Introduction
When creating a company in France, entrepreneurs must navigate a range of formalities. Alongside the drafting of articles of association (statuts), registration with the Trade and Companies Register (RCS), and legal publicity requirements, there is also the question of registration duties (droits d’enregistrement). These duties are a form of tax collected upon certain legal acts, including contributions to a company’s share capital.
Understanding registration duties is essential, because while many contributions benefit from generous exemptions, others may give rise to significant costs. The distinction between pure and simple contributions (apports à titre pur et simple) and contributions for consideration (apports à titre onéreux) is central to determining whether duties apply. Further complexities arise when contributions are mixed, when liabilities are assumed, or when certain assets such as immovable property or business goodwill are involved.
This article provides a comprehensive guide to the French regime of registration duties as applied to company contributions, focusing in particular on SARLs but also relevant to other forms of companies.
1. The Variable Cost of Incorporation
At incorporation, the main costs to be considered include:
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registration duties potentially applicable to contributions,
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drafting costs for the articles of association,
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and publicity formalities imposed by law.
In practice, the latter two often represent the larger expense, because the law exempts most contributions from registration duties. However, when contributions in kind are made, one must also account for the possible taxation of capital gains, which can outweigh the duties themselves.
2. Distinguishing Between Pure and Simple and For-Consideration Contributions
Pure and Simple Contributions
A pure and simple contribution is one that is remunerated exclusively by the allocation of company shares to the contributor. The contributor brings assets or cash, and in exchange receives equity rights—nothing more.
This type of contribution is, in most cases, exempt from registration duties. However, exceptions exist, notably for contributions of certain types of property to companies subject to corporate tax, unless a specific commitment to retain the shares is made.
Contributions for Consideration
A contribution for consideration arises where the contributor receives something other than shares in return—for example, a sum of money, or where the company assumes a personal debt or liability of the contributor. In such cases, the transaction is treated as a transfer for consideration and taxed according to the nature of the property contributed.
For example:
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if the company assumes a contributor’s mortgage debt when property is contributed, duties apply on that liability;
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if the company pays cash in addition to issuing shares, that part is treated as consideration and taxed.
A preferential regime exists, however, for contributions of a business or branch of activity where the company assumes liabilities, provided the contributor commits to holding the shares received for three years.
3. Pure and Simple Contributions Exempted
General Case
French tax law (CGI, art. 810, I) provides that pure and simple contributions—other than those expressly subject to transfer duties—are recorded free of charge.
This exemption applies to acts recording:
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contributions in cash to any company,
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pure and simple contributions of immovable property, real rights, business assets, clientele, or leasehold rights made to companies not subject to corporate tax, or between corporate-tax-paying entities,
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contributions of other movable property.
Furthermore, under CGI article 810 bis, the exemption extends to acts and declarations made at incorporation, such as the appointment of managers or the granting of powers to complete registration formalities.
Contributions to an SARL under the Partnership Regime
When contributions are made to a partnership taxed under the partnership regime, the transfer of property is deemed subject to a suspensive condition: that it will be allocated to someone other than the contributor upon liquidation. If the property is ultimately returned to the contributor, no transfer duty arises, except for land publicity tax in the case of immovable property.
For family SARLs opting for the partnership tax regime, this same preferential treatment applies, provided the option is exercised in the incorporation act.
4. Pure and Simple Contributions Subject to Duties
4.1 Contributions by Persons Subject to Income Tax
Pure and simple contributions made by individuals (or entities not subject to corporate tax) to a company subject to corporate tax are, unless a commitment to retain shares is made, treated as transfers for consideration when they concern:
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immovable property or real rights (usufruct, bare ownership, etc.),
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a business (fonds de commerce),
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clientele,
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leasehold rights or promises relating to immovable property.
4.2 Exemption by Commitment to Retain Shares
Contributors may avoid these duties by undertaking to retain the shares received for at least three years (CGI art. 810, III). This commitment must be formalised in the act or declaration.
This exemption applies to immovable property or real rights included in the contribution of all fixed assets allocated to a professional activity. By contrast, immovable property not linked to the business, or contributed in isolation, remains subject to duties.
4.3 Contributions of Sole Proprietorships with Assumption of Liabilities
Where a sole proprietor contributes all fixed assets used in a professional activity to a company, with liabilities assumed by the company, the transaction would normally be taxed as a transfer for consideration. However, exemption applies if the contributor commits to holding the shares for three years (CGI art. 809, I bis).
This mechanism facilitates the incorporation of sole proprietorships into companies without triggering excessive duties, though liabilities must be carefully allocated to benefit fully from the regime.
4.4 Withdrawal of the Exemption
The exemption is withdrawn if:
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the company ceases to meet the conditions,
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or the contributor fails to respect the three-year holding commitment.
In such cases, the company becomes liable for duties on business assets or immovable property, with credit for any duties that would have been payable initially.
Exemptions are not withdrawn in cases of death, donation (if the donee undertakes to retain shares), or dissolution of the company with reallocation of contributed property.
4.5 Applicable Rates
a. Business Assets
In the absence of a holding commitment, pure and simple contributions of business assets to an SARL subject to corporate tax are taxed according to a progressive scale:
| Fraction of value | Total duties |
|---|---|
| Up to €23,000 | 0% (min. €25) |
| €23,000 – €107,000 | 3% |
| €107,000 – €200,000 | 3% |
| Above €200,000 | 5% |
Payment may be staggered over five years, upon request.
b. Immovable Property (Real Estate)
Unless exempt, contributions of immovable property or real rights to an SARL subject to corporate tax are taxed at 5%, split between budgetary, departmental, and municipal duties.
5. Contributions for Consideration
a. Business Assets or Clientele
The contribution of business assets (clientele, leasehold rights, equipment, furniture, etc.) for consideration gives rise to registration duties, unless exempt under VAT rules (for new goods, for instance).
b. Immovable Property (Real Estate)
The contribution of immovable property for consideration is subject to duties at 5%. Contributions of shares in real estate companies are also taxed at this rate.
6. Mixed Contributions
When a contribution is remunerated partly by shares and partly by another consideration (cash or assumption of liabilities), it is classified as a mixed contribution.
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The part remunerated by shares is treated as pure and simple.
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The part remunerated by other consideration is taxed under the transfer regime.
Parties often allocate liabilities strategically to cash or receivables contributed, in order to minimise duties.
7. VAT and Contributions
Deliveries of goods and services between VAT taxpayers are exempt from VAT when they involve the transfer of a total or partial universality of property (CGI art. 257 bis). This provision prevents double taxation in business transfers and applies equally to contributions.
8. Liability for Payment of Duties
All parties to the act are jointly liable for registration duties. However, the drafter of the act (such as a notary) cannot be pursued personally for payment of duties due upon incorporation.
9. Other Incorporation Costs
Beyond registration duties, other incorporation expenses include:
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fees for drafting the articles of association,
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costs of publication in a legal announcements journal,
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registration with the RCS through the electronic one-stop shop,
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and specific formalities linked to contributions of particular assets (immovable property, intellectual property, business goodwill).
These costs, along with registration duties, are deductible for tax purposes from the first financial year, unless the company elects to treat them as incorporation costs and amortise them over up to five years. While amortisation is ongoing, the company may not distribute dividends unless it has sufficient free reserves equal to the net value of the incorporation costs.
