and process them.
More often than not, tax (or, more broadly, administrative) objections arise in view of taxes still to be paid (corporate income tax, VAT, CFE, etc.). There may also be objections from finance leasing companies.
Only in the absence of opposition, or after paying off creditors who have lodged opposition, will the transferor receive the transfer price.
If the sale price is not high enough to pay all the creditors who have lodged objections, these creditors can request a public auction of the business.
That’s why it’s important to obtain a statement of liens and pledges from the clerk’s office before finalizing the sale of a business, and to understand the importance of preferential and registered creditors.
5. Transferor’s tax returns
The seller of the business then has several deadlines to file his tax returns:
- Within 45 days of publication of the sale in a legal gazette, the seller must close its accounts and notify the tax authorities of the sale;
- Within 60 days of publication of the transfer in a legal gazette, the transferor must file all declarations relating to profits, capital gains, etc., with the relevant authorities.
- VAT returns are subject to different deadlines, depending on the applicable system. However, the sale of the business is exempt from VAT if the sale concerns the entire business and if the purchaser is himself liable for VAT.
If all these steps are followed to the letter, then the tax solidarity deadline is 30 days after the tax returns have been filed. The funds can then be released to the seller.
If you’ve sold your business, or are considering selling your business or acquiring a business, we’re here to help.
