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    Absorbedco: Profits

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    thierno bah
    1) Under the ordinary regime, ABSORBEDCO would incur immediate taxation on profits, capital gains, reversal of provisions, and loss of carrying forward losses. Distributions of less than two years would also be fully taxed. 2) Under the favorable regime, ABSORBEDCO would not pay tax on capital gains or profits from the merger. Provisions would transfer without tax and the parent-subsidiary regime would be maintained for shares held less than two years. 3) It is important to sell TargetCo after the merger to maintain the parent-subsidiary regime for shares held less than two years.

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    Absorbedco: Profits

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    thierno bah
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    1) Under the ordinary regime, ABSORBEDCO would incur immediate taxation on profits, capital gains, reversal of provisions, and loss of carrying forward losses. Distributions of less than two years would also be fully taxed. 2) Under the favorable regime, ABSORBEDCO would not pay tax on capital gains or profits from the merger. Provisions would transfer without tax and the parent-subsidiary regime would be maintained for shares held less than two years. 3) It is important to sell TargetCo after the merger to maintain the parent-subsidiary regime for shares held less than two years.

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    1) Under the ordinary regime, ABSORBEDCO would incur immediate taxation on profits, capital gains, reversal of provisions, and loss of carrying forward losses. Distributions of less than two years would also be fully taxed. 2) Under the favorable regime, ABSORBEDCO would not pay tax on capital gains or profits from the merger. Provisions would transfer without tax and the parent-subsidiary regime would be maintained for shares held less than two years. 3) It is important to sell TargetCo after the merger to maintain the parent-subsidiary regime for shares held less than two years.

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    11 views4 pages

    Absorbedco: Profits

    Uploaded by

    thierno bah
    1) Under the ordinary regime, ABSORBEDCO would incur immediate taxation on profits, capital gains, reversal of provisions, and loss of carrying forward losses. Distributions of less than two years would also be fully taxed. 2) Under the favorable regime, ABSORBEDCO would not pay tax on capital gains or profits from the merger. Provisions would transfer without tax and the parent-subsidiary regime would be maintained for shares held less than two years. 3) It is important to sell TargetCo after the merger to maintain the parent-subsidiary regime for shares held less than two years.

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    of 4

    Ordinary regime

    Following the merger: ABSORBEDCO will incur

     Immediate taxation upon business profits not taxed yet;


    ABSORBEDCO  Immediate taxation upon capital gains determined when the merger occurs;
     Reversal of provisions: taxation is then triggered;
     Previous losses cannot be carried forward anymore;
     Distributions received under the parent-subsidiary regime are retroactively fully
    taxed when the shares have been held for less
     than two years,.

    TAXABLE PROFIT = EUR 500 because there are not Impairment in


    REMAININGCO 2020

    ▪ No CIT is due
    on the assets
    received
    TAX = 0
    FAVOURABLE REGIME
    Regarding AbsorbedCo:
    • No CIT is due on capital gains and profits at the date of the merger;
    • Provisions are transferred from the merged company to the merging
    company with no CIT;
    • Maintain of the parent-subsidiary regime with respect to shares
    held for less than two years.

    TAXABLE PROFIT = 0

    Regarding AbsorbedCo shareholders:

    ▪ The shares received from the merging company will benefit


    from a tax deferral regime (be they
    individuals (150-0 B FTC) or companies (38, 7 bis FTC));
    ▪ When the merging company is a shareholder of the merged
    company, tax exemption on the cancellation of shares.(not the
    case here)
    QUESTION 3
    • the acquisition date of the shares of TargetCo in RemainingCo’s books IS January 1st, 2020)

    • When a business reorganization is performed, the completion date taken into account may be
    either:
    The completion date of the final transfer of assets or;
    A conventional date, decided by both parties (generally, the merger is concluded with retroactive effect
    from 1st January 2021 (the beginning of the merging company’s business year) – it’s impossible to go
    beyond
    this date).

    • It is important to sell TargetCo after the merger because they require the maintain of the
    parent-subsidiary regime with respect to shares held for less than two years.
    QUESTION 4) In the mergers’ favorable tax regime, can we
    speak about a tax exemption of the capital gains? Why?

    • Tax exemption on Capital occurs when the merging company


    (RemainingCo) is a shareholder of the merged company.

    • Not the Case here: No exemption

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