The Dutreil Pact and Expatriation 2027: Securing the Transfer of the Family Business

The Dutreil Pact Mechanism

The Dutreil Pact is a mechanism for optimizing the transfer of family businesses. It transforms a transfer tax that can reach 45% in direct line (marginal rate above €1,805,677 per beneficiary) into an effective tax of approximately 11% on the taxable value, representing an exemption of 75% combined with an additional allowance of 50% in the case of a gift of full ownership by a donor under 70 years of age (Article 790 of the French General Tax Code). The combined effect can reduce the effective transfer tax to between 5% and 7% of the business's value.

Three cumulative conditions of Dutreil pact and expatriation

Collective conservation commitment (article 787 Ba CGI).

At the time of transfer, the shares must be subject to a collective holding commitment of at least two years, signed by the deceased or the donor with other shareholders. The commitment must cover at least 17 % of the financial rights and 34 % of the voting rights for unlisted companies (10 % and 20 % for listed companies). A deemed commitment (without prior formalization) is permitted in certain circumstances.

Individual conservation commitment.

Each heir or donee must make an individual commitment to retain the securities received for a period of four years from the expiry of the collective commitment. Breach of the individual commitment results in the loss of the pro rata temporis exemption for the beneficiary concerned.

Exercise of a direction function.

One of the signatories of the collective undertaking or one of the heirs/donees must effectively hold a management position (corporate office) for three years from the date of transfer, within the company whose shares are being transferred. This condition is essential and determines the continued eligibility for the exemption.

The specific case of active holding companies

Active holding companies, meaning those that, in addition to managing their investments, actively manage the controlled companies (strategic direction, internal services, service contracts), are eligible for the Dutreil Pact. The 2024 Finance Law clarified the criteria for qualifying as an active holding company, notably requiring concrete evidence of this management role (minutes of strategic committees, service agreements, presence of an operational manager).

For a manager who has structured their assets through a asset holding company, The classification of a holding company as an active holding company is a critical condition for the Dutreil tax benefit. A holding company without real operational substance is reclassified as a pure holding company and therefore excluded from the scheme. Tax audits frequently focus on this classification.

The interplay between the Dutreil Pact and expatriation

Donor or deceased expatriate.

The benefits of the Dutreil Pact remain valid if the transferred company is French and if the conditions for signing the collective and management commitment are met. The expatriation of the donor or the deceased is not in itself grounds for forfeiture.

Expatriate heirs or donees.

Heirs residing abroad can benefit from the Dutreil Pact on inherited French securities, provided they sign the individual holding commitment. Maintaining the exemption requires one of them, or another heir, to hold a management position.

Article 750 ter CGI: potential double inheritance tax.

If the heir resides in France or if the inherited assets are located in France, French inheritance tax applies. The country of residence of the deceased or the heir may also impose its own tax. Bilateral inheritance tax treaties (where they exist) resolve these conflicts; otherwise, Article 784 A of the French General Tax Code (CGI) provides for a tax credit on foreign taxes paid on foreign assets.

Risk of post-2027 reform

The Dutreil Pact is regularly cited as a potential target in radical left-wing political programs. Reform options mentioned in public documents for 2024-2025 include: total abolition of the scheme, capping the exemption at a certain threshold (for example, 5 million euros per beneficiary), stricter commitment conditions, and abolishing the regime for active holding companies.

The retroactive application of a reform to existing agreements (retrospection on commitments not yet expired) is legally possible but constitutionally restricted. Existing commitments would likely benefit from a grandfathering clause, but this protection is never guaranteed in advance.

Strategy 2026: Secure the transmission before uncertainty

Action 1 — Sign the collective commitment in 2026.

The collective agreement can be signed in advance of a planned transfer, without needing to know the exact date of the transfer. Signing it in 2026 places the transaction under the tax regime in effect on the date of signing.

Action 2 — Activate a gift in full ownership or divided ownership before the end of 2026.

For a donor under 70 years of age, a gift of full ownership combines the Dutreil exemption (75 %) and the tax reduction of 50 % (Article 790 of the French General Tax Code). For a donor over 70 years of age, the split of ownership (gift of bare ownership) remains very advantageous and preserves the usufruct (and therefore the income) for the donor.

Action 3 — Rigorously document the qualification of active holding company.

If the transfer involves the shares of a family holding company, a convincing record of the management (annual minutes of the strategic committee, service agreements, invoices, presence of an operational manager) must be compiled before the end of 2026. A post-transfer tax audit that reclassifies the holding company as a pure management company would retroactively invalidate the Dutreil advantage.

Balmont Reading

The Dutreil Pact is the most powerful tax instrument in French law regarding inheritance. It is also the most politically exposed. The prudent approach in 2026 is to prioritize Dutreil transfers for key family assets, without waiting for a transfer upon death that could coincide with a stricter tax framework. In the cases handled by our firm, we systematically expedite collective commitments and outright gifts for family assets exceeding €10 million—the tax difference between a 2026 Dutreil transfer and a 2028 Dutreil transfer under the stricter regime can reach 20 to 30% of the transferred value.

Sources & references

Dutreil Pact Mechanism and 75% % Exemption

• Legifrance — Article 787 B of the French General Tax Code
• BOFiP — Partial exemption and reassessment (BOI-ENR-DMTG-10-20-40-20)
• Notaries of France — Dutreil Pact and the transfer of family businesses

Engagement thresholds and management function

• Paris Chamber of Notaries — Easing of the Dutreil Pact

50% reduction for % gifts in full ownership (donor < 70 years old)

• Legifrance — Article 790 of the French General Tax Code
• BOFiP — Reduction of duties (BOI-ENR-DMTG-20-30-20-50)

Scale of rights in direct line (5 % to 45 %)

• Legifrance — Article 777 of the French General Tax Code

Active holding company — definition codified by the 2024 Finance Law

• Village of Justice — Clarifications of the 2024 Finance Law on the Dutreil Pact
• Deloitte Law Firm — Update of the BOFiP on the Dutreil Pact

Territorial inheritance and tax credit on foreign rights

• Legifrance — Article 750 ter of the French General Tax Code
• Legifrance — Article 784 A of the French General Tax Code