taxation of sums recorded in the LégiFiscal credit

In a written response to a senator, the Government specified that the sums credited to a partner’s current account were not taxable in the event that they were not available (Response Masson, Senate, question n ° 19892, JO 11 March 2021).

​Principle of taxation of sums credited to a partner’s current account ¶

It is common for partners to leave sums at the disposal of their company, in particular to ensure their financing. The account – 455 – Partners – Current accounts is used in accounting. In addition to loans, credit can also be income that partners can withdraw whenever they want.

The 2 ° of 1 of article 109 of the CGI provides that all sums or securities made available to partners and not taken from profits are considered as distributed income. If it is a partner-natural person, these sums are then in principle subject to income tax in the category of income from movable capital, except in the case of remuneration for a function ( taxation in the salary and wages category or, where applicable, in the remuneration category of certain managers falling under Article 62 of the CGI such as majority managers of SARLs).

Unless there is evidence to the contrary, case law has always considered that these sums credited to the partner’s current account of a company subject to corporate tax were freely available to the partner and taxable in the category of RCM (most recently Council of ‘State, June 14, 2017, no.396,930).

​Non-taxation in case of unavailability of sums ¶

1. Masson, Senator for Moselle, asked the Government in writing if these sums were also taxable when they were not available. The Government replied in the negative. These sums are non-taxable when the partner can establish that the sums to the credit on this current account do not constitute the provision of income.

The Ministry of the Economy, Finance and Recovery thus gives the following examples:

• an advance made by the partner for the benefit of the company
• the assumption by the partner of a debt of the company,
• cases where the partner does not have the disposal of these sums in law or in fact.

Unavailability of funds (3^e case) may arise from the following situations:

• the company’s cash flow situation makes any withdrawal financially impossible.
• Adoption of an agreement, a contract or a decision to block sums which does not result from the will of the account holder

In the latter case, the ministry specifies that the partner in question must not have taken part in the blocking decision for the sum to be non-taxable.

Extract Response Masson, Senate, question n ° 19892, OJ March 11, 2021

The unavailability of funds can also result from an agreement, a contract or a decision to block sums which does not result from the will of the account holder (for example the blocking of the account of a minority partner decided by the general meeting, the release of which required a unanimous decision by the partners). In the event that the unavailability of sums results from a decision, the partner should not have taken part in it so that the latter is not taxable at the rate of these sums. For example, if the blocking of the sums entered in the current account is intended to guarantee a bank loan granted to the company and the beneficiary of the account exercises managerial functions and has, in his duties, accepted the blocking of the sums, he has these last.

Source : Response Masson, Senate, question n ° 19892, OJ March 11, 2021

–