Pacte Dutreil: a 75% exemption, on what conditions

The real effect on the bill

The Pacte Dutreil, codified in article 787 B of the French general tax code, exempts 75% of the value of the transferred shares from gift and inheritance tax. Only 25% of the value enters the taxable base.

Take a company valued at four million euros, passed on to two children. Without the scheme, the taxable base is two million per child, and the tax reaches a level that almost always forces the family to sell the company to pay it. With the pacte, the base falls to 500,000 euros per child, before the personal allowance. The difference runs to hundreds of thousands of euros.

This is what explains the phrase often heard from advisers: without Dutreil, the family transfer of an SME of any significant size is economically impossible in France.

Be careful how you read the figure. The exemption applies to the value of the shares, not to the amount of tax. The remaining 25% is taxed at the progressive scale, after the direct-line allowance has been applied.

The three commitments that follow one another

The scheme rests on a chain of commitments. Each must be honoured; breaking a single one brings the whole down.

What the 2026 Finance Act changes. Law no. 2026-103 of 19 February 2026 tightened article 787 B for transfers made from 21 February 2026. The individual commitment goes from four to six years, which brings the minimum holding period to eight years once the collective commitment is counted. And the exemption no longer covers the fraction of the share value that corresponds to assets with no business use: property not used for operations, passenger cars, boats, works of art, jewellery or precious metals held by the company. An SME that keeps surplus cash or non-operating assets inside its structure must therefore take them out, or accept that this share is taxed in full.

The collective commitment must cover a minimum percentage of the capital, assessed separately in financial rights and in voting rights, with different thresholds depending on whether the company is listed or not. For an unlisted SME held by a family, the threshold is in practice met without difficulty.

The deemed commitment. An owner-manager who has held for more than two years a stake reaching the required thresholds, and who holds a management role in the company, may be exempted from signing a prior collective commitment. This is a valuable facility when the transfer has to happen quickly, for health reasons for example. It is still necessary to check beforehand that the conditions are met, because this route has its own limits.

Which companies are eligible

The pacte applies to companies carrying on an industrial, commercial, craft, agricultural or professional activity. Companies with a purely civil activity, in particular asset-management companies and property companies letting unfurnished premises, are excluded.

The case of holding companies deserves particular attention. A passive holding company, which merely holds shareholdings, is not directly eligible. An active holding company, which takes an active part in steering its group's policy and provides services to its subsidiaries, is treated as an operating company. The boundary between the two is one of the most active battlegrounds in tax litigation.

If your set-up includes a holding company, the question of its active character must be documented well before the transfer: board minutes, management-services agreements, actual invoicing of services, effective presence on the governing bodies of the subsidiaries. A file reconstructed after the fact rarely convinces.

The combinations that make the difference

The pacte combines with the other mechanisms of gift and inheritance tax, and it is the stacking that produces the final result.

• The direct-line allowance applies after the Dutreil exemption, per parent and per child, and is renewed every fifteen years.
• The 50% reduction in tax applies when the gift covers full ownership and the donor is under 70. It is a strong argument for anticipating, and the reason why a 66-year-old owner-manager should already be working on it.
• Splitting ownership makes it possible to give the bare ownership while keeping the usufruct, and therefore the dividends. The taxable value is reduced according to the donor's age. Be careful, however: the articles of association must then limit the usufructuary's voting rights to decisions on the allocation of profits alone, failing which the exemption is lost.

Combined with a gift before the age of 70, the pacte can in some configurations bring the tax burden down to a few percent of the company's value. That is the difference between a company that stays in the family and a company that has to be sold to pay the tax authorities.

What brings it all down

The causes of a challenge are known and almost always avoidable.

Selling shares during the commitment period. This is the leading cause. A child who wants to leave the capital, a poorly arranged buyout of shares between siblings, and the exemption falls for the one who sells, sometimes for the other signatories depending on the configuration.

The disappearance of the management role. If the donor dies or steps back and no beneficiary effectively holds a management role during the three years, the exemption is lost. The important word is "effectively": a purely nominal mandate, with neither pay nor presence, is fragile.

Restructurings. Merger, contribution, change of legal form: each of these operations must be examined against the commitments in progress. Some are neutralised by tolerance clauses, others are not.

Reporting obligations. Certificates to produce, deadlines to meet. These are formalities, but forgetting them produces exactly the same effect as a substantive breach.

One last point, often discovered too late: the pacte deals with the tax side of the transfer, it deals neither with the question of financing, nor with that of fairness between heirs. In most families, a single child takes over the company. The others expect compensation, in cash or in other assets. If the owner-manager's wealth is concentrated in the company, that compensation does not exist and has to be created. The tax-exempt gift therefore solves half the problem. The other half is a matter of financial structuring. See how we structure these operations.