Vendor loan: spreading the capital-gains tax in 2026

Quick answer. With a vendor loan, the capital gain remains taxable all at once, in the year of the sale, because the triggering event is the sale itself. But Article 1681 F of the French Tax Code allows, by election and subject to conditions, the payment of the income tax and social levies to be spread in line with the price instalments received, without going beyond 31 December of the 5th year following the sale.

You are selling your company or your business and agreeing to be paid over several years. The buyer breathes easier, but a nasty surprise awaits you: the tax authorities will not wait. Without a specific mechanism, you must pay tax on the entire capital gain in the year of the sale, even though the price arrives in instalments. Article 1681 F of the French Tax Code exists precisely to defuse this cash-flow tension.

Two things are often confused and must be told apart. The taxation of the capital gain and the payment of the tax do not follow the same timetable once a vendor loan is in place.

The triggering event for the capital gain is the sale itself, that is, the transfer of ownership. The capital gain is therefore taxable in full in the year of the sale, even if part of the price is received only in later years. This principle has been confirmed as constitutional. In other words, spreading the taxation of the capital gain does not exist: the taxable base is fixed in the year of the transaction.

What Article 1681 F allows is solely the spreading of the payment of the income tax and social levies relating to that capital gain. You pay the same amount of tax, but spread over time, instead of having to disburse it all immediately. This distinction is decisive in understanding what you actually gain: cash-flow relief, not a tax reduction.

To understand how the amount you will actually receive after tax is calculated, our article on the net price after tax of a business sale sets out the mechanics of the capital gain.

A vendor loan means accepting that the buyer pays all or part of the sale price in instalments, over several years. It is a useful tool to ease a transfer when the buyer does not have full financing, and it often works alongside a bank loan. Our guide on financing the purchase of a company covers how a vendor loan and bank financing fit together on the buyer's side.

The problem arises on the seller's side. You transfer ownership today, but you receive the price only gradually. Yet the tax on the capital gain is due on the full amount as soon as the year of the sale.

Common case. In transfer files, one pattern recurs: a seller accepts payment over four years to close the sale, then discovers they must pay the entire tax on the capital gain in the first year, even though they have received only a fraction of the price. The cash-flow tension is immediate, and sometimes personal savings must be drawn on to settle the tax notice.

This is exactly the mismatch that the Article 1681 F election corrects.

The spreading is not automatic. It is an election, subject to several cumulative conditions relating to the size of the business, the nature of the transaction and the seller's situation.

These conditions are assessed for the financial year of the sale. Both a sole proprietorship and a company can qualify, provided the size thresholds are met.

Points to watch on eligibility:

• Headcount and financial size are assessed at the level of the business being sold, not the seller: check the figures for the year of the sale before relying on the mechanism.
• For a share sale, a majority of the capital must change hands: a minority sale does not trigger eligibility.
• The seller must not retain control of the company after the transaction, which rules out certain arrangements where one sells while keeping a hold.
• The election is barred if the tax results from an adjustment or an automatic assessment: it cannot be used to spread a reassessment.
• Being up to date with tax obligations is a prerequisite, not a side formality.

Our reading. Article 1681 F is designed for the transfer of small businesses, not for large transactions. The pairing of "fewer than 50 employees and €10m of balance sheet or turnover" targets precisely very small and small businesses, where the vendor loan is most common and where the cash-flow risk weighs most heavily on the owner's personal wealth. For an analysis of the tax scope of your transaction, our corporate tax support secures the election upstream.

The spreading is not unlimited. Two limits frame its duration.

First, the spreading cannot exceed the duration set for the payment of the price. If the vendor loan runs over four years, the spreading of the tax aligns with that timetable. Second, and this is an absolute cap, the spreading cannot extend beyond 31 December of the 5th year following the sale. This is the so-called N+5 deadline.

In practice, even if you grant the buyer payment over seven or eight years, the spread payment of tax will stop at 31 December of the 5th year. Beyond that, the remaining tax balance becomes due. This point must be anticipated as soon as the payment timetable is negotiated with the buyer.

The mechanism does not change the total amount of tax owed. It changes when you disburse it. The table below illustrates the logic on a capital gain on shares subject to the flat tax of 31.4% (12.8% income tax and 18.6% social levies), with a price paid over four years.

The idea is simple: without the election, you pay the tax with money you have not yet received. With the election, the tax follows the cash flow. It is an alignment, not a tax gift.

Here are the operational steps, in order.

1. Check eligibility against the size thresholds, the nature of the sale and the seller's tax situation, for the financial year of the sale.
2. Set the vendor loan payment timetable with the buyer, taking the N+5 cap into account so as not to end up with a tax balance due before the final instalment.
3. Prepare the guarantees suitable to ensure recovery, a substantive condition of the mechanism.
4. Make the election with the tax authorities under the required conditions, with your adviser.
5. Track the tax payment deadlines in line with the instalments received, and set aside the balance due at N+5.

The underestimated risk. Providing the guarantees suitable to ensure recovery is not a formality. It is a substantive condition: without guarantees deemed sufficient, the election may be refused. Yet many sellers think only of the security protecting their own claim against the buyer, and forget those the tax authorities require for their tax. These are two distinct logics. The "protecting your claim against the buyer" angle is covered in our dedicated article on securing the deferred payment of a sale.

Spreading the payment does not exhaust the tax topic of the sale. It combines with other mechanisms that act, for their part, on the taxable base or the rate.

For a capital gain on the sale of shares, the flat tax stands in 2026 at 31.4%. In addition, an owner retiring may benefit, subject to conditions, from a €500,000 allowance on the portion taxable to income tax, under Article 150-0 D ter. This allowance reduces the tax owed, while Article 1681 F spreads its payment: the two logics are complementary, not competing.

To review the mechanisms that actually reduce the base, see our overview of exemptions on capital gains from a sale. And even before deciding on the method of transfer, our guide to choosing the right method of transfer helps you weigh up a share sale, a business sale and other routes.

Sale of a business by a sole proprietorship. The mechanism covers both the sole proprietorship and the company, provided the size thresholds are met. The condition of selling the majority of the share capital concerns, by nature, only companies.

Vendor loan over more than five years. If you grant payment over a period longer than five years, the spreading of the tax stops at 31 December of the 5th year. The tax balance then becomes due, even though you have not finished receiving the price. This point must be provisioned.

Minority share sale. A sale that does not cover the majority of the share capital does not open the right to elect for companies. It is a structuring criterion to factor into the negotiation.

Tax following an audit. If the capital gain is increased following an adjustment, the corresponding tax cannot benefit from the spreading. Hence the importance of a sound initial return. The reporting pitfalls are detailed in our article on the owner's tax mistakes in a sale.