Ab initio dismemberment: what is it?
The november 30, 2022
Ab initio dismemberment is a method of transferring bare ownership shares from the creation of the company without the need to make a donation, but what are the advantages and risks of this practice?
The classic mechanism
Let's take the case of the creation of a non-trading real estate company by two parents who wish to transmit their real estate to their two children. In the classic scheme, the parents will make a contribution to the company and in return will have full ownership of the shares. Now, if they wish to dismember these shares in order to give the bare ownership to their children and keep the usufruct (= the income) of the shares, they will have to make a donation to each of their children. This donation is subject to transfer duties after the allowance of 100 000€ per parent and per child (= effective allowance every 15 years).
The transfer duties can be very high depending on the value of the assets contained in the partnership.
DMTG scale
|
Bracket
|
Rights |
|
Up to 8 072€
|
5% |
|
Above 8 072€ and up to 12 109€
|
10% |
|
Above 12 109€ and up to 15 932€
|
15% |
|
Above 15 932€ and up to 552 324€
|
20% |
|
Above 552 324€ and up to 902 838€
|
30% |
|
Above 902 838€ and up to 1 805 677€
|
40% |
|
Above 1 805 677€
|
45% |
Ab initio dismemberment
The ab initio dismemberment is a different mechanism than the classic dismemberment. Indeed, in our case, the parents will make a contribution to the company and will directly own the stripped shares. In concrete terms, whereas in a traditional scheme, the parents will have received full ownership of the shares in return, here the shares will already be stripped.
The tax advantage is important, first of all there is only one deed instead of two, and secondly, it avoids excessive transfer taxes.
An arrangement under discussion
The ab initio dismemberment raises many questions. The biggest objection is the difficulty of conceiving that a property which does not exist can be dismembered. There are also several cases of contribution (= in kind, in cash) and each one raises its own question, in particular the set-up may be more certain when the property contributed is already dismembered. Secondly, it is mainly article L64 A of the Book of Tax Procedures that is frightening. Indeed, this article aims at sanctioning as an abuse of right the acts whose purpose is "exclusively" fiscal or "mainly" fiscal since 2019. The ab initio dismemberment effectively allows to avoid the transfer duties, which can be, depending on the amount, very expensive.
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