France: Tax measures in Finance Act 2026 adopted!

5^th february 2026

The French Finance Act for 2026 was adopted by the Parliament on February 2, 2026. It will be formally enacted after the publication in the official gazette, following the Constitutional Court’s decision on the bill, expected late February 2026.

Once again, this year, the bill comes against a political backdrop marked by the absence of a clear majority in the National Assembly, which led to increased negotiation during parliamentary discussions.

Furthermore, France is subject to an excessive deficit procedure decided by the EU Council. Consequently, the government intended to keep the public deficit below 5% in 2026.

To achieve this while avoiding a vote of no confidence, the government, which passed the bill using article 49-3 of the Constitution (allowing a bypass of the vote), had to make some political compromises in its final text.

As a result, the Act proposes 3 main measures of interest:

• a one-year extension of the exceptional surtax on corporate income tax applicable to the largest companies with significant profits (its rate will not be halved, as was initially proposed, but its threshold will be increased for 2026 to 1.5 billion Euros);
• the 20% minimum tax on high income taxpayers, also introduced last year as a temporary measure, is extended until the public deficit falls below 3% of the GDP and
• a tax on certain extravagant non-professional assets of holding companies is also created (note that it was initially intended as a tax on the financial assets of asset holding companies).  

One of the major compromises was that the timetable for abolishing the contribution on companies’ added value (CVAE) would not be modified as proposed in the initial finance bill in October. The CVAE will disappear, as set out in the 2025 Finance Act, in 2030.

These measures, as well as the bill’s proposed amendments to the Pillar Two rules, are discussed in more detail below.

Note that the adoption of the French Finance Act (which, in principle, should have happened before 31 December) was delayed after the Parliament failed to reach a compromise on the draft within the time allotted by the Constitution.

In the 2025 French Finance Act, large companies with sales revenues equal to or over €1 billion Euro in France were 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 (2024 and 2025 for financial years ending on the calendar year-end).

As a reminder, the 2025 exceptional surtax rates are determined by the 2025 financial year's turnover and/or that of the previous financial year (depending if it is above or below 3 billion Euros):

The 2026 Finance Act extends the contribution to two years. The tax is due 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).  

For 2026, the scope of the contribution is limited to larger companies and reduced in order to exclude medium sized companies. The 2026 surtax will only apply to companies with a turnover greater than or equal to €1.5 billion for the financial year in question, i.e. 2026 (€1 billion for the 2025 surtax). This means that the threshold will only be assessed for the financial year in which the contribution is due (2026), and not over two financial years as was the case for the contribution due in 2025.

The other elements of the surtax would remain the same.

The CVAE is a part of the territorial economic contribution (CET) due by companies engaged in an activity taxable under the business property tax (CFE) and whose sales revenues are over or equal to EUR 500,000. This tax is key for the public finances of French territories.

The CVAE will not be abolished two years ahead of the schedule set out in the 2025 Finance Act as initially proposed in the 2026 finance bill. The schedule for phasing out CVAE will not be revised and will follow the calendar set out by the 2025 Finance Act. It provides for the total abolition of the CVAE in 2030, with a maximum rate of 0.28% in 2026 and 2027, reducing to 0.19% in 2028 and 0.09% in 2029.

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 guidelines.

Since then, the OECD has continued its work, regularly releasing new administrative guidelines. 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  December 2023. However, the guidelines published in June 2024 could not be included in the 2025 Finance Act and are therefore transposed into the 2026 Finance Bill.

The guidelines concern: 

• a 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;
• reporting obligations for joint ventures.

The Directive of April 14, 2025, known as "DAC 9" on automatic exchange of tax information between Member States, would also be transposed. In particular, the French tax authorities would be able to ask constituent entities to file an amended global information return when the initial return contains obvious errors.

The 2026 French Finance Act introduces a tax of €2 per item contained in each small parcel (valued under 150 Euros) imported from a third country.

This temporary measure will come into force on 1 March 2026. It will apply until a Europe-wide levy is introduced to cover the costs of customs controls on e-commerce shipments, but no later than 31 December 2026.

A 20% tax on extravagant non-professional assets held by holding companies is introduced. It was initially intended as a tax on the financial assets of holding companies.   

Taxpayers liable for the tax remain as defined by the original text, but the scope and rate have been significantly modified. The new tax is now presented as an anti-optimization tool with a low expected yield.

It concerns:

• companies subject to French corporate income tax (CIT) with a registered office in France,
• 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 individual who is a French tax resident. In this case, the tax is paid by the individual French tax resident shareholder (otherwise, the tax is due by the company established in France).

These companies are liable for the tax if they meet the following cumulative conditions on the closing date of the financial year for which the tax is due:

• The market value of all the assets they hold is equal to or greater than €5 million.
• At least one individual (or its family circle) holds a fraction of the voting rights or financial rights equal to or greater than 50%, or an individual effectively exercises decision-making power therein.
• They receive passive income (dividends, interest, royalties, etc.) representing more than 50% of the amount of operating income and financial income, excluding reversals of provisions and depreciation.

The tax base is calculated on the market value of “extravagant goods” owned by the company that are not used for operational purposes, such as vehicles, yachts, aircrafts, jewellery, wines and spirits, accommodation reserved for the use of the relevant individual, etc.

The tax is payable for financial years ending on or after December 31, 2026.

The 2025 Finance Law introduced a temporary and exceptional contribution for 2025. It applies to French tax residents with an income exceeding €250,000 (€500,000 for married couples and other joint tax 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 this adjusted tax income.  

This minimum tax is extended until the public deficit falls below 3% of the GDP. The contribution gives rise to an instalment payment between 1 and 15 December each year.