The Dutreil scheme and transfer of ownership in family businesses
Subject to certain conditions, the Dutreil scheme allows three-quarters of the value of a family business to be transferred without any liability for transfer tax .
Definition of Dutreil scheme
The transfer of shares in companies and one-person businesses (whether industrial, commercial, craft-based, agricultural businesses or self-employed professionals) is eligible for a tax exemption when the property is transferred in the form of a gift or as an inheritance , whether the transfer involves full ownership or subdivision of ownership (for example only the bare ownership or the usufruct ).
The exemption applies to ¾ of the value of the shares or the business.
Passing the business: conditions of exemption of the Dutreil Pact
- The company whose shares are subject to collective commitment must carry on an industrial, commercial, artisanal, agricultural or liberal activity or holding company.
- A collective conservation commitment must be concluded for a minimum of two years and be in progress on the day of transmission.
- This collective commitment must be made by the deceased or the donor for him and his assigns free of charge, with other partners or by a single person (since January 1, 2019 for a single person), for her and her successors free of charge.
- This commitment covers at least 17% of the financial rights and 34% of the voting rights in the case of non-listed companies (and at least 10% of the financial rights and 20% of the voting rights in the case of listed companies).
- Upon the transfer of the securities, each heir , donee or legatee wishing to benefit from the provisions of article 787B of the CGI must make the individual commitment to keep the securities transmitted for a period of four years minimum from the end of the collective commitment.
- One of the signatory partners of the collective conservation commitment or one of the donees, heirs or legatees will have to exercise in the company, during the duration of the collective commitment and during the three years following the date of the transmission, a direction function (listed in 1 ° of 1 of III of Article 975 of the CGI).
Special case: the deemed collective commitment
The collective commitment is deemed to be acquired when both conditions are met:
- Detention by the deceased (or the donor), or with his / her spouse, or with a PACS-linked partner for at least two years, of securities representing the thresholds required for financial rights and voting rights.
- Exercise in the society, by the deceased (or the donor) or his spouse or partner, for more than two years at the date of transmission:
- his main professional activity if the company is a member of the IR.
- one of the management functions referred to in article 975 of the CGI if the company is subject to the SI.
Note: this arrangement presents a major interest in case of predecease of the leader, even before having been able to subscribe a collective commitment of conservation, thus offering the possibility to his heirs as soon as the conditions are fulfilled, to profit from the application a 75% abatement.
Special case: conclusion of a collective conservation commitment after death (post mortem commitment)
Where the units or shares transferred by death have not been the subject of a collective retention commitment, and the conditions of a collective undertaking deemed acquired can not be fulfilled, one or more heirs or legatees may with other partners enter into a collective commitment to retain the securities within six months after the transmission.
All the conditions laid down in Article 787B must be fulfilled.
Passing the business: Dutreil Exemption Requirements for Sole Proprietorships
- Activity company: the company must carry out an eligible operational activity (commercial, industrial, artisanal, liberal or agricultural).
- Périod of detention: the business must have been owned by the deceased or the donor for at least two years. No delay is however required in case of acquisition for free or creation of the company transmitted.
- Commitment to hold shares: Each of the heirs, legatees or donees must make the individual commitment in the declaration of succession or deed of gift to keep the company for 4 years.
- Continuation of the operation of the business by one of the heirs or one of the donees: one of them must, in addition, actually continue the operation of the company for 3 years from the transmission .
Conclusion: Through the Dutreil Pact, business transfer benefits from a favorable regime both in terms of donation and succession. A good knowledge of the device and a good anticipation will thus allow to transmit the family business in privileged conditions (article 787C of the CGI).
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