The key mechanisms, explained simply

A commitment to retain the shares of a company that allows gift or inheritance duties to be paid on only 25% of the value of the business (a 75% exemption), subject to conditions.

The same 75% benefit for a business run in one’s own name (without a company), subject to its own retention commitments.

Before the transmission, one or more partners undertake together to keep the shares for a minimum period, the condition for entering the Dutreil pact.

After the gift or the death, each beneficiary undertakes in turn to keep the shares for a further period.

The reduction applied by the Dutreil pact: only 25% of the value of the shares is subject to transfer duties.

Where shares under a Dutreil pact are given in full ownership before the age of 70, the gift duties are further reduced by half.

One of the signatories of the pact must perform a genuine management function within the company for the required period.

A company carrying on a real activity (industrial, commercial, craft, agricultural or professional), as opposed to the mere management of assets.

A holding company that actively takes part in running its group and controlling its subsidiaries; on this basis, it may be eligible for the Dutreil pact.

A gift by which one distributes one’s assets among one’s heirs during one’s lifetime, freezing the values as at the date of the deed to avoid future disputes.

A sum paid by the heir who receives an asset of greater value (e.g. the business) to the others, in order to balance the lots of a shared gift.

Tax due on gifts and inheritances, calculated after allowances according to a progressive scale.

Each parent may give up to €100,000 to each child free of duty, this allowance being restored after a period set by law.

Splitting the ownership of an asset in two: the usufruct (the use and the income) and the bare ownership (ownership without enjoyment).

The right to use an asset and to receive its income (rent, dividends) without holding full ownership of it.

Ownership of an asset without the right to enjoy it; on the death of the usufructuary, it becomes full ownership again, in principle without further tax.

A scale that fixes, according to the age of the usufructuary, the split of value between usufruct and bare ownership for the calculation of duties.

Giving the bare ownership while keeping the usufruct: one transmits at a reduced tax cost (duties calculated on the bare ownership alone) while keeping the use and the income.

A usufruct over a sum of money: the usufructuary may use it, subject to returning the equivalent to the bare owner at the end.

A deed that increases the share the surviving spouse will receive on death, to protect them better.

A company whose purpose is to hold and manage shareholdings in other companies and assets, in order to organise a family’s wealth.

A holding company that merely holds shares and exercises its shareholder rights, without running its subsidiaries.

Dividends received from a subsidiary (a holding of at least 5% kept for 2 years) are almost exempt from corporation tax: only a 5% cost share remains taxable.

A group held at least 95% may pool the profits and losses of its companies to pay a single overall tax.

The capital gain on the sale of participation shares held for at least 2 years is exempt from corporation tax, except for a 12% cost share.

Allows mergers and restructurings between companies to be carried out without immediate taxation of the capital gains.

Financing an acquisition with debt: as long as the return exceeds the cost of credit, the loan amplifies the yield on the funds invested.

Separating the share of capital held from control (voting rights), through the articles of association or preference shares.

Shares carrying particular rights (voting, dividends) allowing, for example, the capital to be transmitted while keeping the power.

The director sells his business to a holding company that he owns: he releases liquidity while remaining at the helm.

Acquiring a company through a holding company that borrows, the loan being repaid from the dividends of the acquired company.

Sums lent by a shareholder to their company; they may be repaid or incorporated into the capital.

A holding company that merely holds shareholdings, without carrying on any other activity.

A holding company that holds shareholdings and, in addition, carries on its own activity (services, commercial activity, etc.).

Two ways of setting up a holding company: “top-down”, by contributing the shares of an existing company to a new company; “bottom-up”, by hiving an activity into a subsidiary within an existing company.

An agreement that authorises and frames loans and cash advances between companies of the same group, by way of exception to the banking monopoly.

Fees charged by a holding company to its subsidiaries for management or service provision; their reality and their price must be justified.

A company’s renunciation of a debt it holds, often on a subsidiary; its tax treatment depends on whether it is commercial or financial in nature.

In a consolidated group, limits the deduction of financial charges where a company acquires a target from a shareholder who controls it (a “self” buy-out).

Companies placed between the holder and the operating company (e.g. a holding company); their interposition is allowed but framed by certain regimes (the Dutreil pact, etc.).

Contributing one’s shares to a holding company one controls before selling them: the taxation of the capital gain is deferred, subject to reinvesting part of the price in an eligible activity.

The capital-gains tax is not cancelled but postponed, as long as the conditions provided by law are met.

If the holding company sells the contributed shares within a certain period, it must reinvest a significant part of the price (a threshold set by law) in an eligible activity to keep the deferral.

An automatic deferral of taxation where one contributes one’s shares to a corporation-tax company that one does not control.

The gain realised by selling shares for more than they were acquired; in principle taxable.

Giving shares before selling them cancels the unrealised capital gain: the beneficiary will only be taxed later on the increase after the gift. Exception: for shares within article 163 bis H (managers’ gain), the gain is taxed in the donor’s name in the year of the gift.

Giving shares before selling them: the unrealised capital gain is purged, the beneficiary being taxed, on any resale, only on the increase after the gift, except for shares within article 163 bis H.

The order in which the gift, contribution and sale are carried out; it governs the tax treatment of the whole and the security of the arrangement.

An operation by which one company absorbs another: the absorbed company disappears and transfers all of its assets and liabilities.

An operation by which a company divides, its assets being distributed among several companies.

The contribution by a company of a branch of activity to another company, in exchange for shares.

A joint-stock company with very flexible articles, subject to corporation tax, with liability limited to contributions; suited to preference shares and to transmission.

A company with a civil purpose (managing assets or real estate), taxable under income tax or corporation tax, but whose partners are indefinitely liable for the debts.

A limited-liability commercial company, with a more regulated operation than the SAS.

A company allowing regulated liberal professions to practise in the form of a capital company.

A financial holding company for the liberal professions: a holding company reserved for liberal professionals to hold shares in SEL companies.

An independent professional tasked with valuing contributions in kind on a formation or a capital increase (Commercial Code).

An independent professional who checks the terms and the exchange ratio of a merger (Commercial Code).

The tax paid by the company on its profits.

The tax paid by individuals on their income, according to a progressive scale.

A tax on net real estate wealth above a threshold; certain business assets and shareholdings may be exempt from it.

The tax authorities may set aside a sham act, or one motivated solely by the aim of avoiding tax, with penalties.

Targets arrangements with a mainly (and no longer exclusively) tax purpose.

Sets aside, for corporation-tax purposes, non-genuine arrangements whose main purpose is a tax advantage contrary to the object of the law.

An act contrary to the interest of the business (e.g. an unjustified advantage) that the tax authorities may add back to taxable income.

The share of profits distributed to the partners; taxed differently depending on whether it is received by an individual or by a company.

A “pure” holding company in principle cannot recover VAT (no taxable activity); a “mixed” holding company may deduct it, where applicable on a pro-rata basis.

The proportion of VAT recoverable where a company has both activities that give a right to deduction and activities that do not.

A tax due by employers that are not subject to VAT on most of their activity, assessed on the remuneration paid.

The operating rules of a company, drafted to organise the powers, the income and the transmission.

An agreement between partners that supplements the articles of association (entry and exit, governance, transfer of shares).

A document that accompanies a gift (often of a sum of money) to set its conditions: use of the funds, inalienability, etc.

The set of rules organising the spouses’ assets (community, separation of property, etc.), decisive for protection and transmission.

A person is tax domiciled in France if their home or principal place of stay is in France, if they carry on their main professional activity there, or if the centre of their economic interests is there. One criterion is enough. Where two States both treat the same person as resident, the applicable tax treaty settles the matter.

A treaty between two States that allocates the right to tax each category of income and eliminates double taxation, by exemption or tax credit. It prevails over domestic law.

The rule of a tax treaty that designates a single State of residence where two States claim the same person: permanent home, then centre of vital interests, habitual abode, nationality and, failing that, agreement between the tax authorities.

Tax on unrealised gains on shareholdings when tax domicile is moved out of France, where the taxpayer was French tax resident for at least six of the ten years before leaving and their holdings exceed €800,000 or 50% of a company’s profits. Deferral of payment is automatic on a move to an EU State or a State bound to France by administrative assistance and tax recovery agreements, provided it is not on the list of non-cooperative States; elsewhere it is granted on request, against security.

The deferred tax is discharged if the shares are still held two years after departure, or five years where their total value exceeds €2.57 million. A sale, buy-back or cancellation of the shares before then makes the tax payable.

A regime for employees and executives recruited from abroad to work in France who were not French tax resident in the five calendar years before taking up their post. The impatriation premium is exempt from income tax until 31 December of the eighth year after they take up their post, and certain foreign-source income is 50% exempt.

The additional pay linked to working in France, exempt under the inbound regime. Where the contract provides for no premium, a person recruited directly from abroad may elect for a flat-rate valuation equal to 30% of their net pay.

French tax residents report every year, with their income tax return, accounts opened, held, used or closed abroad (form no. 3916-3916 bis), including digital asset accounts and life insurance contracts taken out outside France.

A €1,500 penalty per undeclared account, raised to €10,000 where the account is in a State without an administrative assistance agreement with France. The tax authorities’ assessment period may also be extended to ten years (art. L. 169 LPF).

Gift and inheritance tax applies to assets in France and abroad where the donor or deceased is domiciled in France, or where the heir or donee is domiciled there and has been for at least six of the previous ten years. In other cases, only assets located in France are taxable in France.

A regulation that designates, for successions opened since 17 August 2015, the civil law governing the whole succession: that of the deceased’s habitual residence, unless they chose the law of their nationality. It does not govern taxation, which remains a matter for each State and the tax treaties.

A person who is not tax domiciled in France is liable to the real estate wealth tax only on real estate assets and rights located in France, held directly or through companies, where their net value exceeds €1.3 million.

The set of instruments (ordinary or preference shares, share warrants, free shares, BSPCE) offered to a company’s executives and managers, most often on an LBO, to share in the value created until the investor exits.

Since 15 February 2025, the gain on the sale of shares acquired in return for duties as an employee or executive is taxed as salary. The portion within a limit tied to the growth in the company’s value is taxed as a capital gain, provided the holder bore a risk of loss and, except for free shares, BSPCE and stock options, held the shares for at least two years.

The ratio between the company’s real value on the sale and its real value when the manager came in, multiplied by three. It sets the portion of the gain that may be taxed as a capital gain under article 163 bis H.

Instruments, often preference shares, that give managers a share of the gain larger than their share of the capital invested, depending on the performance achieved on exit.

Founder share warrants reserved for the employees and executives of eligible young companies. The exercise gain is taxed at a flat 12.8% (30% if the beneficiary has worked in the company for less than three years), plus social levies; the later gain on sale is taxed as a capital gain.

Shares granted at no cost to employees and corporate officers after a vesting period. The acquisition gain is taxed as salary, with a 50% allowance up to €300,000 a year for plans authorised since 2018; the later gain on sale follows its own regime.

A contribution due on the portion of the managers’ gain taxed as salary above the article 163 bis H limit. It comes on top of the income tax scale, giving a top marginal rate of 59% with the exceptional contribution on high incomes.