23th october 2025
The initial draft of the Finance Bill for 2026 was published on October 14, 2025. Assuming the parliamentary procedure follows its normal course, the constitutional deadline of 70 days for Parliament to examine the bill should be met such that it may be adopted before December 31, 2025.
The draft bill text will serve as the basis for negotiations during parliamentary scrutiny and is likely to undergo several amendments. Once again, this year, the draft comes against a political backdrop marked by the absence of a clear majority in the National Assembly, which may lead to increased negotiation and potential amendments during parliamentary discussions.
Furthermore, France is subject to an excessive deficit procedure decided by the EU Council. Consequently, the newly appointed government has proposed to reduce the public deficit to below 5% for 2026.
To achieve this, the bill proposes a one-year extension of the exceptional surtax on corporate income tax applicable to the largest companies with significant profits (while halving its rate for the 2026 financial year) and the 20% minimum tax on high income taxpayers, both introduced by the 2025 Finance Act. Introduction of a tax on the financial assets of holding companies is also proposed.
At the same time, the timetable for abolishing the contribution on companies’ added value (CVAE) would accelerated to 2028 (rather than in 2030 as set out in the 2025 Finance Act).
These proposals, as well as the bill’s proposed amendments to the Pillar Two rules, are discussed in more detail below.
TAXATION FOR BUSINESSES
One-year extension of exceptional surtax on corporate income tax applicable to largest companies with significant profits, with halved rates
The exceptional surtax on corporate income tax, which was introduced by the 2025 Finance Act and applies to the largest companies with significant profits would be extended by one year. The applicable rates would also be halved.
Large companies with sales revenues equal to or over €1 billion in France are subject to an exceptional contribution for the first FY ending on or after December 31, 2025. The sales revenues level is assessed based on the fiscal year in which the contribution is due or the previous fiscal year.
The tax would be payable for the first two financial years ending on or after December 31, 2025 (i.e. 2025 and 2026 for financial years ending on the calendar year-end).
As a reminder, the 2025 Finance Act provides that the exceptional surtax rate will be determined by the 2025 financial year's turnover and/or that of the previous financial year:
| Liable companies with turnover of less than €3 billion for the financial year in which the contribution is due and for the previous financial year | Companies with turnover greater than or equal to €3 billion for the financial year in which the contribution is due or for the previous financial year | |
|---|---|---|
| FY 2025 | 20,6% (TEI 30,97%) | 41,2% (TEI 36,125%) |
The applicable rates would thus be halved as follows for the second financial year ending on or after December 31, 2025:
| Companies liable for tax with turnover of less than €3 billion for the financial year in which the contribution is due and for the previous financial year | Companies with turnover greater than or equal to €3 billion for the financial year in which the contribution is due or for the previous financial year | |
|---|---|---|
| FY 2026 | 10,3% (TEI 28,4%) | 20,6% (TEI 30,97%) |
The other elements of the surtax would remain the same.
Contribution on companies’ added value (CVAE) abolition brought forward to 2028
The schedule for phasing out CVAE would be revised and accelerated. The gradual phasing out of the CVAE would resume in 2026. The maximum CVAE rate would thus be lowered from 0.28% to 0.19% in 2026, then to 0.09% in 2027, before the contribution would be completely abolished in 2028 (i.e., two years ahead of the schedule set out in the 2025 Finance Act).
For the time being, the 2025 Finance Act provides for the total abolition of the CVAE in 2030, with a maximum rate of 0.28% in 2026 and 2027, rising to 0.19% in 2028 and 0.09% in 2029.
INTERNATIONAL TAX
Pillar Two: Integration of OECD's June 2024 administrative guidelines and transposition of DAC9
The 2024 Finance Act implemented the EU Directive on Minimum taxation (GloBE rules) into domestic law (Directive (EU) 2022/2523 of 14 December 2022). It introduced a domestic minimum top-up tax (DMTT), the income inclusion rule (IIR), as well as the undertaxed profit rule (UTPR). The 2024 Finance Act also transposed parts of the February and July 2023 OECD Pillar Two administrative guidance.
The transposition by the 2024 Finance Act incorporates the administrative guidelines adopted by the OECD/G20 Inclusive Framework in February and July 2023.
Since then, the OECD has continued its work, regularly releasing new administrative guidance. The latest two were made public in December 2023 and June 2024.
The Finance Act for 2025 enriched the French text, incorporating the administrative guidance of 18 December 2023. However, the guidance published in June 2024 could not be included in the 2025 Finance Act and is therefore proposed to be transposed into the 2026 Finance Bill.
The proposed clarifications concern:
- Mechanism for adjusting deferred tax liabilities not reversed after a period of five years (possibility of tracking these liabilities by category)
- Adaptation of some definitions (e.g., ultimate parent entity and consolidated financial statements) to the specific characteristics of the mutual banking sector and mutual insurance groups, which present combined accounts rather than consolidated accounts
- Rules for allocating the QDMTT between the constituent entities of a group where the current allocation rules do not allow for the allocation of any tax
- Rules relating to the taxation of certain investment entities and insurance investment entities under the QDMTT
The directive of April 14, 2025, known as "DAC 9" would also be transposed. In particular, the French tax authorities would be able to ask constituent entities to file an amended information return when the initial return contains obvious errors.
PERSONAL TAXATION
One-year extension of the 20% minimum tax on high income taxpayers
The 2025 Finance Law introduced a temporary and exceptional contribution for 2025. It applies to French residents with an income exceeding €250,000 (€500,000 for married couples and other joint filers) whose effective income tax rate is below 20% of their adjusted tax income.
The contribution is equal to the difference between the taxpayer’s effective income tax and 20% of the adjusted tax income.
This minimum tax would be extended for one year. The contribution would therefore be due for 2026 and would give rise to the payment of an instalment between December 1, 2026, and December 15, 2026.
Introduction of a tax on the financial assets of asset holding companies
A 2% tax on non-professional assets held by holding companies would be introduced. It would be payable by (1) companies subject to French corporate income tax (CIT) with a registered office in France, and (2) companies with a registered office outside France that are subject to a tax equivalent to the French CIT or that are limited companies, and which are owned at least by one natural person who is a French tax resident, where these companies meet the following cumulative conditions on the closing date of the financial year for which the tax is due:
- Market value of all the assets they hold is equal to or greater than €5 million
- At least one natural person holds a fraction of the voting rights or financial rights equal to or greater than 33.33%, or a natural person effectively exercises decision-making power therein
- They receive passive income representing more than 50% of the amount of operating income and financial income, excluding reversals of provisions and depreciation
- They are not controlled, directly or indirectly, by another company subject to the tax
The tax would be payable for financial years ending on or after December 31, 2025.
According to the explanatory memorandum, "companies whose main activity is the production of goods and services are not subject to this tax, thereby protecting operational companies and our productive fabric. However, income from these activities, when held in asset-holding companies and not distributed, is subject to taxation."
