Invest in a business? Yes, but beware of different taxes

Participation in fundraising means contributing to the development of entrepreneurial adventure, as well as giving yourself the opportunity to benefit from great future added value. Equity risk is never zero, but the return that can be obtained is not insignificant. Directly, thanks to a stock savings plan (PEA) or a holding company, the right choice and the associated tax implications can play a very important role in the ultimate return on investment.

The simplest and least restrictive option: direct investment

In some cases, direct investment may offer a reduction in income tax of up to 25% of the amount invested. Indeed, subscribing to the initial capital of SMEs or increasing the capital of SMEs under the age of 7 under development entitles them to a reduction in income of 18% or 25% of withheld payments of up to € 50,000 at a time. person or 100,000 euros per couple. This device is called “Loi Madelin Decrease Income”. In order not to lose the benefit of the reduction, the shares should in principle be kept for 5 years. In turn, dividends and capital gains are subject to a single tax (or “single lump sum”), which results in a 30% loss of productivity.

The best option for holdings less than 25%: PEA

Investments are not subject to tax reduction, but dividends and capital gains are capitalized in tax-exempt PEAs (except for dividends in excess of 10% of the value of unlisted securities). If withdrawals occur only from the 5th year of maintenance of PEA, they are exempt from income tax and only social insurance contributions of 17.2% are paid.

However, this decision is limited because the total amount of payments made from the outset to PEA and PEA PME by its owner is limited to a total limit of € 225,000.

However, payments should not be confused with acquired capital. In fact, if payouts are limited, the capital acquired on PEA is not there, and you can often find PEA in the millions!

The most important limitation of PEA is that the share of the family group in the company should not exceed 25% throughout the life of the plan. Otherwise, the tax benefits of PEA would be lost. So if you want to control a company with more than 25%, forget about this option! Otherwise, go for it!

Ideal for serial investors: holding securities through a holding company

This is a powerful capitalization tool: in the case of a sale, the capital gain is subject to a very low tax rate, limited to 3%, leaving 97% of the result to the holding company. This preferential regime is reserved for joint-stock securities stored in the holding company for more than 2 years. Beware of transfers that are too fast: they will suffer from the usual income tax rate.

Dividends distributed to the holding company also benefit from the preferential regime known as the mother-daughter regime. Applicable if the holding company owns at least 5% of the operating company, this regime allows taxation limited to 1.25% (exemption, except for a share of costs and fees of 5% taxable in the IS).

To be able to use the holding company’s money, you must first go through the “dividend distribution” field or, possibly, “capital reduction”, and therefore pay 30% tax before you can use the remaining 70%. Therefore, the tool of the holding company is not suitable for investors who need personal income or cash. On the other hand, it will be ideal for investors who want to capitalize on their profits in the structure.

Also remember before you start:

– Investments of the holding company, made exclusively in the interests of the partner, are completely prohibited, for fear of falling under the sphere of misuse of corporate assets.

– It is necessary to ensure that the securities held by the holding company are subject to preferential regimes known as the “mother’s daughter regime” for exemption from dividends and the so-called “equity regime” for partial exemption. capital increase in case of sale. To benefit from all these agreements, the securities must be registered as equity securities on the holding company’s balance sheet for more than 2 years, and the latter must have at least 5%. For the system of equity securities, however, the case law accepts a lower threshold of ownership, if it is possible to prove the usefulness and necessity of long-term ownership of shares by the holding company.

– It is necessary to bear the costs of the operation and follow the rules of administrative management of the structure subject to corporate tax, which far exceeds the operation of the securities account or PEA.

If the investor’s first choice is to buy his shares directly or through PEA, the use of a holding company may well be possible or even, sometimes, appropriate in the second stage, to obtain cash through the leverage effect (LBO). The securities can actually be sold to a holding company that will be in debt to buy them. This will allow the investor to monetize their shares, indirectly remaining in the company’s capital.

PEA also remains a great tool for investing from time to time or if you don’t want to have more than 25%. Otherwise, the winning combination will undoubtedly find the right balance between direct withholding and withholding through withholding. Thus, investments benefit from the optimized tax regime, without depriving the investor of a share of its results.