The legislator’s objective is simple: to prevent the tax burden from forcing heirs or successors to sell all or part of the business to pay inheritance tax.
Today, the Dutreil Pact is one of the main wealth transfer tools for business owners, family company executives, and shareholders who wish to prepare succession under the best possible tax conditions.
The Dutreil Pact in a few figures
The Dutreil Pact makes it possible to transfer a business while benefiting from a 75% exemption on the value of the shares or the business for the calculation of transfer duties. The collective holding commitment must be made for a minimum period of 2 years, after which the beneficiaries must retain the shares for several years in accordance with the scheme. For companies, the collective commitment must in particular cover at least 17% of financial rights and 34% of voting rights when they are not listed. This mechanism is now one of the main tools for transferring family businesses in France.
How does the Dutreil Pact work?
The principle of the scheme is based on a commitment to retain the company’s shares.
In return for this commitment, beneficiaries can benefit from a 75% exemption on the value of the transferred shares for the calculation of gift or inheritance duties.
In practical terms, when a business is valued at €4 million, only €1 million is taken into account for the calculation of transfer duties.
This reduction in the taxable base can represent considerable tax savings.
Which businesses can benefit from the Dutreil Pact?
Eligible companies
The scheme applies to many types of companies carrying out an operating activity:
- Private limited company (SARL)
- Simplified joint-stock company (SAS)
- Public limited company (SA)
- General partnership (SNC)
- Civil company carrying out an eligible activity
The business must primarily carry out an industrial, commercial, craft, agricultural, or professional activity.
Sole proprietorships
The Dutreil Pact can also apply to the transfer of a sole proprietorship, subject to certain specific conditions.
This option enables craftspeople, traders, liberal professionals, or farmers to prepare the transfer of their activity within a favourable tax framework.
The conditions of the Dutreil Pact
The collective holding commitment
Traditionally, the scheme is based on a collective commitment to retain the shares.
This commitment must cover a minimum percentage of the share capital and voting rights of the business.
During this period, the signatories undertake to retain their shares in order to ensure shareholder stability.
The individual holding commitment
After the transfer, each heir, donee, or legatee must continue to retain the shares for a specified period.
This obligation is intended to ensure the long-term viability of the business and to prevent purely opportunistic transfers designed to benefit from a tax advantage before a quick resale.
The management requirement
One of the beneficiaries must also hold a management position in the business for a minimum period provided for by the texts.
This condition reflects the legislator’s intention to promote genuine continuity of operations.
What are the tax benefits of the Dutreil Pact?
A 75% exemption
The main benefit lies in the 75% exemption on the value of the transferred business.
This exemption applies before inheritance or gift duties are calculated.
In many cases, it significantly reduces the tax bill borne by heirs.
An additional reduction in the case of a gift
When the transfer is carried out by way of a lifetime gift from the business owner, other tax benefits can sometimes be combined with the Dutreil Pact.
This combination can make an early transfer particularly attractive.
Better succession planning
Beyond tax savings, the scheme often helps organise the future governance of the business, identify successors, and secure continuity of operations.
Why is the Dutreil Pact so important for family businesses?
Avoiding a forced sale of the business
Without a specific scheme, inheritance duties can reach significant amounts when the value of the business is high.
Heirs may then be forced to sell assets or dispose of the business to fund this tax burden.
The Dutreil Pact greatly limits this risk.
Preserving jobs and know-how
The transfer of a business does not concern only the owner’s wealth.
It also affects employees, customers, suppliers, and sometimes an entire economic area.
The Dutreil Pact therefore helps preserve the French entrepreneurial fabric.
Facilitating transfer across several generations
Many family businesses wish to maintain their independence over several generations.
The scheme promotes this continuity by reducing the tax cost of successive transfers.
What are the main limitations of the scheme?
Despite its many advantages, the Dutreil Pact remains a complex mechanism.
Failure to comply with the conditions may result in the exemption being withdrawn and the payment of the duties initially saved, together with late-payment interest.
Drafting the commitments, organising governance, and monitoring compliance therefore require particular vigilance.
In addition, certain wealth or asset management activities may be excluded from the scheme or require specific analysis.
Dutreil Pact and holding company: a specific situation
The application of the Dutreil Pact to holding companies is regularly the subject of debate and case-law developments.
An active holding company, which plays an active role in steering the group’s policy and provides services to its subsidiaries, can generally benefit from the regime under certain conditions.
By contrast, a purely passive holding company faces greater difficulties in accessing the scheme.
This distinction is often decisive in family group transfer strategies.
When should a Dutreil Pact be put in place?
The best time to consider a Dutreil Pact is often well before the business owner’s retirement.
Sufficient anticipation makes it possible to organise the transfer gradually, involve future successors in strategic decisions, and optimise the company’s legal structure.
The earlier the process begins, the greater the room for manoeuvre.
Key takeaways
The Dutreil Pact is now one of the most powerful tools for transferring a family business under favourable tax conditions. Thanks to a 75% exemption on the value of the transferred shares or business, it significantly reduces inheritance or gift duties while supporting the long-term viability of the activity.
However, this scheme is based on strict technical rules relating to the retention of shares, the exercise of a management role, and compliance with commitments over several years. An implementation error can call into question the entire tax benefit obtained.
To secure a business transfer and determine whether the Dutreil Pact is suitable for your situation, it is strongly recommended to be supported by a professional listed in the Experts du Patrimoine directory. A wealth management adviser, a tax lawyer, a chartered accountant, or a notary will be able to help you structure the transaction and optimise the transfer of your business in compliance with the regulations in force.
