No income tax on capital gains in France
Investing in a Venture Capital Company (SCR) can offer individuals attractive tax advantages, in particular the exemption from income tax on capital gains realized after holding for more than five years. However, to benefit from this exemption, certain conditions must be met.
What is a Venture Capital Company (SCR)?
An SCR is a joint-stock company — société anonyme, société en commandite par actions or société par actions simplifiée — whose main purpose is to invest in unlisted companies of the European Union or the European Economic Area, subject to corporation tax and carrying on a commercial, industrial or craft activity. It benefits from a specific tax regime aimed at encouraging the financing of these companies.
Exemption from capital gains tax after five years of ownership
Individuals residing for tax purposes in France who hold shares in SCR may be exempt from income tax on capital gains realized during the sale of their shares, provided they have held them for at least five years. However, these capital gains remain subject to social levies, the rate of which is 18.6 % since 1 January 2026.
Conditions to be met to benefit from the exemption
To take advantage of this exemption, several conditions must be met:
- Holding period : SCR shares must be held for at least five years. In the event of a transfer before this period, the capital gain is taxed under the ordinary regime, save for the exceptions provided by law, which form a closed list: disability of the second or third category, death, retirement or dismissal.
- Reinvestment of distributions : During these five years, the investor must immediately reinvest any income distributed by the SCR into the SCR, either by subscribing or buying shares or into a blocked account, in order to keep the whole investment inside the scheme.
- Non-majority ownership, and two thresholds not to be confused : the shareholder, their spouse, ascendants and descendants must not together hold more than 25 % of the rights to the profits of the companies held by the SCR — this is the condition bearing on the investor. Separately, an individual and their family may not hold more than 30 % of the rights to the profits of the SCR itself, a condition bearing on the SCR.
SCR obligations to maintain tax eligibility
The SCR must also comply with certain obligations in order for its shareholders to benefit from tax advantages:
- Investment quota : at least 50 % of its net book equity must be invested in securities of unlisted companies of the European Union or the European Economic Area, subject to corporation tax.
- Diversification : no single holding may represent more than 25 % of the SCR’s net book equity (article 171 AO of annex II to the CGI), thereby ensuring diversification.
- Eligible activity : securities counted towards the quota are those of companies carrying on a commercial, industrial or craft activity within the meaning of article 34 of the CGI, which rules out civil and real estate activities.
Valeureux invests 100% in French, unlisted companies based on Science.
Valeureux’s first fund, Value-X, is therefore perfectly compatible with these obligations, with a large margin.
Other cumulative tax arrangements
In addition to the capital gains exemption, investors can benefit from other tax advantages by combining their SCR investment with other devices:
- Real Estate Wealth Tax (IFI) : SCR shares fall within the IFI base only up to the fraction of their value representing real estate assets or rights. Since the fund’s holdings are not real estate, that fraction is nil.
Conclusion
Investing in an SCR can offer significant tax benefits to individuals, including exemption from income tax on capital gains after five years of ownership. However, it is essential to comply with the conditions related to the duration of ownership, the reinvestment of distributions and the obligations specific to SCR in order to fully benefit from these advantages. It is therefore recommended to be well informed and to consult experts before making such an investment.
Legal sources:
- Article 150-0 A, III-1 bis of the General Tax Code
- Article 163 quinquies C of the General Tax Code
- Article 208, 3° septies of the General Tax Code
- BoFiP taxes BOI-RPPM-PVBMI-10-20 §70-80 and §120 (regime for individuals)
And to join SCR Value-X, which is Valeureux’s first multi-asset fund, to benefit from this tax exemption, discover our first participations and participate in the selection of the next ones, it happens directly here:
Any investment in unlisted companies involves risks of illiquidity and capital losses.
Tax arrangements may change - consult the official sites and consult a specialist.
This is neither tax advice nor investment advice. Please consider your own situation and, where appropriate, consult a tax or wealth management professional.