French draft Finance Bill for 2026

Extension of the Exceptional CIT Contribution for large companies (Article 4)

Initially introduced by the Finance Bill for 2025, the exceptional contribution applies to companies subject to corporate income tax (CIT) that generate turnover in France exceeding EUR 1 billion over a twelve-month period. The contribution is calculated based on the amount of CIT due at both the standard and reduced rates, prior to the application of any tax reductions, credits, or other receivables of any kind.

The applicable rate was determined according to the turnover generated during the first financial year ending on or after 31 December 2025:

• 20,6% for companies with turnover up to EUR3 billion
• 41,2% for companies exceeding this threshold

The draft Finance Bill for 2026 retains the same framework but proposes to extend the contribution for an additional year. For the second financial year ending on or after 31 December 2025, the rates would be cut in half:

• 10,3% for companies with turnover below EUR3 billion
• 20,6% for companies with turnover above EUR3 billion

Finally, the draft bill introduces a smoothing mechanism to adjust the applicable rate for companies whose turnover falls between EUR1 billion and EUR1.1 billion, and between EUR3 billion and EUR3.1 billion.

Clarifications to the Global Minimum Tax framework for multinational and domestic enterprise groups (article 26)

The Finance Bill for 2024 transposed Directive (EU) 2022/2523 of 15 December 2022 (the Directive) into domestic law under Articles 223 VJ to 223 WZ of the French Tax Code (FTC). The Directive aims to establish a minimum effective tax rate of 15% on the profits of large domestic and multinational enterprise groups operating in France. It forms part of the OECD/G20 Inclusive Framework’s global anti-base erosion (GloBE) rules, endorsed on 14 December 2021 under the BEPS initiative.

The draft Finance Bill for 2026 continues the transposition of the OECD’s administrative guidance. In this context, several amendments to the FTC are proposed, including:

• Clarifications of key definitions;
• Adjustments to the mechanism for deferred tax liabilities not reversed within five years;
• Refinements to the rules governing the allocation of the Qualified Domestic Minimum Top-up Tax (QDMTT).

The draft bill also proposes changes to the rules for designating the QDMTT taxpayer. In particular, to align the QDMTT collection requirements with the neutrality of the French tax regime applicable to investment entities, a specific exemption is introduced for standalone French investment entities. Where no other constituent entity (i.e. one that is not an investment entity) is located in France, the standalone investment entity would be exempt from the QDMTT. As a result, investment entities that are structurally undertaxed due to their tax-exempt status would not be subject to the QDMTT.

• These provisions would apply retroactively to fiscal years beginning on or after 31 December 2023.
• This measure is especially relevant for French investment funds with significant foreign investor participation, as it would relieve them from the reporting obligations and potential tax liabilities associated with the QDMTT.

Finally, the draft Finance Bill for 2026 also transposes the DAC 9 Directive. Notably, it grants the French tax authorities the power to request constituent entities to file a corrective information return where the initial filing contains manifest errors.

Adjustment of the VAT exemption threshold regime (Article 25)

The draft Finance Bill for 2026 revisits the reform of the VAT exemption threshold (franchise en base de TVA) introduced by the Finance Bill for 2025, which had established a single annual turnover threshold of EUR25,000 – a measure that was suspended until 31 December 2025.

While maintaining the aim of simplifying this regime, the draft Finance Bill proposes to raise the standard single threshold to EUR37,500, with a tolerance threshold of EUR41,250, beyond which the exemption ceases immediately.

By way of exception, to reflect the specific characteristics of the construction sector and avoid competitive distortions, real estate works would retain a specific threshold of EUR 25,000, with a tolerance threshold of EUR27,500.

The draft Finance Bill also clarifies that companies may continue to apply the thresholds in effect as of 1 January 2025 throughout the 2025 fiscal year, thereby ensuring a gradual transition to the new regime.

Lastly, copyright royalties subject to VAT withholding would be excluded from the threshold calculation.

Adjustment of E-invoicing and E-reporting obligations (Article 28)

The draft Finance Bill for 2026 introduces various amendments to the obligations concerning electronic invoicing (e-invoicing) and electronic data transmission (e-reporting), which are set to take effect from 1 September 2026.

The draft Finance Bill introduces the concept of certified platforms through which the issuance, transmission, and receipt of electronic invoices would be carried out. Under the new Article 290 B of the FTC, these platforms will be listed as partners of the French tax administration in a central directory and will be granted a renewable three-year certification.

For public entities, the draft Finance Bill for 2026 designates the Chorus Pro platform for the issuance and receipt of electronic invoices.

In order to ensure both legal certainty and administrative simplicity, the draft Finance Bill incorporates measures announced in recent months by the French Government for the benefit of taxpayers, along with certain additional adjustments.

Finally, the draft Finance Bill increases the penalties applicable in the event of non-compliance with these new obligations (subject to correction of a first infraction):

• Companies that fail to issue and receive their electronic invoices through a certified platform would be subject to a EUR500 fine after a formal notice remaining unaddressed for three months, increasing to EUR1,000 after a second notice within the same timeframe. This fine would be renewed every three months if the non-compliance persists.
• The fine provided under Articles 290 and 290 A of the FTC for failure to comply with data transmission obligations would increase from EUR 250 to EUR 500, capped at EUR15,000 per year.
• Certified platforms that fail to fulfill their transmission obligations would be subject to a fine of EUR750 per transmission, capped at EUR100,000 per year (compared with EUR45,000 currently).

The income tax reduction for small and medium-sized companies (IR-PME) is being refocused on investments by French fonds communs de placement dans l’innovation (FCPI) in young innovative companies (jeunes entreprises innovantes or JEI) (Article 8)

The draft Finance Bill refocuses the tax reduction on subscriptions to units of fonds communs de placement dans l’innovation (FCPI) in young innovative companies (jeunes entreprises innovantes or JEI) referred to in Article 44 sexies-0 A of the FTC. The scheme would henceforth be reserved for the financing of innovation and businesses with high growth potential.

As a reminder, the Finance Bill for 2025 had increased the income tax reduction rate to 30% for investments made through an FCPI in qualifying young innovative companies (JEI) between January 1, 2024, and December 31, 2028.

Meanwhile, the draft Finance Bill proposes more favourable conditions for FCPI investing in JEI.

• Funds would have 48 months (rather than the current 30 months) to reach their investment quota;
• Under certain conditions, funds could also use a broader range of financial instruments, including shareholder loans (current account advances);
• The overall cap on contributions and aid received by JEIs from subscriptions and financial assistance would increase from EUR15 million to EUR16.5 million.

These measures would apply to subscriptions made as from 1 January 2026, apart from the possibility for FCPI to use new eligible instruments for their investment quota, which would be subject to prior approval by the European Commission and would enter into force on a date to be set by decree (subject to such approval).

Acceleration of the phased elimination of the CVAE (Article 11)

The draft Finance Bill for 2026 proposes to accelerate the phase-out of the corporate value-added contribution (cotisation sur la valeur ajoutée des entreprises - CVAE) by bringing forward its full repeal to 2028, instead of 2030 as previously scheduled in the Finance Bill for 2025. In the meantime, the maximum CVAE rate would be reduced from 0.28% to 0.19% in 2026, and further to 0.09% in 2027.

Additionally, the cap rate for the territorial economic contribution (contribution économique territorial - CET), based on value added, would be adjusted accordingly.

Introduction of a tax on plastic packaging (article 21)

The draft Finance Bill for 2026 introduces several new environmental taxes, notably a tax on plastic packaging. This tax would be governed by newly established provisions in the Code of Taxes on Goods and Services (Code des impositions sur les biens et services – CIBS).

The tax would apply to packaging used for marketing products intended for household consumption or use, where the structural component is made of plastic. Packaging used for professional or industrial purposes would be excluded from its scope.

Liability for the tax would fall on:

• Eco-organisations responsible for the collection and recycling of such packaging;
• Local authorities;
• Producers operating individual compliance schemes under their extended producer responsibility (EPR) obligations, where applicable.

The tax would be calculated based on the national quantity of unrecycled plastic and allocated among the eco-organisations according to their respective market shares.

Extension of the Differential Contribution on High Income (Article 2)

The Differential Contribution on High Income (CDHR), introduced by the Finance Bill for 2025, would be extended for an additional year.

As a reminder, the CDHR applies to French taxpayers whose reference taxable income, after certain adjustments, exceeds EUR250,000 for single, separated, or divorced taxpayers, and EUR500,000 for jointly taxed couples.

The CDHR becomes payable if the average effective tax rate taking into account both income tax and the exceptional contribution on high income (CEHR) is below 20% of the adjusted reference taxable income.

Taxpayers subject to the CDHR will be required to make an advance payment equal to 95% of the estimated contribution due on 2026 income, between 1 and 15 December 2026, failing which penalties may apply.

The draft bill also clarifies the rules for determining whether a particular income qualifies as exceptional income, especially in cases involving changes in family circumstances during the tax year or the preceding three years.

Introduction of a 2% tax on non-operational assets held by private holding companies (article 3)

The French draft Finance Bill for 2026 introduces a new 2% tax on the value of certain assets held by private holding companies that are not allocated to the conduct of a professional activity.

Scope of application

The 2% tax applies to companies that meet the following criteria:

1. Companies established in France, subject to CIT either by default or by election;
2. Foreign companies, subject to an equivalent CIT or qualifying as corporations for French tax purposes (sociétés de capitaux), where at least one controlling shareholder is a French tax resident individual.

To be subject to the 2% tax, companies must cumulatively meet the following conditions as of the closing date of the financial year for which the 2% tax is due:

1. The fair market value of all assets held by the company equals or exceeds €5 million;
2. At least one individual shareholder, either directly or indirectly, holds (alone or with their family group — spouse, partner of a pact of civil solidarity, partner ascendants, descendants, siblings — or under a shareholders’ agreement) at least 33.33% of voting or financial rights, or exercises de facto decision-making power;
3. The company receives “passive income” (dividends, interest and similar income, royalties, copyright income, rental income, or capital gains from the sale of assets generating such income when they qualify as operating or financial income) representing more than 50% of the combined amount of operating and financial income, excluding recaptures of provisions and depreciation; and
4. The company is not directly or indirectly controlled by another company subject to the 2% tax.

Exemptions are provided for:

1. Collective investment undertakings (French UCITS and AIFs or foreign equivalents) structured as companies, where at least 33.33% of voting or financial rights are held by investors other than individuals;
2. Venture capital companies or foreign entities subject to equivalent regulation in their jurisdiction;
3. Companies that have opted for the SIIC (REIT-type) tax status or are subject to an equivalent tax regime in their country of establishment.

Tax base

The 2% tax is calculated on the aggregate fair market value of the following assets at the closing date of the financial year:

a. Tangible movable assets, real estate and related rights, excluding those used in an operational activity carried out by the private holding company, a related party, or the individual shareholder, or in a company where the individual carries out their professional activity. Debts incurred for the acquisition of real estate are deductible under rules similar to those applicable to the French real estate wealth tax.

b. Cash and investment securities, reduced by:

• Unused capital raised in the last 24 months;
• Proceeds from disposals not yet reinvested over the last two financial years;
• The highest of the following:
  - 15% of the fair market value of assets held at closing;
  - Twice the average accounting profit over the last three financial years; or
  - Short-term liabilities (due within one year) at closing.
  
  This mechanism allows for a “cash buffer” to be retained by the private holding company.

c. Direct and indirect interests in unlisted subsidiaries controlled by the private holding company, which themselves meet the criteria of 2% tax. The taxable amount includes:

• The value of the interests;
• Receivables held against the subsidiary;
• Certain debts owed by the subsidiary to the private holding company or its controlled entities, proportionally adjusted based on the subsidiary’s taxable assets and the holding’s ownership percentage.

Excluded from the tax base are:

• Qualifying participations - Titres de participation - (specific class of shares for accounting purposes that enables the shareholder to have a controlling interest or influence on the company);
• Shares in SMEs as defined under EU law;
• Units issued by a French fund complying with the tax quota requirements set out in Article 163 quinquies B of the FTC.

Taxpayers

• For companies with a French registered office, the 2% tax is payable by the company itself for financial years ending on or after 31 December 2025. It is not deductible for CIT purposes and must be paid with the final CIT balance. A detailed annex must be submitted outlining the 2% tax calculation.
• For companies with a foreign registered office, the 2% tax is payable by the French tax resident individuals who control the foreign company. The tax base is adjusted to reflect the share of non-resident shareholders. It must be declared in the individual income tax return of the French resident and applies to financial years ending on or after 31 December 2026.

To avoid double taxation, real estate assets subject to the 2% tax will be exempt from the French real estate wealth tax.

Mesures to modernise and streamline tax procedures (Article 29)

The 2026 French draft Finance Bill introduces a series of adjustments aimed at simplifying taxpayers’ obligations and improving administrative efficiency. The text extends the digitalisation of tax procedures, notably for the filing of inheritance tax returns.

Several measures are also intended to give taxpayers greater flexibility in their tax choices. In particular, the irrevocable nature of the option that currently allows taxpayers to choose between the progressive income tax scale and the flat-rate for the taxation of investment income and capital gains would be removed.