Transfer of a company registered office
The company’s head office is its registered office but may also include the concept of the centre of effective management i.e. the place where the company’s strategic decisions are made.
The transfer of a French company’s registered office abroad is then, first and foremost, a decision of a strategic and legal nature.
Such a decision also has tax consequences and therefore needs to be anticipated.
Even if in principle, the transfer of registered office is not a taxable operation in itself, the operation becomes taxable if it is accompanied by a transfer of assets.
There is also the question of whether this transfer takes place in or outside the European Union.
If no assets are transferred, the transfer of the registered office is neutral with regard to corporate tax.
If the transfer is accompanied by a transfer of assets, corporate tax is payable on unrealised gains arising from elements of the fixed assets transferred as well as on the deferred capital gains or deferment of taxation.
However, there is a scaling down of this taxation if the registered office is being transferred from France to another member country of the European Union.
The situation regarding capital gains tax on transferred assets together with the transfer of the company’s registered office may benefit from the option of staggered recovery if the receiving country is a member of the European Union.
It is important to make a detailed analysis of the scope of transfer to understand all the relevant tax implications. We also need to underline that the transfer of a pure holding company without any personnel or offices is nevertheless a transfer of registered office accompanied by a transfer of assets.
What about taxation of profits on transfer of registered office?
Profits are not covered by the scope of application of the option for staggered recovery within the European Union which applies to gains on assets.
Regarding the taxation of profits, we need to distinguish between two different situations:
- the transfer of the registered office is accompanied by a partial transfer of assets
- the transfer is accompanied by a total transfer of assets
A partial transfer of assets does not lead to the end of corporate tax liability in France if a part of the operation remains there. The profits from the financial year of transfer could therefore be taxed there under common law.
A total transfer of assets leads, on the other hand, to the end of corporate tax liability in France. In this case, the profits from the financial year of transfer of the registered office are taxable immediately.
The question of deficits existing on the date of transfer must be carefully addressed in the case of a partial transfer of assets which may be accompanied by a change in activity but also in the case of a total transfer leading to the end of corporate tax liability in France.
Furthermore, the immediate taxation of profits in the case of the end of corporate tax liability leads to the taxation of profits through the personal income tax of the partners to the extent that these profits are deemed to be distributed. But here again, there is a certain scaling down in the case of a transfer of registered office within the European Union.
Questions to anticipate
The other questions to consider in advance if a company is planning to transfer its registered office relate to the tax regulations that will apply in the receiving country:
- What will be the recognised taxable value of the assets transferred?
- What will happen to the deficits of the company whose registered office is being transferred?
- What about the taxation of a company where the taxation scheme is handled differently in the country of departure and the receiving country?