The joint tax liability of the buyer of a business (fonds de commerce)
Beyond the creditors' right of opposition, a second rule renders the price of a business (fonds de commerce) unavailable: the buyer's joint tax liability. It is intended to secure the recovery of the taxes owed by the seller in respect of its activity.
The principle
The buyer of a business (fonds de commerce) may be held jointly liable, with the seller, for the payment of certain direct taxes (article 1684 of the General Tax Code) assessed on the profits made by the seller - in particular those of the year of the sale and, where applicable, of the preceding financial year. In other words, if the seller does not pay these taxes, the tax authorities may turn to the buyer.
A price unavailable for a period
This joint liability applies during a period running from the filing of the seller's income tax return. This period may, under certain conditions, be significantly reduced where the publicity and filing formalities are completed on time. During this period, handing the price to the seller would expose the buyer to the risk of having to pay it a second time to the Treasury.
How can the joint liability period be reduced?
The duration of the joint tax liability can be significantly shortened where certain conditions are met: timely completion of the formalities for publicising the sale, filing of the income tax return within the prescribed period, and the absence of any observations from the tax authorities. Careful management of the timetable therefore allows the price to be released to the seller more quickly, without compromising the buyer's security.
Securing it through escrow
The price escrow covers precisely this risk. The funds remain blocked while the joint tax liability periods and the creditors' right of opposition are cleared. The balance is released to the seller only once these obligations have been settled.
Are you preparing a sale of a business (fonds de commerce)? Fidens holds the price in escrow until the joint tax liability and the oppositions are lifted, on a CARPA account.
Frequently asked questions
What is the joint tax liability of the buyer of a business (fonds de commerce)?+
It is the mechanism by which the buyer may be held liable, together with the seller, for the payment of certain direct taxes assessed on the profits made by the seller. It secures the recovery of these taxes for the tax authorities and renders the price unavailable for a period.
How long does the joint tax liability last?+
It applies during a period running from the filing of the seller's income tax return. This period may be significantly reduced where the publicity and filing formalities are completed on time.
Why place the price in escrow because of joint tax liability?+
Because handing the price to the seller before the period expires would expose the buyer to having to pay it a second time to the Treasury if the seller failed to pay their taxes. The escrow blocks the funds until this risk is cleared.
A transaction to secure?
Fidens sets up the escrow of the price on a CARPA account, under the responsibility of a lawyer.