When a business is sold, the buyer is liable to pay registration duty on the sale price and the seller is liable to pay capital gains tax.
Registration duties on the sale of a business
The purchaser is required to pay registration duty on the higher of the purchase price plus expenses and the market value.
|
Taxable value |
Applicable rate |
|||
|
Budget duty |
Departmental tax |
Communal tax |
Total |
|
|
Not exceeding €23,000 |
0 |
0 |
0 |
0 |
|
Between €23,000 and €107,000 |
2% |
0,60% |
0,40% |
3% |
|
Between €107,000 and €200,000 |
0,60% |
1,40% |
1% |
3% |
|
More than €200,000 |
2,60% |
1,40% |
1% |
5% |
Therefore, when the value of the business is less than €23,000, the purchaser does not have to pay any registration duty, with the exception of a minimum collection duty of €25.
Between €23,000 and €200,000, registration duty will amount to 3% of the value of the business.
Above €200,000, registration duty will amount to 5% of the value of the business.
Capital gains tax on the sale of a business
If the seller has made a capital gain on the value of his business between the time he became the owner and the time he sells it, he will be taxed on this capital gain as a business capital gain.
If the seller created the business himself, the original value of the business used to calculate the capital gain will be zero.
The calculation of business capital gains tax is relatively complex and will usually be carried out by the seller's accountant. Without going into detail, there are two types of capital gain on the sale of a business subject to income tax:
- short-term capital gain: the capital gain is added to the company's taxable income and is taxed as such.
- long-term capital gains: capital gains are taxed at 31.5% (16% + 15.5% social security contributions).
This can be a heavy tax burden. Fortunately, there are a number of exemptions:
- The exemption provided for in article 151 septies of the General Tax Code: if the seller, who is subject to income tax, has been in business for at least five years and if his revenue does not exceed €250.000 for companies whose main business is the sale of goods, objects, supplies and food to be taken away or consumed on the premises, or the provision of accommodation (excluding the direct or indirect letting of furnished residential premises or premises intended to be let furnished), or in the case of companies carrying on an agricultural business, the seller may be fully exempt from capital gains tax on the sale of his business. The exemption will be partial if revenues are between €250,000 and €350,000.
For other activities (such as the provision of services), revenue must not exceed €90,000 to qualify for full exemption. The exemption will be partial if revenue is between €90,000 and €126,000.
- Exemption under article 238 quindecies of the General Tax Code: Subject to various conditions, where the business has been in operation for at least five years, the vendor may be fully exempt if the value of the business sold is less than €300,000. The exemption will be partial if the value of the business is between €300,000 and €500,000.
- Exemption under article 151 septies A of the General Tax Code: sellers who are subject to income tax on their business, who have been in business for at least 5 years and who wish to sell in order to retire may be fully exempt from capital gains tax on the sale of their business.