DUTREIL: the Cour de cassation overturns the tax authorities' position on the activity requirement

As a reminder, the Dutreil regime allows partners to benefit from a 75% tax allowance on the gratuitous transfer of their shares (article 787 B of the French General Tax Code), provided that:
– the company carries on an industrial, commercial, agricultural or professional (libérale) activity,
– it is managed for at least 3 years by one of the signatories of the holding commitment,
– the signatories of the collective commitment keep the shares for at least 2 years and the beneficiaries undertake to keep them for at least 4 years after the collective commitment ends.

An active holding company whose fixed assets consist of subsidiaries carrying on an industrial, commercial, agricultural or professional activity can benefit from this regime. These operating subsidiaries must represent at least 50% of the holding company's value.

The tax authorities take the view that the company must continue to carry on an eligible activity throughout the collective commitment and until the end of the individual commitments.

But the decision of the Cour de cassation, handed down in a case concerning a holding company and which could apply to any eligible company, rejects this interpretation and holds that only the conditions expressly laid down by law must be met. To date, however, the tax authorities' position remains unchanged. To be continued…