Because its current activity is declining, or on the contrary to expand and develop it, a company wants to change its corporate purpose. What are the possible tax consequences of such a decision? Here's our advice on how to avoid unpleasant surprises.
A change in actual activity?
Formalities. A change of corporate purpose requires an amendment to the articles of association, and therefore a collective decision by the partners. Since January 1, 2023, it must be declared within one month on the company formalities website?
A change in actual activity or not? Under certain conditions, a change in the company's corporate purpose may lead to a change in its actual business activity. For this to occur, the addition, abandonment or transfer of activity must result in an increase or decrease of more than 50% in either the company's sales, the average number of employees or the gross value of fixed assets. To assess this 50% variation, the amounts declared during the financial year in which the change of corporate purpose occurred should be compared with the previous financial year.
Tax consequences: a change in corporate purpose is treated for tax purposes as a cessation of activity. This implies immediate taxation of profits, as well as elimination of the right to carry forward losses. While losses can still be offset against profits that are immediately taxable due to the change in actual business activity, those incurred prior to the change in corporate purpose are definitively lost. They can no longer be offset against any subsequent profits. The company may, however, request approval from the Minister of the Budget to avoid losing the right to carry forward its losses. Approval is granted if the change in corporate purpose is essential to the continuation of the activity that gave rise to the losses and to the continuity of jobs.