When a loan-for-use agreement does indeed exempt the lawyer from capital gains tax on his client base

A lawyer had initially made his client base available to a SELARL through a loan-for-use agreement signed in 2009. He transferred this client base to the SELARL in June 2016, thereby terminating the agreement. The lawyer then reported the capital gain realized as a long-term capital gain, which was exempt under the provisions applicable to the sale of a sole proprietorship set forth in Article 238 quindecies of the General Tax Code.

However, following the tax audit of the lawyer,administration issued him a tax assessment, determining that he was not eligible for this exemption.

administration that the execution of the loan-for-use agreement had terminated the lawyer’s business, which precluded him from benefiting from the exemption (which requires that the business be in existence at the time of the transfer).administration also held that the lawyer could not benefit from the leniency provided for in the statutes regarding lease-management agreements because the loan-for-use agreement was not comparable to such an agreement.

The Administrative Court of Appeals will, however, note that the exemption requires that the sole proprietorship be subject to income tax.

She notes that even though the attorney practices within the SELARL, which is subject to corporate income tax, the sole proprietorship that entered into the loan-for-use agreement“had not ceased to exist despite the absence of any reported income or expenses; it paid the annual business property tax and was, in principle, subject to income tax.”

The Court further holds that contracts of loan for use and lease-management contracts“are intended to enable a third party to carry out the professional activity that is their subject matter without this resulting in the transfer to that third party of the assets of the corresponding professional practice, which revert to the lender or lessor at the end of the contract, such that neither of these contracts can be regarded as a cessation of activity generating capital gains.”administration couldadministration therefore conclude that the exception provided for in the law regarding contracts comparable to lease-management agreements was inapplicable, even though a loan for use is a contract entered into free of charge.

The lawyer was therefore entitled to the capital gains exemption. The tax assessment is therefore rescinded.

CAA Lyon, June 12, 2025, No. 23LY00315

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