Dutreil pact: why the valuation expert is essential

The “Dutreil-company” regime (French General Tax Code, Article 787 B) provides for an exemption from duties on 75% of the value of the shares transferred, where the company’s main activity is industrial, commercial, craft, agricultural or professional. The text explicitly excludes the management of one’s own securities or real estate assets from the scope of eligible activities.

The same article gives a statutory definition of the active holding company: a company which, beyond managing a portfolio of shareholdings, has as its main activity active participation in steering its group’s policy and, where applicable, provides intra-group services.

The scheme then imposes a framework of retention and governance: a collective commitment (minimum term of two years), minimum thresholds of financial and voting rights, followed by an individual four-year retention commitment. The “Dutreil-sole proprietorship” regime (Article 787 C) applies the same 75% exemption to assets used in the business, under its own conditions. Finally, subject to conditions, the exemption may be combined with the 50% reduction in duties under Article 790 of the French General Tax Code for certain gifts of full ownership where the donor is under 70 years of age.

The Dutreil pact does not reduce duties in the abstract: it reduces the taxable base by exempting 75% of the value. The higher the value, the higher the stakes; the more fragile the value, the higher the risk of challenge.

Above all, the tax authorities’ guidelines make the market value of assets a qualifying factor in at least three sensitive areas. For companies with mixed activities, whether the eligible activity is predominant is assessed against two cumulative criteria: eligible turnover equal to or greater than 50% of the total, and market value of the gross assets used in the eligible activity equal to or greater than 50% of total gross assets. The valuation can therefore influence the very conclusion on eligibility.

For holding companies, the guidelines treat active management as the main activity where the market value of the assets used for that purpose (shares in the managed subsidiaries, assets made available to them, cash allocated to the group) represents more than half of total assets: the valuation becomes a means of proving the holding company’s active role.

Finally, where there are intermediate companies, the BOFiP (the official French tax guidelines) provides for a proportional calculation: the exemption applies to the value of the shares in the intermediate company in proportion to the market value of its gross assets representing the shareholding subject to the commitment. Here again, the exemption depends on elements of value.

For transfer duties, the assets transferred are valued at their market value on the date of the taxable event (Article 666 of the French General Tax Code). The guidelines give a structuring definition: the price obtained through the interplay of supply and demand in a real market, taking into account the factual and legal situation on the date of the taxable event. They stress a decisive methodological point: valuation at market value is incompatible with the use of indicative tables and flat-rate estimates.

For unlisted shares, the tax authorities have published a business valuation guide setting out their principles: a preliminary analysis of the business, the use of various traditional methods also applied by private experts, and valuations carried out under the scrutiny of the courts.

The valuation expert works at the interface between a demanding legal regime and a debatable economic value. Their contribution is first methodological: producing a value consistent with market logic and the relevant tax date, with reasoning that withstands scrutiny. It is then evidential: Article 787 B requires the return or deed to be supported by certificates, and a properly constructed valuation report provides the figures and the scope of what has been valued. Finally, it is structuring for complex files, since market value features in the very criteria for qualification.

Mixed activity and predominance: determining what falls within the eligible activity and assigning values to this map of assets, since discussion during an audit often focuses on these allocations.

Active holding company: without a valuation of the assets used for active management and justification of their allocation, the demonstration is fragile.

The decisive date: the principle is valuation on the date of the taxable event; recent case law underlines the importance of the date of death and the requirements of proof regarding the reality of the eligible activity at that precise moment. The valuation work must be dated and consistent with the information available on that date.

Commitment deemed to be in place and management functions: case law (24 January 2024) takes a strict reading of the management condition, which requires careful work on the chronology and governance of the file.

Intermediate companies: the valuation substantiates the values (shares, shareholdings, gross assets) on which the pro rata exemption depends.

Capital transactions during the commitments: a merger, demerger or capital increase requires specific certificates; the expert helps to keep the values consistent.

Valuation is a tool for analysing and justifying the value of the shares transferred. It replaces neither the legal analysis of the scheme nor the taxpayer’s reporting obligations, but serves as a technical element of security that can be relied on in an audit or in adversarial proceedings.