Until now, the gain realized by a corporate shareholder resulting from the repurchase of its shares in a subsidiary (share buy-back) was qualified under certain situations as a dividend and not as a capital gain, therefore eligible to the French participation exemption. Further to a decision of the French Constitutional Council on the situation of individuals taking part to a share buy-back, the text has been amended in order to qualify the gain resulting from a share buy-back as a capital gain in all situations. Within the real estate sector, this means that for corporates, such a gain becomes taxable at standard corporate income tax and is no longer eligible to the French participation exemption.

Share buy-back schemes are mainly used within the real estate industry with a view (i) to repatriate cash trap, (ii) to increase the leverage or (iii) to allow a shareholder to exit or decrease its shareholding in a joint venture vehicle. This change significantly increases the cost of such kind of operations.

Entry into force: applicable to share buy-back realized as from 1st January 2015