Professional Capital Gains Exemptions: 151 Septies & 238 Quindecies

Quick answer. Three exemption regimes coexist for professional capital gains: article 151 septies (based on turnover: EUR 250,000 for traders, EUR 90,000 for service providers), article 238 quindecies (based on sale value: EUR 500,000 for full exemption, scaling to EUR 1,000,000 for partial exemption), and article 151 septies B (real estate holding period deduction: 10% per year after 5 years, full exemption at 15 years). Articles 151 septies and 238 quindecies do not combine on the same capital gain; you must identify which applies. All three require professional activity exercised for at least 5 years.

When a self-employed entrepreneur, farmer or freelancer sells a business, commercial goodwill or part of an operating activity, capital gains can be partially or fully exempted from tax. At Hayot Expertise, we regularly observe that many business owners do not realize three distinct legal regimes are available to them, each with different thresholds and conditions.

French tax law designed these three mechanisms to encourage business succession and entrepreneurship by relieving the fiscal burden at exit. However, the classic mistake is attempting to layer them or apply them in the wrong sequence. Each follows its own logic:

• Article 151 septies focuses on average turnover of the activity (a test of business size);
• Article 238 quindecies focuses on the total value of assets transferred (a test of economic value);
• Article 151 septies B applies specifically to operating real estate according to holding period (a test of tenure).

Understanding the order of application and the conditions of each regime is critical for optimizing the tax position at exit.

Scope and Eligibility#

Article 151 septies applies to entrepreneurs selling goodwill, business assets or an entire operating branch. The essential condition is that professional activity has been carried on for at least 5 years as of the date the capital gain is realized.

The decisive criterion is the average net turnover (excluding VAT) over the two calendar years preceding the year of capital gain realization. This average determines whether the capital gain qualifies for full, partial or no exemption.

Thresholds by Activity Type#

Calculating Partial Exemption#

When turnover falls within the intermediate band, the capital gain receives a sliding exemption. The formula is:

Exemption fraction = (High threshold − Average turnover) / (High threshold − Low threshold)

Example: A service provider generated average turnover of EUR 105,000 over the prior two years. The low threshold is EUR 90,000; high threshold EUR 126,000.

Exemption fraction = (126,000 − 105,000) / (126,000 − 90,000) = 21,000 / 36,000 = 58.33%

If the capital gain is EUR 60,000, the exemption is: 60,000 × 58.33% = EUR 35,000.

Scope of Application#

Article 238 quindecies applies to the transfer (for payment or by gift) of:

• a self-employed business in its entirety;
• an entire operating branch;
• all rights or shareholdings in a partnership (SARL, SNC, EIRL).

As with article 151 septies, the activity must have been carried on professionally for at least 5 years.

Thresholds and Regimes#

Calculation is based on the value of assets transferred, defined as the agreed price or, where no agreed price, fair market value, plus any liabilities or indemnities payable to the seller.

Calculating Partial Exemption#

When value falls between EUR 500,000 and EUR 1,000,000, the exemption fraction is:

Exemption fraction = (1,000,000 − Sale value) / 500,000

Example: An entrepreneur sells a sole proprietorship valued at EUR 700,000.

Exemption fraction = (1,000,000 − 700,000) / 500,000 = 300,000 / 500,000 = 60%

If the capital gain is EUR 250,000, the exemption is: 250,000 × 60% = EUR 150,000.

Scope and Features#

Article 151 septies B introduces a progressive deduction on long-term capital gains relating to buildings or land used by the business for its own operations (warehouses, factories, dedicated office space), or shareholdings in companies owning primarily operating real estate.

This deduction does not apply to:

• short-term capital gains;
• land awaiting development;
• investment real estate (rental property).

Deduction Schedule#

10% deduction for each year of ownership beyond the 5th year.

Specifically:

In practice, the three regimes should not be applied randomly. The recommended order is:

1. First, 151 septies B (real estate deduction) on the real estate component, if it exists and conditions are met;
2. Second, 151 septies A (retirement exemption, not covered here) if the seller qualifies;
3. Then, 151 septies OR 238 quindecies, whichever is most favorable — but never both on the same capital gain.

Critical Point: 151 Septies and 238 Quindecies Do Not Combine#

This is a frequent misconception: thinking the two exemptions can be "stacked." They cannot. A capital gain falls under either the turnover regime (151 septies) or the value regime (238 quindecies). The taxpayer—or their advisor—must identify which applies and apply it exclusively.

Which Regime to Choose?#

The choice between 151 septies and 238 quindecies depends on the transaction structure:

• If turnover is low (e.g., freelance services, BNC), article 151 septies is often preferable because the threshold is low (EUR 90,000 / EUR 126,000) and full exemption may apply even for a high sale value.
• If the total sale value is modest (< EUR 500,000), article 238 quindecies may be preferable, offering full exemption regardless of turnover.
• If sale value exceeds EUR 1,000,000, neither applies, unless 151 septies B partially covers the real estate component.

151 Septies A vs 151 Septies (and 238 Quindecies)#

Article 151 septies A is a separate exemption exclusively for entrepreneurs who sell their business at retirement. It is a distinct regime with its own conditions and scope. Do not confuse it with article 151 septies covered here.

The Flat Tax (31.4% in 2026): A Different Regime#

The "flat tax" or flat-rate withholding tax (PFU) of 31.4% in 2026 applies to capital gains on securities held by individuals. It does not apply to professional capital gains in the sense of this guide. A professional capital gain (that of a trader, freelancer or farmer) is taxed under the long-term or short-term business income regime, not the flat tax.

The 150-0 D ter Deduction#

This is a separate deduction applying to directors selling their securities in a personal capacity. Again, this is distinct from the three regimes we cover.

Case 1: Small Retail Store Sold for EUR 320,000#

A shopkeeper sells a small clothing retail business. Average turnover over two years is EUR 200,000. Capital gain is EUR 60,000.

Article 151 septies: Turnover EUR 200,000 < EUR 250,000 → full exemption EUR 60,000. Article 238 quindecies: Value EUR 320,000 < EUR 500,000 → full exemption EUR 60,000.

Both regimes apply and grant full exemption. The choice is tax-neutral.

Case 2: Consulting Firm Sold for EUR 750,000#

A consultant sells a freelance practice (BNC). Average turnover is EUR 120,000. Capital gain is EUR 200,000.

Article 151 septies: Turnover EUR 120,000 > EUR 126,000 (BNC threshold) → no exemption. Article 238 quindecies: Value EUR 750,000 between EUR 500,000 and EUR 1,000,000 → partial exemption = (1,000,000 − 750,000) / 500,000 = 50% → exemption EUR 100,000.

Here, article 238 quindecies is far more favorable, reducing taxable capital gain by EUR 100,000.

Case 3: Operating Building Held 8 Years#

An industrial operator sells the building where the business operates. Ownership is 8 years old. Long-term capital gain is EUR 180,000.

Article 151 septies B: Holding period 8 years = 8 − 5 = 3 years beyond threshold → deduction 3 × 10% = 30% → exemption EUR 54,000, taxable EUR 126,000.

The owner receives substantial tax relief on the real estate capital gain.

Recently, a mid-market business owner we advise was preparing to sell goodwill. He believed he could combine the "turnover-based" exemption with the "value-based" exemption. In early conversations, he asked: "If I sell for EUR 600,000 and my turnover is below the threshold, do I get both?"

The answer is no. This misunderstanding reveals a very common source of confusion. The three regimes are not "layers" to be stacked. They are alternative regimes. The taxpayer selects one (except 151 septies B, which is complementary). Our role is to swiftly calculate which offers the best result and to document that choice in case of audit.

Moreover, one of the costliest errors we see is overlooking the real estate holding period. An entrepreneur selling an operating building just before 10 years of ownership "leaves money on the table" in the form of a sizable exemption. This is why exit timing strategy must incorporate article 151 septies B from the outset.

Hayot Expertise Advice. Before committing to a sale, meet with your accountant for a comparative simulation of the three regimes on your facts. You will identify the most favorable option, document your choice, and avoid costly application errors. Selling a business is not a do-it-yourself matter: it is a tax-driven project that must be steered months in advance.