The Dutreil pact under article 787 B of the French Tax Code provides, subject to conditions, a 75% exemption from gift and inheritance tax on the transfer of a family business. For years, its application to furnished rental activities was disputed by the tax authorities. By a decision of 29 September 2023 (no. 473972), the Conseil d'État opened the window, holding that furnished rentals carried on as a habitual activity constitute an eligible commercial activity. But the legislature immediately closed the door: article 23 of Law no. 2023-1322 of 29 December 2023 (the Finance Act for 2024) expressly excluded furnished rentals and the letting of equipped commercial or industrial premises from the Dutreil regime, for transfers occurring on or after 17 October 2023. One nuance remains for mixed activities.
The Dutreil pact under article 787 B of the French Tax Code is one of the most powerful instruments in French business-transfer law: a 75% exemption from the taxable base for gift and inheritance tax on transferred company shares, subject to conditions relating to the nature of the activity (commercial, craft, industrial, agricultural or professional), to holding commitments and to management functions.
Its application to furnished rental activities was disputed for years by the tax authorities, which treated such operations as the management of private assets, outside the scope of the regime. That position was overturned by the Conseil d'État on 29 September 2023 (no. 473972), in line with consistent case law of the Cour de cassation: furnished rentals carried on as a habitual activity are commercial in nature and therefore eligible for the Dutreil regime.
The Finance Act for 2024 (Law no. 2023-1322 of 29 December 2023, article 23) immediately overrode that case law by expressly excluding from the Dutreil regime furnished rental activities and the letting of equipped commercial or industrial premises. The exclusion applies to transfers occurring on or after 17 October 2023, the date the 2024 Finance Bill was presented to the Council of Ministers, chosen to prevent any windfall effect.
One important nuance remains: for mixed activities (an entity combining an operating activity with a civil or rental activity), the Dutreil regime remains available where the operating activity is predominant. Establishing that predominance opens a technically demanding field of practice for complex family structures.
Beyond the letter of the statute, several avenues of analysis remain to preserve the benefit of the Dutreil regime in transactions involving rental activities.
The exclusion applies to transfers occurring on or after 17 October 2023. For transfers completed before that date, the Conseil d'État case law (29 September 2023) remains applicable: eligibility is possible where the furnished rental activity is habitual. Particular care is required as to the effective dating of the deeds.
Where a company carries on both an operating activity (commercial in the strict sense) and a civil or rental activity, the Dutreil regime may apply if the operating activity is predominant. Predominance is assessed on a bundle of indicia: turnover, value of fixed assets and actual economic activity, with no automatic hierarchy between those criteria (settled Conseil d'État case law on the Dutreil regime).
The 2024 Finance Act also extended the benefit of the Dutreil regime to active holding companies that manage their group, now regarded as carrying on an operating activity in their own right. This opening partly offsets the closure on furnished rentals: a family structure built around a genuine active holding company can continue to benefit from the Dutreil regime on the value of the holding.
Taxpayers holding a furnished rental activity who were contemplating a transfer can restructure in advance: sale or contribution of the rental activity to a separate vehicle, refocusing the transferred company on a pure operating activity. Such restructurings must be carried out well ahead of time (the Dutreil regime requires prior holding commitments) and secured against recharacterisation as an abuse of law.
Beyond the Dutreil regime, other tools can be used to transfer a furnished rental activity: inter vivos distribution (donation-partage) with a division of ownership, a family OBO (contribution followed by sale), a gift of bare ownership, or a French fiducie (Civil Code, art. 2011 et seq.). The choice of instrument depends on the family's asset position, timetable and objectives.
The firm advises family offices and wealthy families, owners of hotel businesses and tourist residences, and rental real-estate investors on transfer strategies after the 2024 Finance Act. Our work covers pre-transfer analysis (mapping of activities, predominance of the operating activity, restructuring scenarios), the structuring of transactions (contributions, intra-group sales, active holding companies, divisions of ownership), and defence in the event of a tax audit (administrative appeals, litigation before the administrative court and then the Conseil d'État).
The decision of 29 September 2023 and the 2024 Finance Act created a window of opportunity for transfers completed before 17 October 2023, and a technically demanding landscape for later transfers. A case-by-case analysis is essential.
No, not since 17 October 2023. Article 23 of the Finance Act for 2024 (Law no. 2023-1322 of 29 December 2023) expressly excluded furnished rental activities from the scope of the Dutreil regime. The exclusion applies to transfers occurring on or after 17 October 2023. For earlier transfers, the Conseil d'État (29 September 2023, no. 473972) had held the activity eligible: the regime may still apply where the transfer predates the cut-off.
Decision no. 473972 of 29 September 2023 held that furnished rentals carried on as a habitual activity are commercial in nature and therefore eligible for the Dutreil pact. That ruling overturned the tax authorities' long-standing position. It opened a window that the 2024 Finance Act immediately closed, but it remains applicable to all transfers completed before 17 October 2023.
Where a company carries on both an operating activity (industrial, commercial) and a civil or rental activity, the Dutreil regime remains available if the operating activity is predominant. Predominance is assessed on a bundle of indicia (turnover, value of fixed assets, actual economic activity), with no automatic hierarchy between those criteria. This framework has been refined by the BOFiP administrative guidelines and the case law, and it opens a technical field for structuring family arrangements in which the rental activity remains ancillary.
Everything turns on whether the holding company is genuinely active. The 2024 Finance Act expressly extended the benefit of the Dutreil regime to active holding companies that manage their group, regarded as carrying on an operating activity of their own. If the holding company genuinely manages its subsidiaries (documented commercial, financial and human-resources policy), it can benefit from the Dutreil regime on its value, regardless of the nature of the underlying activities.
Yes, provided the planning starts well in advance. Several routes exist: (a) a sale or contribution of the rental activity to a separate vehicle; (b) refocusing the transferred company on a pure operating activity; (c) creating an active holding company that takes over the management of the group. Any restructuring must be completed several months before the transfer (the Dutreil regime requires prior holding commitments) and secured against recharacterisation as an abuse of law (Tax Procedure Code, art. L.64 / L.64 A).
Several tools can supplement or replace the Dutreil regime: (1) an inter vivos distribution (donation-partage) with a division of ownership (reservation of usufruct), allowing bare ownership to be transferred while retaining the income; (2) a family OBO (contribution followed by sale to a family holding company); (3) a French fiducie for management or transfer purposes (Civil Code, art. 2011 et seq.); (4) optimising the allowances and brackets of the gift and inheritance tax scale. The choice depends on the assets involved, the timetable and the family's objectives.
Beyond the eligibility of the activity, the Dutreil regime requires (French Tax Code art. 787 B): (a) a collective holding commitment over the shares for at least 2 years before the transfer; (b) an individual commitment by each heir or donee to hold the shares received for 6 years after the transfer (extended from 4 to 6 years by the 2026 Finance Act, for transfers occurring on or after 1 January 2026); (c) a management function exercised by one of the signatories of the collective commitment throughout that commitment and for 3 years after the transfer; (d) an eligible activity carried on as the main activity (industrial, commercial, craft, agricultural or professional).
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