Dutreil, holding companies, real estate: timing is everything!
The ACTIVE holding company (holding animatrice) is not always the holy grail of business succession. Sometimes it can even become a real tax trap, especially when real estate is involved...
Ever since the Dutreil Pact came into being, we have advised our clients with two mantras: the active holding company is the absolute holy grail, but beware of real estate, which can make everything implode.
One of our clients had already passed on the majority of his holding company to his children, fighting, rightly, for it to be recognised as an active holding company. Wishing to pass on the rest of the group, he quite legitimately wanted to repeat the same scheme.
Except that the rules had tightened: as his holding company no longer held a majority in the target, the risk of requalification by the tax authorities had become prohibitive. We therefore talked him out of it (not without difficulty!) in favour of a safer mechanism: the interposed company. Only the assets eligible for the Dutreil scheme were thus taken into account.
Imagine his surprise when, a few months later, he entrusted us with restructuring real estate assets reaching the end of their cycle.
The most advantageous option was to sell these assets, through SCIs subject to income tax, to a new structure set up by the holding company that had been passed on. Quite logically, we feared that this additional real estate would throw our ratios off balance and call the succession into question.
Well, for once, things went in the taxpayer's favour! Whereas an active holding company requires its advisers (notaire, lawyer, chartered accountant) to recalculate the ratios for 8 long years... the interposed company is assessed as a snapshot on the day of the commitment. Whatever happens afterwards does not matter!
Freedom under close watch
Of course, advising a massive investment in real estate the very next day would be foolish. This favourable finding must not overshadow the need for caution.
There is a carefully calibrated process to follow so as not to cross the red line of abuse of law. The proportion of real estate and avoiding simultaneous transactions, so disliked by the tax authorities, are essential. There is in fact an ideal strategic moment to structure this ownership (a precise window that must be identified without being forced).
So, all political comment aside, thank you to our governments for what has been preserved in terms of succession tools: it will help our beautiful country keep its talents and entrepreneurs!
The key is to receive the right advice, at the right time, and to surround yourself with the right people.