Under the Dutreil pact, up to 75% of the shares in the company being transferred are exempt from transfer duties. Over the past 20 years, the scheme has undergone a number of changes. Here are the latest developments to be aware of when managing your business assets.
What is the Dutreil pact?
The transfer of shares in companies and sole proprietorships with a craft, commercial, agricultural, industrial or liberal profession activity may give rise to an exemption, whether the transfer is by gift or inheritance and takes place within the framework of a dismemberment of ownership or in full ownership. This exemption corresponds to 75% of the value of the shares or business, in accordance with the Dutreil pact.
The aim of this system is to encourage the family to keep business assets within the family circle, subject to specific conditions of application.
Major changes
Since its creation in 1999, the Dutreil pact has been constantly revised. There have been 14 modifications in 20 years, the main ones being :
- the extension of the scheme to gifts (2003),
- raising the exemption rate from 50% to 75% (2005),
- and the reduction in the holding period to 6 years.
The purpose of these adjustments was to bringthe text into line with the reality of transfer operations, but also to make it more flexible so that it applies to a greater number of companies.
Three main new features
The Dutreil pact has become a must for business owners wishing to organize the transfer of their company free of charge. At present, this system offers partial exemption from transfer duties, with the highest rate reaching 45% above 1.8 million per taxable share for direct line transfers. Donation tax can be reduced by 50% if the donation is made in full ownership before the executive's 70th birthday.
Among the latest changes introduced by the French Finance Act are the lowering of the minimum holding thresholds and the possibility of signing a retention undertaking alone instead of a collective undertaking. The tax authorities' comments on these changes, which came into force on April 6, are subject to public consultation and may be partially modified.
The bill clarifies another point by stating that companies habitually engaged in the business of letting furnished accommodation are excluded from the scheme, unless Bercy's comments following the public consultation are modified. However, property development activities remain eligible.
Lastly, in these new comments, the tax authorities specify that in the event of a gift, the donor will no longer be able to manage the company himself once all the shares have been transferred. To maintain control, he or she will have to extend the collective retention agreement beyond 2 years.