Dutreil Pact and Paraguay: transfer your French business at a 75% discount before expatriating in 2026

The Dutreil Pact (articles 787 B and 787 C of the French General Tax Code - CGI) is France's most powerful tax mechanism for business transfers: it allows for a 75% exemption on the value of shares transferred by gift or inheritance, subject to conservation commitments. For a company valued at €4 million, the Dutreil Pact reduces the taxable base to €1 million — a potential saving of several hundred thousand euros in transfer duties.

But what happens to the Dutreil Pact when the business owner moves to Paraguay? Can one benefit from the mechanism from abroad? Is the Pact compatible with Paraguayan residency? Should the transfer happen BEFORE or AFTER departure? This guide details the interactions between the Dutreil Pact and expatriation to Paraguay in 2026 — a topic almost no expatriation guide covers.

The Dutreil Pact: Mechanism Overview

The Principle

The Dutreil Pact allows for a 75% exemption on the value of shares transferred (by gift or inheritance) if the following conditions are met:

• Collective conservation commitment: A commitment to hold the shares for at least 2 years, made by the donor/deceased and at least one other associate. The commitment must cover at least 17% of financial rights and 34% of voting rights (for unlisted companies).
• Individual conservation commitment: Each beneficiary of the transfer commits to holding the received shares for at least 4 years after the end of the collective commitment.
• Management function: One of the signatories of the collective commitment or one of the beneficiaries of the transfer must exercise an effective management function in the company throughout the duration of the collective commitment AND for 3 years following the transfer.
• Operational activity: The company must carry out an industrial, commercial, craft, agricultural, or liberal activity (purely patrimonial companies – managing their own assets – are excluded, except for active holding companies).

The case of an active holding company

The Dutreil Pact can apply to active holding companies — holding companies that actively participate in the group's policy and control of subsidiaries, and that provide specific services to subsidiaries (strategy, management, accounting, legal). This is the case for many business owners' patrimonial holding companies (see our patrimonial holding company guide).

Please note: the qualification of an active holding company is regularly challenged by the tax authorities. It must be possible to demonstrate effective animation (management agreement, board meeting minutes documenting strategic decisions, invoices for intra-group services).

The concrete savings of the Dutreil Pact

Value of transferred business	Without Dutreil (duties 5-45%)	With Dutreil (75% exemption)	Savings
€1,000,000 (2 children)	~€130,000	~€15,000	~€115,000
€3,000,000 (2 children)	~€530,000	~€80,000	~€450,000
€5,000,000 (2 children)	~€1,050,000	~€150,000	~€900,000
€10,000,000 (2 children)	~€2,500,000	~€380,000	~€2,120,000

For a company worth €10 million, the Dutreil saving is €2.12 million. This is the most powerful mechanism in French tax law for business transfers.

The Dutreil Pact and Expatriation: Key Questions

Question 1: Can one benefit from Dutreil if the donor lives in Paraguay?

Yes, under certain conditions. The Dutreil Pact applies to the transfer of shares in French companies (or companies with their registered office in France). The donor's residence is not an eligibility criterion for the Dutreil Pact as such. What matters is:

• The company must carry out an eligible operational activity
• The conservation commitments (collective 2 years + individual 4 years) must be respected
• The management function must be exercised by a signatory or a beneficiary
• The shares are assets located in France (French company) = French taxation applicable

Therefore, a donor residing in Paraguay can use the Dutreil Pact to transfer shares of their French company — provided that the fundamental conditions are met.

Question 2: Can the management function be exercised from Paraguay?

This is the tricky part. The Dutreil Pact requires that an effective management function be exercised in the company during the collective commitment and 3 years post-transfer. Eligible functions: manager (SARL), president or CEO (SAS), administrator or member of the management board (SA).

Two scenarios:

• Scenario A — You remain a manager from Paraguay: Technically possible if you are a non-resident president of the French SAS. But you must demonstrate effective management (not just a title). Board meetings, board minutes, documented strategic decisions, regular trips to France. The administration could challenge the effectiveness of the management if you never set foot in France.
• Scenario B — A beneficiary (child) exercises management in France: This is the most secure scenario. Your child who receives the shares becomes the effective manager of the company in France. They exercise management for the required duration (3 years post-transfer). No question of effectiveness.

Recommendation: if possible, transfer management to a beneficiary based in France (child taking over the business) before or at the time of the Dutreil gift. This is the safest configuration.

Question 3: Should the transfer happen BEFORE or AFTER expatriation?

Both are possible, but the implications differ:

Transfer BEFORE departure (French resident)

• Advantage: No question about the effectiveness of management from abroad — you are in France, you manage, you give. Classic and secure configuration.
• Advantage: If you combine Dutreil + bare ownership (gift of bare ownership), the taxable base is reduced by 75% (Dutreil) × bare ownership value (tax scale according to age) = colossal savings.
• Disadvantage: You are still a French resident = the gift is subject to classic French law (but with Dutreil, that's precisely what you want).
• Disadvantage: Residual gift duties (on the 25% not exempt) are paid at the French rate.

Transfer AFTER departure (Paraguayan resident)

• Advantage: If condition 750 ter neutralized (6+ years PY) AND donee outside France: shares of a French company remain taxable in France (assets located in France), but Dutreil remains applicable = 75% exemption.
• Disadvantage: The management function must be effectively exercised — more delicate if you are in Paraguay. Plan for the transfer of management to a beneficiary in France.
• Disadvantage: If you relinquished your management functions before the gift, the collective commitment may have been broken if the signatory conditions are no longer met. Essential verification.

The optimal timing

The most frequent and safest strategy:

1. Before departure: Establish the collective conservation commitment (Dutreil Pact) with the concerned associates
2. Before or at the time of departure: Make the gift of shares with Dutreil (75% exemption) + bare ownership if possible
3. At the time of departure: Transfer effective management to a beneficiary (child taking over) who remains in France
4. After departure: The beneficiary exercises management for 3 years. You move to Paraguay as an ex-manager, free from any personal Dutreil obligation.

Dutreil + Bare Ownership + Paraguay: The Ultimate Combination

The combined mechanism

The Dutreil + bare ownership combination is the most powerful setup in French tax law for business transfers:

1. You gift the bare ownership of the shares to your children (value reduced according to your age)
2. You retain the usufruct (you continue to receive dividends)
3. The Dutreil Pact applies = 75% exemption on the value of bare ownership
4. Upon death: the usufruct merges with the bare ownership without additional duties

Numerical example

You are 50 years old. Business valued at €5 million. 2 child beneficiaries. Gift of bare ownership with Dutreil:

Step	Calculation
Full ownership value	€5,000,000
Bare ownership (50 years = 40% according to CGI article 669 scale)	€2,000,000
Dutreil exemption 75%	-€1,500,000
Taxable base	€500,000
Per child (€500,000 / 2)	€250,000
Allowance €100,000/child	-€100,000
Net taxable base per child	€150,000
Gift duties per child (20% scale)	~€28,000
Total duties for 2 children	~€56,000

Without Dutreil or bare ownership: duties on €5 million = ~€1,050,000. With Dutreil + bare ownership: €56,000. Savings: ~€994,000.

And if you add the 50% reduction for a full ownership gift before age 70 (article 790 of the CGI, applicable if the donor is under 70 for a full ownership gift — not applicable to bare ownership but applicable if full ownership gift): even greater savings in certain configurations.

After the gift: departure to Paraguay

Once the Dutreil gift is made and management is transferred to a child taking over:

• You retain the usufruct of the shares = you receive the company's dividends
• You move to Paraguay
• Dividends you receive as a non-resident usufructuary are subject to a 30% French withholding tax (no France-PY convention)
• Solution: if the company is sold after the gift, dividends are replaced by capital (no withholding on capital repayment). Or: sale of usufruct (repurchase by the bare owner children).
• Your main income now comes from your US LLC (consulting, new projects) = 0% in Paraguay

Transmission scenarios from Paraguay

Scenario 1: Dutreil gift before departure, child successor in France

Most secure and common configuration:

• Gift of shares with Dutreil + bare ownership BEFORE expatriation
• Child A becomes effective manager of the company
• You move to Paraguay with usufruct
• Individual commitment (4 years) respected by the child
• Management exercised by the child for 3 years
• After 4 years: the child can sell the shares if desired (without Dutreil challenge)

Risk: low if well structured. The gift is made BEFORE departure, all commitments are respected in France.

Scenario 2: Dutreil gift after departure, child successor in France

You are already in Paraguay and want to transfer:

• Collective commitment in place for 2+ years
• Gift by French notarial deed (possible by power of attorney from abroad)
• Child takes effective management in France
• Shares = assets located in France = French gift duties applicable
• Dutreil applies = 75% exemption

Moderate risk: the administration could scrutinize your role in the company (are you still a signatory to the collective commitment? Did you exercise a management function at the time of the gift?). Rigorous notarial structuring is essential.

Scenario 3: Succession (death) with active Dutreil

If you die in Paraguay with a Dutreil Pact in place:

• Shares of the French company are part of your estate
• Shares are assets located in France = French inheritance duties apply regardless of your domicile
• The Dutreil Pact applies if the commitments were respected at the time of death
• 75% exemption applicable on the value of the shares
• Heirs must undertake the individual 4-year conservation commitment and exercise management for 3 years

Risk: if no heir is able to exercise management in France, Dutreil could be challenged. Plan in advance for an heir to be trained and ready to take over management.

Dutreil and business sale: timing

The trap of selling before the end of commitments

If you sell the company's shares before the expiry of the 4-year individual commitment, the Dutreil Pact is challenged: the initially exempted transfer duties become payable (+ late interest + potential penalties).

The optimal sales strategy

1. Dutreil gift + bare ownership (minimal duties)
2. Respect of commitments (2 years collective + 4 years individual = 6 years minimum from the start of the collective commitment)
3. After expiry of commitments: company sale possible without Dutreil challenge
4. Capital gain: taxable in France (shares of French company) at PFU 30% or progressive scale. But for the beneficiary of the gift, the capital gain is calculated on the value on the day of the gift (not on the donor's original acquisition price) = reduced base = reduced tax.

Articulation with expatriation

Recommended timing:

• Year 0: Establishment of collective Dutreil commitment
• Year 2: Gift of shares (Dutreil + bare ownership)
• Year 2-3: Departure to Paraguay, transfer of management to child successor
• Year 6: End of 4-year individual commitment. Dutreil commitments respected.
• Year 6+: Child can sell the business or continue to manage it. No Dutreil challenge.
• Year 8+: Condition 750 ter neutralized for the donor. No residual French tax risk on worldwide assets.

The Dutreil Pact and non-French companies

European companies

The Dutreil Pact can apply to companies with their registered office in an EU or EEA State (article 787 B, I of the CGI). If your company is a Belgian, Luxembourg, or German company, Dutreil is usable under the same conditions as for a French company.

Companies outside the EU (US LLC, Paraguayan company)

The Dutreil Pact does not apply to companies outside the EU/EEA. Your US LLC or your Paraguayan SRL are not eligible for Dutreil. Consequence: Dutreil only concerns French (or EU) companies you own. For your Paraguayan and American structures, the transfer is done via Paraguayan (0% in direct line) and American mechanisms.

Specific pitfalls

The pitfall of the non-active holding company

If your holding company is a simple passive holding company (it holds investments but does not animate them, does not manage them, does not provide them with services), it is not eligible for the Dutreil Pact. The tax administration regularly challenges the active nature of holding companies. Necessary proofs:

• Animation/management agreement between holding and subsidiaries
• Board/shareholder meeting minutes documenting strategic decisions made by the holding company
• Invoices for intra-group services (accounting, HR, strategy, legal)
• Dedicated staff in the holding company (at least 1-2 people)
• Organizational chart showing the operational role of the holding company

The pitfall of articles of association modification post-gift

Any substantial modification to the company's articles of association during the commitment period (dilutive capital increase, change of activity, change of legal form) can challenge Dutreil. Consult your lawyer before any statutory modification.

The pitfall of the contribution-sale (150-0 B ter)

If you contribute your shares (benefiting from Dutreil) to another holding company before sale, the tax deferral regime (Article 150-0 B ter) interacts with Dutreil. The contribution may challenge the conservation commitment if the contribution occurs before the end of the individual commitment. Tax analysis is essential.

The pitfall of expatriation of the de facto manager

If you were the effective manager of the company and you go to Paraguay without genuinely transferring management (your child is the manager on paper, but you make all decisions from Asunción), the administration may contest the effectiveness of management in France = challenging the Dutreil scheme. The transfer of management must be real and documented.

The Dutreil Pact in the overall Paraguay wealth strategy

Dutreil is a complementary tool for the Paraguay strategy, not a substitute:

Tool	Usage	Interaction with Paraguay
Dutreil Pact	French company transfer at -75%	Compatible. To be done before or during expatriation. French shares = reduced French rights by Dutreil.
Paraguayan residency	0% current taxation on foreign income	Foundation of the strategy. US LLC consulting income = 0%.
US LLC	Post-transfer income	New consulting/advisory income after divestment of management.
Luxembourg life insurance	Capitalization and transmission	Company sale proceeds (after Dutreil) placed in Luxembourg life insurance = 0% capitalization + 0% transmission.
Trust	Asset protection, intergenerational governance	Post-sale: assets transferred to trust for long-term protection and governance.

The complete wealth sequence

1. Phase 1 (France): Implementation of the Dutreil Pact + donation of shares with bare ownership/usufruct split
2. Phase 2 (France → Paraguay): Transfer of management to the inheriting child + departure to Paraguay
3. Phase 3 (Paraguay): Consulting income via US LLC at 0% + capitalization of usufruct dividends (30% French withholding tax, temporarily acceptable)
4. Phase 4 (after 4 years): Dutreil commitments expired. The child can sell the company if desired.
5. Phase 5: Sale proceeds placed in Luxembourg life insurance (0% capitalization + 0% transmission) and/or trust (protection + governance)
6. Phase 6 (after 6+ years in PY): Article 750 ter condition neutralized. Future donations of assets outside France = 0%. Assets definitively outside French tax jurisdiction.

Case studies

Case 1: Industrial SME €4M, 2 children, manager 52 years old

Pierre manages a French industrial SME (SAS). Valuation: €4M. 2 children: Sophie (28, engineer in the SME) and Thomas (25, developer in Paraguay). Pierre wants to move to Paraguay.

Strategy:

• Collective Dutreil commitment (Pierre + Sophie) on 34% of shares: in place for 2 years
• Donation of bare ownership of 100% of shares to Sophie and Thomas with Dutreil
• Bare ownership at 52 years = 40%. Base: €4M × 40% = €1.6M. Dutreil 75%: base €400,000. Per child: €200,000. Allowance €100,000: net €100,000/child. Duties ~€18,000/child. Total: ~€36,000
• Sophie becomes president of the SAS (effective management in France)
• Pierre moves to Paraguay, retains usufruct (dividends)
• PY income: consulting via US LLC + usufruct dividends (30% French withholding tax on dividends)

Without Dutreil or bare ownership/usufruct split: duties ~€730,000. With: €36,000. Savings: ~€694,000.

Case 2: Holding company €8M, sale envisaged in 3 years

Catherine, 48, owns an active holding company (SAS) that controls 3 operating subsidiaries. Overall valuation: €8M. Only one child (24) who does not wish to take over. Objective: transfer then sell.

Strategy:

• Collective Dutreil commitment (Catherine + child) in place
• Donation of bare ownership with Dutreil: bare ownership 48 years = 30%. Base: €8M × 30% = €2.4M. Dutreil 75%: €600,000. Allowance €100,000. Net: €500,000. Duties: ~€90,000
• Catherine remains manager for 3 years post-donation (Dutreil condition)
• Year 3: Catherine transfers management and moves to Paraguay
• Year 4+: End of individual commitment. The child sells the holding company shares (sale of subsidiaries or global sale)
• Capital gain: calculated on base = value on the day of donation (not original price). If value has not increased much in 4 years: limited capital gain = limited tax.
• Sale proceeds: placed in Luxembourg life insurance + US LLC. 0% capitalization in Paraguay.

Without Dutreil: duties on €8M = ~€2M. With Dutreil + bare ownership/usufruct split: ~€90,000. Savings: ~€1.9M.

The complete ecosystem

• Tax lawyer specialized in Dutreil: structuring collective commitment, drafting pact, donation, notary coordination. Budget: €10,000-€30,000 (largely offset by savings).
• French notary: deed of donation, publication, registration
• Accountant: company valuation, justification of active holding company status
• Paraguayan tax residency (from €1,400)
• US LLC (post-transfer income)
• Luxembourg life insurance broker (placement of sale proceeds)
• Corporate law attorney (management transfer, amendment of articles of association if necessary)

Conclusion

The Dutreil Pact is the most powerful French tax scheme for business transfers — and it is fully compatible with expatriation to Paraguay. The 75% exemption on the value of shares, combined with bare ownership/usufruct split, allows for the transfer of a €5M company for ~€56,000 in duties (vs ~€1,050,000 without Dutreil). Savings: nearly one million euros.

The key is timing: ideally, structure Dutreil and make the donation BEFORE expatriation, then transfer management to an inheriting child in France, and move to Paraguay as a former manager retaining usufruct. The conservation commitments (6 years total) run while you live in Paraguay. After expiration, the child can sell the company and the proceeds are reinvested in Paraguayan structures (US LLC, Luxembourg life insurance) at 0%.

The Dutreil Pact is a French tool used for French assets. Paraguay is the framework that optimizes everything else: current income (0%), capitalization (0%), subsequent transmission (0%). The two are not in opposition — they are in synergy. Dutreil optimizes the exit from France. Paraguay optimizes what follows.

Do you own a French company and are you considering Paraguay? Contact our team for a personalized Dutreil + expatriation strategy: pact structuring, donation timing, management transfer, US LLC creation, coordination with your tax lawyer and notary. Your company deserves the best transfer — and your life deserves the best tax framework.