France / Individual & Business – 2026 Tax Season: The Tax Changes You Need to Know

France’s 2026 tax season brings a series of important developments if you are a high-income taxpayer, business owner, entrepreneur, investor, or holder of a patrimonial holding company. You now need to think more in terms of effective tax rate, economic substance, and timing. Here is what is changing, what it may mean for you, and what you should start reviewing now. The Finance Law for 2026 was enacted on February 19, 2026.

CDHR: what you need to understand if you are a high-income taxpayer

The Contribution Différentielle sur les Hauts Revenus (CDHR) is one of the most important measures in the 2026 tax season. Its purpose is straightforward: if your overall level of taxation is considered too low compared with your income, an additional contribution may apply to move you toward a 20% minimum taxation level. The 2026 Finance Law does not let the CDHR expire after 2025; it extends it, with technical adjustments, until the year in which the public deficit falls below 3% of GDP. In practice, you should now treat the CDHR as part of the French tax landscape, not as a one-off measure.

Who may be affected?

You may be affected if your adjusted reference tax income exceeds:

• €250,000 if you are single, widowed, separated, or divorced
• €500,000 if you file jointly

The calculation logic is as follows:

• The tax authorities compute 20% of your adjusted reference tax income
• They compare that amount with tax already borne, including:
  • Income tax
  • The exceptional contribution on high income (CEHR)
  • Certain final withholding taxes
• If the tax already paid is below the minimum threshold, the difference becomes your CDHR

Why this matters

The CDHR particularly affects situations where a significant share of your income comes from:

• Dividends
• Capital gains
• Flat-taxed investment income
• Income benefiting from reductions, credits, or favorable structuring

Simple example

Assume your adjusted reference tax income is €600,000.

• Minimum tax target: €120,000
• Income tax + CEHR already paid: €105,000
• CDHR due: €15,000

What changes technically in 2026?

You should pay close attention to several features:

• The CDHR is extended
• Exceptional income is generally taken into account at only one quarter of its amount
• Family status changes are assessed over a broader look-back period
• Inbound and outbound tax residency situations are more clearly addressed
• Charitable donation reductions are treated less favorably in the CDHR calculation
• A year-end advance payment is required

The real operational issue: the December prepayment

You must pay between December 1 and December 15, 2026 an advance equal to 95% of your estimated CDHR.

That means before year-end, you should:

• Review income already received
• Estimate income likely to be received by December 31
• Model your effective tax burden
• Identify any year-end shortfall

If you materially underestimate the amount due:

• A 20% surcharge may apply
• Year-end transactions become more sensitive
• Late dividends, capital gains, and exceptional income deserve closer review

Key takeaway

• If you are a high-income taxpayer, the CDHR is now a recurring planning issue
• You need to think in terms of effective tax rate, not just nominal tax
• December 2026 is a key tax planning month for you

Applicable rates

• 20.6% if turnover is between €1.5 billion and €3 billion
• 41.2% above €3 billion

Practical points

• A smoothing mechanism applies between €1.5 billion and €1.6 billion
• A 98% advance payment is required
• The contribution is not deductible

Example

Assume your company has €1.58 billion of turnover in 2026.

Because of the smoothing mechanism:

• The rate is not automatically 20.6%
• It may be reduced to roughly 16.48%

This is an important reminder that these thresholds should not be read in a purely binary way. A precise simulation can materially change the actual cost.

Participation shares: why the TRPVLT sub-account matters

The law creates a specific sub-account called:

• TRPVLT = securities falling within the long-term capital gains regime

In practice, this helps you:

• Better identify relevant securities
• Secure the applicable tax treatment
• Reduce future controversy risk

Interest deduction: more flexibility in some cases

The possibility of using a market rate is extended to minority shareholders that are companies.

If you are in a:

• Co-investment structure
• Structured financing arrangement
• Joint venture
• Minority shareholder financing setting

This change may be useful.

Other business measures that matter

Several tax rules are extended or adjusted:

• Tax amortization of commercial funds is extended through December 31, 2029
• Deductions for artworks and musical instruments are extended through December 31, 2028
• Insurer provisions are extended to risks linked to riots
• Foreign activity income is now included in the LMP/LMNP status test in certain cases
• Several BIC, BNC, BA, and VAT thresholds are revalued
• The payroll tax scale is updated

Key takeaway

• If you are a large company, the exceptional contribution remains a major issue
• If you manage a group, documentation and accounting classification matter even more
• If you invest, some tax benefits remain available, but they are more targeted than before

The tax base may include:

• Certain non-business vehicles
• Yachts
• Pleasure boats
• Aircraft
• Jewelry
• Precious metals
• Wines and spirits
• Racehorses
• Certain residential properties reserved for your personal use

Numerical example

Assume you hold a French holding company with:

• Total assets: €12 million
• Passive income: 65%
• Family control: 80%
• Taxable personal-use assets: €4 million

The potential tax would be:

• 20% × €4 million = €800,000

This is the legislature’s message in very clear form: it is not only trying to tax income, but also to tax patrimonial structures that hold under-taxed lifestyle or non-professional assets.

If your holding is foreign

The issue does not disappear.

In some situations:

• The tax may be imposed directly on the individual tax resident in France
• A capping mechanism may apply
• An anti-abuse clause may also apply

Key takeaway

• If your holding is patrimonial, passive, and family-controlled, your risk level may be high
• This is no longer only a wealth structuring issue; it can become a major cash tax issue
• You should reassess substance, asset use, and the nature of passive income now

Tax credits: where opportunities remain

The 2026 tax season is not only restrictive. Some incentives remain valuable if you are investing, innovating, or operating in targeted sectors.

C3IV: the “green industry” tax credit

This tax credit is extended through December 31, 2028.

It supports investments linked to:

• Batteries
• Solar panels
• Wind turbines
• Heat pumps
• Certain critical raw materials

What you need to know

• The EU state aid framework matters more
• Approval requirements are tighter
• An ADEME opinion is no longer enough by itself
• The favorable view of the Ministry of the Economy becomes important

Example

Eligible project: €120 million

• Base rate: 15%
• Theoretical credit: €18 million

Collaborative research tax credit

The collaborative research tax credit is also extended through December 31, 2028.

• 40% standard rate
• 50% for SMEs
• €6 million annual cap

Other extended or adjusted incentives

• Investment tax credit in Corsica
• Audiovisual and animation tax incentives
• Incentives for foreign productions
• Sustainable aviation fuel tax credit

Key takeaway

• If you invest, 2026 still offers opportunities
• But the files are more selective and more regulated
• You should bring tax, regulatory, and documentation work together earlier in the project cycle

Individuals: apport-cession, real estate, and retirement planning

If you are an entrepreneur, investor, or private wealth holder, several rules change directly for you.

Apport-cession becomes more restrictive from February 21, 2026

If you use Article 150-0 B ter, here is what changes:

• Reinvestment quota: 60% → 70%
• Reinvestment period: 2 years → 3 years
• Holding period for reinvested assets: 1 year → 5 years
• Reinvestment is more tightly focused on eligible business activities
• Several financial and real estate activities are excluded

Example

Sale proceeds: €5 million

• Before: required reinvestment of €3 million
• After: required reinvestment of €3.5 million

👉 You now need to commit an additional €500,000.

Other important changes for you

Flat tax vs progressive rates

• The option to elect the progressive scale instead of the PFU becomes revocable from 2026 onward

Real estate

• The capital gains exemption for social housing is extended through December 31, 2027
• The exceptional allowance in certain tight housing markets is extended through December 31, 2029

Rental losses

• The enhanced €21,400 rental loss offset for certain energy renovation costs is extended through December 31, 2027

Retirement plans (PER)

• The carryforward period for unused deduction capacity increases from 3 years to 5 years
• Tax advantages on entry generally stop for contributions made after the holder’s 70th birthday

Example: retirement plan

If you do not fully use your 2026 deduction capacity:

• You may use the remainder through 2031

But if you contribute after age 70:

• You will no longer benefit from the same tax advantage at entry

Key takeaway

• Apport-cession still works, but it is much more demanding
• Real estate still offers selected opportunities
• Retirement planning remains useful, but age now matters more in the analysis

Net State revenues in 2024

• Total net State revenues: €348.9 billion
• Net personal income tax: €88.0 billion
• Net corporate income tax: €57.4 billion

Budget share

• Personal income tax share: 25.2%
• Corporate income tax share: 16.5%
• Combined share of both taxes: 41.7%

Public deficit in 2024

• €169.6 billion
• Equal to 5.8% of GDP

What these figures tell you

• Budget pressure remains significant
• Direct taxes remain central to State financing
• Much of the 2026 tax season is driven by yield, targeting, and control

WHAT YOU SHOULD DO NOW

If you want to approach 2026 with clarity, you should avoid a passive approach.

You should:

• Identify which measures really affect you
• Simulate their impact before they materialize
• Document your position
• Reassess your distribution, sale, reinvestment, or retention strategy a
• Bring tax timing into your decision-making

A practical 2026 action list may start with:

• A review of your CDHR exposure
• An assessment of your patrimonial holding
• An apport-cession simulation
• A review of available tax credits
• A quick audit of your real estate or retirement plan strategy