Valuing a company is a delicate and crucial exercise in many situations, particularly when it comes to transfers, successions or transfers to holding companies. In this context, the tax stakes are paramount and may present risks of tax reassessment. It is therefore essential to understand the tax mechanics behind each situation, in order to best anticipate the possible consequences of a company valuation.
The different situations and their tax implications
- Transfer of shares to a partner (Valuation of transfer of shares to a partner): When selling shares to a partner, the company's valuation plays a decisive role in the tax base. An undervaluation could lead to a shortfall in capital gains tax, while an overvaluation could deter a potential partner from buying. It is therefore essential to determine a fair selling price, in line with the company's economic reality.
- Inheritance (Inheritance valuation): In the context of an inheritance, an accurate valuation is necessary to determine the inheritance tax payable. Any undervaluation could result in a tax reassessment, where the administration will demand payment of duties based on the actual value of the business.
- Transfer to a holding company (Valorisation transmission holding): The valuation of the company influences the amount of tax benefits available when it is transferred to a holding company. An inappropriate valuation could therefore have a significant impact on the tax structure of the transaction.
- Divorce valuation (Divorce valuation): If one spouse holds shares in a company, a fair valuation is necessary to ensure an equitable division of assets. Under- or over-valuation could lead to future litigation or tax implications if the valuation is used for subsequent transactions.
If you would like a XVAL consultant to help you add value to your company: request a quote
Risks of adjustment and penalties: a detailed analysis
The tax authorities may contest the value used in such cases if they consider it to be out of line with the company's real value. Let's take the example of a company valued at 1 million euros on the market, but transferred or sold for less. The difference between the market value and the sale or transfer price would be subject to transfer duties. In addition, penalties for under-reporting may be added, generally up to 40% of this difference.
The French tax authorities provide a guide of recommendations to assist in the valuation of companies, which can be consulted here. This guide is a valuable resource for understanding the recommended methods and avoiding significant discrepancies in valuation.
By the same token, the tax implications of business valuation are considerable. It is crucial to rely on proven methods and experts in the field, such as those at www.xval.fr, to guarantee a fair valuation that meets the expectations of the tax authorities.
To request a valuation by one of our consultants XVAL :
