The Pacte Dutreil (Articles 787 B and 787 C of the French General Tax Code) is the main French tax mechanism for reducing inheritance and gift tax on business transfers. It grants a 75% reduction on the taxable base of the shares transferred, provided the owners give a collective commitment to retain their shares for at least two years, followed by an individual commitment of four years for the beneficiaries of the transfer.

The scope of eligible assets is broad: shares in operating companies (SA, SAS, SARL) or mixed holding companies with a majority industrial, commercial, craft, agricultural or liberal activity. The commitment must cover at least 17% of voting rights and 34% of financial rights for listed companies, or 34% of voting rights and 17% of financial rights for unlisted companies. At least one of the signatories or beneficiaries must exercise a managerial function in the company during the collective and individual commitment period.

Combined with the additional 50% reduction for donations in full ownership before age 70, the Pacte Dutreil can reduce inheritance taxes on a business to a very low effective rate. For a company valued at €10 million, the taxable base can be reduced to €1.25 million (75% reduction), further halved to €625,000 if the donation is made in full ownership by the founder before 70 — a major tax optimization tool for business transfers.

In a Franco-Swiss context, the Pacte Dutreil applies exclusively to French assets and French-resident donors/recipients. It does not apply to Swiss companies unless they are held through a French holding structure. Swiss law has no equivalent mechanism, though the near-universal exemption from inheritance tax between parents and children in most cantons achieves a comparable effect.

At Hectelion, we value companies and shareholding structures for Pacte Dutreil transfers, producing reports defensible with the French tax authorities in our business valuation and financial structuring mandates.