The transfer of a company consists in the transfer of all the company's assets or shares to a third party.
The transfer of shares or partner's shares of a capital company has no immediate fiscal impact:
- not for the buyer who is only taking over the shares but not the assets;
- nor for the company that stays the owner of its assets, whoever the shareholders may be.
However, the transferor of shares may be taxed on the capital gains resulting from the transfer, if any, depending on:
- the holding period of the shares (more or less than 6 months);
- the volume of the holding (more or less than 10 % of the company capital).
Who is concerned
In the event of a transfer of shares or partnership shares against payment, the capital gains tax will have to be paid by the transferor.
In the event of a transfer free of charge:
- the transferor is not taxed as there is no capital gains;
- the transferee will eventually be taxed if he decides to transfer his shares at a later stage. Capital gains tax will be calculated by taking into account the share value on the date the transferor initially acquired the shares.
Where applicable, the manager/administrator who is leaving the company must notify their departure to the various bodies where they are registered.
How to proceed
Equity holding for less than 6 months: speculative gains
Whenever the interval between the purchase and sale (transfer) of shares does not exceed 6 months, realised capital gain, if any, is deemed to constitute a speculative gain.
Speculative gain = sales price - (acquisition price + acquisition costs (i.e. fees, etc.))
In the event of a speculative gain:
- if it is below EUR 500, it will not be subject to tax and no tax declaration is necessary;
- if it exceeds EUR 500, the full amount is subject to income tax in the category miscellaneous net income (revenus nets divers).
A speculative loss, if any, can only be compensated by other income in the miscellaneous net income category.
Example: A acquired 8 % of SA Luxembourg on 01.01 in year N. A sells these shares on 31.03 the same year.
Any capital gains are taxable as speculative capital gains.
Any speculative losses can be compensated by other income in the miscellaneous net income category.
Equity holding for more than 6 months
Large equity holdings
The equity holding volume is deemed to be large if the transferor (alone or together with their spouse and under-age children) held more than 10 % of the share capital in the company, either directly or indirectly, at any given time during the 5 years prior to the transfer.
In this case, any capital gains resulting from shares giving entitlement to profits the company makes (partnership shares, shares, but also founder's shares, profit shares, etc.) will be taxed.
- shares representing 12 % of the share capital of SA Luxembourg purchased 6 years ago;
- profit shares issued by SA Luxembourg which entitle the holder to a share of the profits the company makes.
If A sells a part of these profit shares, any capital gain will be taxed in the same way as if he were selling a part of the SA Luxembourg shares that he owns.
The income which must be taken into consideration for tax calculations is the following:
Taxable capital gains = sales price - (acquisition price + acquisition costs)
The acquisition price is the price actually paid by the taxpayer to purchase the shares transferred. It should preferably by determined individually for each share transferred. Failure to do this will imply that the Luxembourg Inland Revenue (ACD) only takes into account the weighted average cost (= global value / quantity).
Capital gains on the transfer of shares in the framework of large holdings are taxed at half the global rate.
Taxation of capital gains realised by non-residents is limited to the speculative capital gains tax.
Realised capital gains by non-residents who have transferred large equity holdings which they have had for more than 6 months remain taxable in Luxembourg if the beneficiary:
- has resided in Luxembourg for at least 15 years;
- but left the country less than 5 years after the transfer (subject to tax treaties which may apply).
Small equity holding
If the equity holding does not meet the conditions to be deemed "large", realised capital gain on the transfer is not taxable.
Example: A has held 8 % of SA Luxembourg for 2 years.
If A sells his shares with a profit, it will not be taxable.