If you are a British national who owns a business in France, this article explains how the Dutreil Pact can significantly reduce French inheritance and gift tax, help protect your family, and safeguard the future of your business.
What is the Dutreil Pact?
The Dutreil Pact is a French tax relief introduced by legislation on 1 August 2003. Its purpose is to help businesses, particularly family-owned and owner-managed businesses continue operating after the passing of their founder without forcing heirs to sell assets to meet inheritance tax liabilities.
The regime is designed to protect business continuity and stable shareholding by offering a partial exemption from French inheritance and gift tax when a business or company shares are transferred.
Named after the Member of Parliament who initiated it, the Dutreil Pact applies to:
- Shares in companies carrying on an industrial, commercial, artisanal, agricultural or liberal activity
- Individual businesses
- Certain holding companies with qualifying interests
Where the conditions are met, 75% of the value of the business or shares transferred is exempt from tax under Article 787 B of the French General Tax Code. The exemption applies whether the transfer is made by gift or on death, and whether ownership is transferred outright or subject to a dismemberment of ownership (bare ownership and usufruct).
Conditions for the Dutreil Pact:
To benefit from the Dutreil exemption when transferring company shares, several conditions must be satisfied:
Qualifying activity
The company must carry on an industrial, commercial, artisanal, agricultural or liberal activity. Certain holding companies may also qualify.
Collective commitment to retain shares
A collective commitment to retain shares must be in place:
- Entered into by the deceased or donor and his successors in title, alone or with other shareholders
- For a minimum period of two years
- In force at the date of transfer
This commitment must cover at least:
- 17% of financial rights and 34% of voting rights for unlisted companies
- 10% of financial rights and 20% of voting rights for listed companies
These thresholds must be maintained throughout the commitment period.
Individual commitment to retain shares
Following the collective commitment, each heir, legatee or donee* must personally commit to retaining the shares for four years, starting from the end of the collective commitment. This undertaking is made in the declaration of succession or the deed of gift.
Ongoing involvement in the business
One of the following individuals must actively participate in the business:
- A party to the collective commitment, or
- An heir, legatee or done
This involvement must continue:
- Throughout the collective commitment period, and
- For three years following the transfer
The role must be either:
- The main professional activity, for partnerships subject to income tax, or
- A qualifying management role, for companies subject to corporation tax
Special cases under the Dutreil Pact
Collective commitment deemed satisfied
In some situations, the law treats the collective commitment as already fulfilled. This applies where:
- The deceased or donor, alone or with their spouse or partner, has held the required percentage of shares for at least two years, and
- The deceased or donor, or their spouse or partner, has exercised their main professional activity or a qualifying management function for at least two years before the transfer
This provision is particularly valuable where a business owner dies before formally entering into a collective commitment. Provided all other conditions are met, heirs may still benefit from the 75% exemption.
Post-mortem collective commitment
If no collective commitment existed at the time of death, and the deemed commitment conditions are not met, heirs or legatees may still enter into a collective commitment:
- Within six months of the transfer
- Either among themselves or with other shareholders
All statutory conditions under Article 787 B must then be satisfied.
Conditions for the Dutreil Pact for individual businesses:
The Dutreil Pact can also apply to individual businesses, subject to specific requirements.
These include:
- The business must carry on a qualifying professional activity
- The business must have been owned for at least two years by the deceased or donor, unless it was acquired free of charge or newly created
- Each heir or donee must commit to retaining the business for four years
- One beneficiary must continue to operate the business for three years following the transfer
- The transfer must include all assets necessary for the business activity
Single-shareholder companies, such as EURL, EARL and SASU structures, can also benefit from the exemption.
Planned changes from 2026
Legislative changes are expected from 2026. These are intended primarily to prevent abuse, particularly where personal assets are artificially linked to business property.
Proposed changes include:
- Extending the retention period from four to six years
- Requiring at least one beneficiary to be aged between 18 and 60
Despite these adjustments, the core philosophy and tax advantages of the Dutreil Pact are expected to remain.
Why the Dutreil Pact matters for British nationals in France
For British nationals who own or are establishing a business in France, the Dutreil Pact can play a central role in succession planning.
Used correctly, it can:
- Reduce French inheritance or gift tax dramatically
- Protect family members from forced asset sales
- Preserve business continuity across generations
Taking legal advice
The Dutreil Pact offers substantial advantages, but it is technically complex and unforgiving of errors. Failing to meet the conditions can result in the loss of the tax exemption. It is essential to seek specialist legal advice before relying on the regime as part of your estate or succession planning.
At Tees, we have specialist French Law experts who can guide you through the complexities of the Dutreil Pact. With access to insights from our independent wealth advisers, we ensure your estate planning is in safe hands and tailored to your unique needs.
* In French law, a legatee (légataire) is a person who receives assets via a will (upon death), while a donee (donataire) is a person who receives assets through a lifetime gift (donation).
