Current issues

France has one of the highest rates for duties on transfers for no consideration (gifts and inheritances): the top marginal bracket is 45% for transfers between lineal ascendants and descendants above €1,805,677 per share, after a modest allowance of €100,000 every fifteen years. For inheritances between parties who are unrelated, the rate is 60% after an allowance of €1,594.

Fortunately, there is a favourable regime which allows for transferring a functioning business or company with a 75% allowance and, in certain cases, a 50% reduction in duties: the “Dutreil” agreement.

This system requires the partners representing 34% of the company’s capital (20% if it is listed) to make a 2-year joint commitment then, once the transfer has taken place and the two years have passed, the donee or heir must make a four-year individual commitment in respect of the securities received for no consideration.

A “Dutreil” agreement may of course be used by business owners to transfer their businesses to their heirs. If the business is operated as a public limited company (société anonyme) or a simplified limited company (société par actions simplifiée), Bornhauser can take care of the entire transaction by setting up the transfer as a gift of personal property (don manuel) with a related, registered agreement. And we can do so at a lower price, with the same legal security, as a notary, whose fees are regulated (see https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000032115...) and who is not entitled to grant a discount of more than 40%.

“Dutreil” agreements may also be used to “cash out”, that is, for a business owner to withdraw cash from the business at a tax cost much lower than the 30% flat tax by using the quasi-usufruct technique (see the related fact sheet).

Bornhauser has extensive experience with these complex legal techniques.