When a company generates deficits, it does not pay taxes. It may postpone its deficits. As part of a group, various operations can permit the optimization of the management of deficits. Experienced French lawyers in tax law or business law can advise you in choosing the appropriate solutions to your situation that most often result in success.
If a financially unstable company is owned by more than 95%, it is possible to consider tax consolidation. This will enact deficits based on the profits of the entire group. The lawyer can analyze your situation to see if all of the potential tax consolidation has been explored.
In France, when the conditions for integration are not met, the merger may not be the best solution. As part of a merger, it is usually the recipient company that absorbs the company’s loss. Deficits are lost unless the company satisfies the conditions enabling him to obtain approval. To avoid being confronted with a rejection during the approval process, it may be wise to conduct a reverse merger.
During this process, the company absorbs the loss payee. This mechanism keeps the deficit at bay. This is possible only if the activity of the company is maintained and static. On March 21, 1986, the State Council argued that the meaning of the merger was loose. However, this freedom is not whole: the choice should not be determined purely by tax reasons under pain of falling under the ambit of the legislation on abuse of rights. It is therefore necessary to consult a legal professional to determine if the operation can be performed safely.
The merger may also be useful in the context of a takeover through a holding company. The holding company borrows to buy the social rights of the target company. The holding company, the structural deficit maker, pays its debt through dividends from the target company. To facilitate this reimbursement, it is possible to combine the target and the holding company so that it has surplus amount of the target. Again, there are risks of abuse. This operation must be performed by a lawyer.
A third mechanism may be used: lease management. The loss company becomes the landlord and a group company becomes the tenant-manager. The latter will pay royalties deductible results. The loss making company, which becomes the lessor, will receive the royalties but will not pay taxes because of the existence of deficits.
Finally, we can consider transforming company deficient CNS to practice a de facto tax consolidation (the deficit of partnerships directly with their partners). But this mechanism is limited in scope since it is necessary that the CNS remains a social form that suits the company's business loss as a candidate for transformation. Do not, under any circumstances make a purely artificial transformation. Here, there is a problem of limited liability ...
All these mechanisms are of real value for deficits. But they must be pursued with caution. The presence of a French business law firm with extensive experience is therefore essential to ensure the validity of the transaction and avoidance of penalties incurred on the grounds of abuse of rights.