Act No. 2026-103 of 19 February 2026 — Articles 787 B and 787 C of the French Tax Code

The 2026 Finance Act significantly tightens the Dutreil Pact regime, France's main mechanism for reducing gift and inheritance tax on family business transfers. While the 75% allowance is formally preserved, the individual holding commitment is extended from two to six years, the list of assets excluded from the exempt base is broadened, and a "look-through" approach now applies to subsidiaries. For owners preparing their succession, these changes mean planning earlier, documenting more rigorously and, in some cases, revisiting wealth-transfer choices. Here is a structured overview of the reform's practical impact.

A flagship regime now under pressure

Codified in Articles 787 B (company shares) and 787 C (sole proprietorships) of the French Tax Code, the Dutreil Pact has, since the Act of 2 August 2003, exempted 75% of the value of shares or businesses transferred free of charge, subject to holding commitments. In practice, it is the most powerful tool available in France to preserve the ownership continuity of family-owned SMEs and mid-caps: at each generational handover, it avoids forced sales triggered solely by the need to pay inheritance tax.

The mechanism is widely used: the French Court of Auditors recorded approximately 5,000 to 6,000 transmissions per year before the reform, with commerce and proximity family businesses being overrepresented. This wide adoption, combined with rising budgetary cost and the perception of optimisation around non-operational assets, prompted lawmakers to recalibrate the regime.

The 2026 Finance Act, definitively adopted after the use of Article 49(3) of the Constitution and promulgated on 19 February 2026, does not repeal the Dutreil Pact — the spirit of the regime is preserved. But it tightens the access and maintenance conditions, with effect for transmissions made on or after the day following publication of the act in the Official Journal.

Longer holding commitment: from 4 to 8 years in total

This is the most visible and structural change. Previously, a beneficiary had to comply with two successive commitments: a collective holding commitment of at least two years, signed by several shareholders representing a minimum percentage of capital and voting rights; followed by an individual holding commitment of two years, starting at the expiry of the collective commitment. Total holding duration: four years.

The 2026 Finance Act keeps the collective commitment at two years but extends the individual commitment from two to six years. Total holding duration thus moves from four to eight years. Article 787 C, which applies to sole proprietorships, is affected in the same way: the holding period for assets allocated to the business rises from four to six years.

In concrete terms, an heir or donee receiving shares in a family company after 21 February 2026 must hold them uninterrupted for six years from the end of the collective commitment, on pain of losing the exemption. This longer horizon mechanically increases risk: family events, disputes between co-heirs, liquidity needs, external growth opportunities — all situations that must now be anticipated contractually, for instance through shareholders' agreements with structured contingency clauses, or through dedicated insurance arrangements.

The extension also reinforces the management involvement requirement. One of the heirs or donees — or one of the shareholders party to the collective commitment — must hold a management position (for companies subject to corporate income tax) or carry on the activity as a main occupation (for partnerships) for three years from the transmission. Organising this management continuity over the extended timeframe is a significant practical challenge.

Refocus on the "working tool": broader asset exclusions

The second major shift concerns the exempt base. The amended Article 787 B excludes from the exemption the portion of the share value representing assets not exclusively allocated to the company's industrial, commercial, artisanal, professional or agricultural activity.

The targeted items — listed exhaustively in new Article 3 quater — cover assets often described as "luxury" or wealth-management assets: real estate not used in the business, certain patrimonial financial holdings, leisure assets, and so on. Good news for groups: cash remains eligible for the exemption, as do digital assets. "Deemed acquired" pact mechanisms and family buy-out schemes also remain available.

The lawmaker introduces a particularly structural group transparency ("look-through") logic for holding companies. The asset-allocation analysis no longer stops at the company whose shares are transferred: it extends to controlled subsidiaries, directly or indirectly held. A non-operational asset booked in a sub-subsidiary can now reduce the exemption available at holding level. For complex patrimonial groups, this requires a granular mapping of assets at every layer of the ownership chain.

Finally, the exclusive allocation to the business must be verified over a minimum of three years prior to the transfer — or since acquisition, if more recent — and maintained throughout the commitment period. This anteriority requirement has a major practical consequence: last-minute restructurings — contributions to an active holding, reorganisations designed to ring-fence operational assets — lose their efficiency. To produce full effect in a Dutreil file, such operations must now be completed three to four years before the planned transfer.

Active holding companies: heightened scrutiny

Where the transfer is structured through an interposed company, the active holding ("holding animatrice") status remains a key eligibility condition. The 2026 Finance Act does not formally redefine the concept, but it strengthens the evidentiary requirements: the holding must actively participate in setting group policy and controlling subsidiaries, and must provide subsidiaries — as its main activity — with administrative, legal, accounting, financial or real-estate services.

This requirement extends established case-law from the French Cour de cassation, which has, in recent years, denied the active-holding status to purely patrimonial structures unable to prove effective animation. With the new "look-through" logic, scrutiny will also focus on the asset composition of the holding itself and of its subsidiaries. Groups must therefore document, on a continuous basis, the reality of group animation: animation agreements, effective re-invoicing of services, board minutes of strategic committees, monitoring of group decisions.

A heavier certification and documentation burden

Procedurally, the reform introduces a triple certification obligation on the company whose shares are transferred:

• an initial certificate, attached to the inheritance declaration or gift deed, certifying that the conditions of Articles 787 B and 787 C have been met up to the date of the transfer;
• a periodic certificate on request: upon request from the tax authority, each heir or donee must, within three months, file a company certificate attesting to continued compliance with the conditions since the transfer;
• a final certificate, within three months of the expiry of the six-year individual commitment, certifying continued compliance until that date.

This mechanism places direct responsibility on the company and its management. A missing, late or inaccurate certificate may suffice to compromise the exemption, with the risk of a tax reassessment plus late-payment interest and penalties. In multi-tier groups, every company in the ownership chain will need to produce the relevant certificates.

Family businesses should therefore implement an internal monitoring framework from the date of transfer: a commitment tracker, a calendar of filing deadlines, retained evidence of asset allocation, traceability of holding-level animation. The administrative burden is all the more significant as it will now stretch over eight years instead of four.

What does this mean for owners?

The reform does not undermine the relevance of the Dutreil Pact — the tax saving remains very substantial. But it clearly shifts the centre of gravity: the tax benefit is now inseparable from upstream succession planning, formalised family governance and uncompromising documentary discipline.

Three priorities deserve immediate attention.

Plan at least two to three years ahead. Decisions on asset composition (sale or ring-fencing of non-operational assets), group structure (interposition of an active holding, simplification of ownership chains) and family shareholders' agreements must now be initiated well in advance of the transfer. The three-year exclusive-allocation requirement imposes a strict timetable.

Secure governance over eight years. A six-year individual commitment combined with a three-year management-role requirement means organising the allocation of roles and the handling of contingencies among heirs (death, disagreement, divorce, liquidity needs). Extra-statutory shareholder agreements become a central instrument: cross-options, indemnified exit mechanisms, governance clauses, even insurance arrangements tied to the commitment.

Document, document, document. With the new certification regime, the tax authority has a stronger lever to verify the reality of professional allocation. A well-built Dutreil file now requires a prior wealth-planning audit, an asset map across each group company, effective and documented animation agreements, and a monitoring framework spanning eight years.

Conclusion: family transmission as a long-term project

The 2026 Finance Act closes no doors, but it tightens the conditions of access to one of the most valuable instruments of French wealth-transfer tax law. For owners of family businesses, the message is clear: succession can no longer be improvised. It is prepared at least three to five years before the operation, through a joint approach involving the tax lawyer, the corporate lawyer, the chartered accountant and the wealth adviser.

COTEG supports its business-owner clients with preparatory audits, the structuring of active holdings, the drafting of shareholders' agreements, the securing of Dutreil commitments and the ongoing documentary follow-up of transmissions throughout their duration. As the margin for error narrows, the added value of an integrated advisory approach becomes decisive.

Author: Cécile Bonnafé-Cazaux, Partner — Corporate Law, Business Taxation.

This article is published for information purposes only and does not constitute individualised legal advice. The above developments reflect the state of French law as of 15 May 2026.