France: Finance Act 2026 Introduces Targeted Tax Adjustments for Companies and Individuals

France’s Finance Act for 2026 (Law No. 2026-103) was adopted on 19 February 2026 following review by the Constitutional Council and was published in the Official Journal on 20 February 2026. The legislation introduces a number of targeted adjustments to corporate and personal taxation rather than the broader fiscal reforms initially anticipated by the government.

The new provisions generally apply to income tax due for 2026 and subsequent years, corporate income tax for financial years ending after the law’s publication, and other measures from the day following publication unless specific provisions state otherwise.

Below is an overview of the principal measures affecting businesses and individuals.

Corporate Taxation

New Tax on Non-Professional Assets of Holding Companies

The Finance Act introduces a new tax on certain non-professional assets held by holding companies, codified in Article 235 ter C of the French Tax Code. The tax will apply to financial years ending on or after 31 December 2026.

The measure targets companies with assets exceeding €5 million where at least one individual directly or indirectly holds more than 50% of the voting or financial rights or exercises effective decision-making power. It also applies where passive income represents more than 50% of the company’s operating and financial income.

Taxable assets include items such as passenger vehicles, yachts, aircraft, precious metals, competition horses, wines and spirits, and residences made available to controlling shareholders or their families without payment of market rent. The applicable tax rate is 20%.

Extension of Exceptional Corporate Income Tax Contribution

The exceptional corporate income tax contribution introduced by the Finance Act for 2025 for large companies has been extended. The contribution applies to companies whose turnover exceeds the applicable threshold and will now cover the first two financial years ending on or after 31 December 2025.

For the second financial year, the turnover threshold triggering the contribution is increased to €1.5 billion. The rules governing the calculation and application of the contribution otherwise remain unchanged.

Adjustment to Interest Deduction Rules

The Finance Act extends the ability to deduct interest at the market rate to interest paid to minority shareholders that have company status. Previously, this option was only available where the lender was a related company.

Clarification of Participation Exemption Rules

Changes have been introduced to clarify the qualification of equity securities eligible for the participation exemption regime. Securities recorded in an equity securities account or in a specific subdivision of a securities account may now qualify regardless of their accounting classification.

Adjustments to Global Minimum Tax Rules

The Act introduces technical adjustments to the French implementation of the OECD Pillar Two global minimum tax framework. These changes affect the calculation of the effective tax rate and the national complementary tax, including exemptions applicable to certain listed investment entities.

Taxation of Individuals

Changes to the Management Package Gains Regime

The Finance Act clarifies and adjusts the taxation of gains realised by employees or executives under management package arrangements involving company securities.

Among the key changes are clarification of the two-year holding requirement for certain instruments, the introduction of a mechanism allowing tax deferral where gains are reinvested, and adjustments to the tax treatment of donations and reinvestment transactions. The legislation also aligns the social security contribution regime with the tax treatment of such gains.

Amendments to BSPCE Share Warrants

The regime governing business creator share subscription warrants (BSPCEs) has been amended to allow issuing companies to allocate warrants to employees and executives of certain indirectly owned subsidiaries.

In addition, the minimum level of capital ownership by individuals required for a company to issue BSPCEs has been reduced from 25% to 15%.

Tightening of Capital Gains Deferral Rules

The Finance Act introduces stricter conditions for maintaining tax deferral on capital gains arising from the contribution of securities to a controlled company.

In particular, the proportion of sale proceeds that must be reinvested has increased from 60% to 70%, while the reinvestment period has been extended from two years to three years. New holding obligations also apply to assets acquired through reinvestment.

Extension of the Differential Contribution on High Income

The differential contribution on high income (CDHR), which ensures a minimum effective tax rate of 20% for certain high-income taxpayers, has been extended to apply to income earned in 2026 and subsequent years.

Amendments to the Dutreil Pact

The Dutreil Pact, which allows a 75% exemption from transfer duties on the transfer of businesses by donation or inheritance subject to certain commitments, has been amended.

Certain assets that are not used exclusively for the company’s economic activity, such as luxury items, collectibles or residences, are now excluded from the exempt base. In addition, the individual retention commitment period has been extended from four years to six years.

Introduction of the “Jeanbrun” Rental Investment Scheme

A new rental investment scheme known as “Jeanbrun” has been introduced in order to stimulate rental housing investment following the end of the Pinel scheme.

The mechanism allows a capped annual depreciation deduction based on the property’s purchase price, subject to rent ceilings, tenant income limits and a minimum nine-year commitment to rent the property.

Other Measures

The Finance Act also includes several additional measures.

The generalised social contribution (CSG) on certain capital income has been increased to 10.6%.

Electronic invoicing obligations have been confirmed, with the mandatory receipt of electronic invoices becoming effective for all businesses from 1 September 2026, while the obligation to issue electronic invoices will be introduced in stages through 2027.

Finally, the legislation merges two existing taxes on vacant dwellings into a single tax on vacant residential premises, which will apply from the 2027 tax year.

Conclusion

Although the Finance Act for 2026 does not introduce sweeping structural tax reform, it contains a number of targeted measures affecting corporate taxation, investment structures and the taxation of individuals. Companies and taxpayers with operations or interests in France should review these changes carefully to assess their potential impact and ensure compliance.

Aramis, France, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact france@transatlanticlaw.com

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