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Dutreil Pact and equipped rental

The conclusion of a Dutreil pact allows you to benefit from a 75% reduction in the tax base for transfer taxes free of charge when transferring shares of an operational company as well as a possible reduction of 50% in donation taxes if the donor is under 70 years old and the donation is made in full ownership (art. 787 B of the General Tax Code).



As indicated in our article relating to Pacte Dutreil, the company whose titles are transferred must imperatively carry out a commercial, industrial, agricultural or liberal activity.

Is the rental activity a commercial activity eligible for the conclusion of a Dutreil Pact?

In principle, the rental activity is a civil activity.

Therefore, the securities of a company carrying out a rental activity are not eligible for the Dutreil pact.

Until now, this observation also applied, according to the tax administration at least, to equipped rentals. Equipped rental consists of renting premises to a professional as well as all the equipment essential to the exercise of the tenant's activity (BOI-ENR-DMTG-10-20-40-10< /u>).

A ruling from the Court of Cassation of 6 June 2023 seems to call into question this interpretation of the tax administration.

Equipped rental, an activity eligible for the conclusion of a Dutreil Pact?

The facts judged by the Court of Cassation in its judgment of June 6, 2023 were as follows: parents had made a donation-sharing of shares that they held in a company . These securities having been the subject of a Dutreil pact, they benefited from a partial exemption from transfer taxes.

The tax administration called into question the conclusion of the Dutreil pact on the grounds that the company in question did not carry out a commercial activity, which the Paris Court of Appeal confirmed.

The Court of Cassation overturns this judgment on the grounds that according to article 35 of the General Tax Code, “the activity of renting out commercial or industrial establishments constitutes a commercial activity equipped with equipment necessary for their operation, whether or not the rental includes all or part of the intangible elements of the business or industry.”

It is true according to article 35 of the General Tax Code, “Also present the character of industrial and commercial profits […] persons who rent a commercial establishment or industrial equipped with the furniture or equipment necessary for its operation, whether or not the rental includes all or part of the intangible elements of the business or industry.

However, this interpretation by the Court of Cassation seems strange.

Indeed, article 34 of the General Tax Code provides that profits made by natural persons and coming from the exercise of a commercial, industrial or artisanal profession are industrial and commercial profits. Article 35 of the General Tax Code provides that certain other activities, such as equipped rental and furnished rental, also have the character of industrial and commercial profits.

In other words, Article 35 does not indicate that the activities it lists are commercial activities but that the profits they generate are assimilated for tax purposes to industrial profits and commercial.

This is how profits from furnished rentals are taxed as industrial and commercial profits. However, the case law is clear regarding the fact that this activity is civil and not commercial.

If such reasoning were adopted, this would mean that the furnished rental activity would become eligible for the Dutreil Pact which seems very improbable but which would be excellent news for taxpayers.

As the case has been referred to the Paris Court of Appeal, its decision is impatiently awaited.

Maître Nicolas Rozenbaum, tax lawyer, is at your disposal regarding any request for tax assistance, both in terms of advice and tax litigation.

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