French Parliament Adopts 2026 Budget Law
On 2 February 2026, the French Parliament formally approved the Finance Bill for 2026, introducing a series of tax reforms affecting large corporations, multinational groups and patrimonial holding structures. The legislation extends several temporary measures, refines the implementation of global minimum tax rules and creates a new tax targeting certain nonprofessional assets.
The new framework confirms France’s continued alignment with European Union directives and OECD guidance while reinforcing domestic corporate taxation rules.
Corporate Income Tax Surcharge Extended
The Finance Bill extends the temporary corporate income tax surcharge for large companies for an additional fiscal year. Initially introduced under the 2025 Finance Law and designed to apply only to the first fiscal year ending on or after 31 December 2025, the surcharge will now also apply to the subsequent fiscal year.
For companies with a calendar year-end, this means the surcharge will apply to fiscal years 2025 and 2026. While the rates and calculation mechanisms remain unchanged, the revenue threshold has been increased. For the second year of application, the surcharge will apply to standalone companies or tax-consolidated groups generating at least €1.5 billion in revenue in France, compared with the previous €1 billion threshold.
Interest Deduction Rules Expanded
The legislation broadens the ability of French corporate borrowers to rely on an arm’s-length interest rate when deducting interest paid to minority shareholders. Previously, a rate exceeding the safe harbor threshold could generally be applied only when the lender qualified as a related entity, typically involving majority shareholders.
The reform extends this possibility to minority non-individual shareholders, provided that the arm’s-length nature of the interest rate is properly documented. The measure applies retroactively to fiscal years ending on or after 31 December 2025.
Goodwill Amortization Deduction Prolonged
The Finance Bill also extends for four additional years the temporary regime allowing tax deduction of goodwill amortization for goodwill acquired from unrelated parties. While the 2022 Finance Law had generally prohibited tax deduction of goodwill amortization, it introduced a temporary exception for acquisitions made between 1 January 2022 and 31 December 2025.
Under the new law, this derogatory regime will apply to goodwill acquired until 31 December 2029, subject to compliance with French GAAP requirements.
Updated Pillar Two and DAC 9 Implementation
France continues to refine its implementation of the EU Pillar Two Directive, which ensures a 15% minimum effective tax rate for multinational enterprise groups with consolidated revenue of at least €750 million in at least two of the last four fiscal years.
The 2026 Finance Bill incorporates OECD guidance issued in June 2024, particularly regarding deferred tax liabilities. It also adjusts definitions for specific industries and refines aspects of the French Qualified Domestic Minimum Top-Up Tax regime, including provisions affecting investment companies and insurance investment entities.
In addition, the law transposes the EU DAC 9 Directive into domestic legislation, strengthening administrative cooperation and information exchange related to Pillar Two compliance.
New 20% Tax on Certain Nonprofessional Assets
For fiscal years ending on or after 31 December 2026, a new 20% tax will apply to the fair market value of certain nonprofessional “lavish” assets, such as yachts and aircraft, when not allocated to operating activities.
The tax targets French companies subject to corporate income tax if more than 50% of their income is passive, the fair market value of their assets reaches at least €5 million, and an individual directly or indirectly controls at least 50% of voting or economic rights. Similar rules apply to foreign companies meeting these conditions where at least one controlling individual shareholder is tax resident in France, in which case the shareholder becomes liable for the tax.
As reported by experts at International Investment, the 2026 Finance Bill signals France’s continued tightening of corporate and patrimonial taxation while reinforcing its commitment to global minimum tax standards. Multinational groups and private holding structures with French exposure are likely to reassess their tax strategies in light of these developments.