France’s 20% Holding Company Tax (2026 Finance Act): Which Holdings Are Affected

Article 7 of the 2026 Finance Act created an annual 20% tax on certain assets held by asset-holding companies (sociétés holdings patrimoniales). It is codified in Article 235 ter C of the French Tax Code (code général des impôts, CGI) and applies to financial years ending on or after 31 December 2026. Its scope is narrow: three cumulative conditions and an exhaustive list of taxed assets. Many holding companies fall outside it. Those that fall within it bear a heavy charge.

The overall wealth planning framework is set out on our page on wealth strategy before 2027 (in French).

Which companies are affected?

The text covers companies with their registered office in France that are subject to corporate income tax, automatically or by election, as well as companies with their registered office outside France that are subject to an equivalent tax, or that are incorporated as capital companies, provided that at least one individual concerned is tax-domiciled in France.

Three conditions must be met at the closing date of the financial year.

1. The market value of all assets held is equal to or greater than €5 million. The threshold covers all assets, not only taxable assets.
2. At least one individual holds at least 50% of the voting rights or financial rights, or in fact exercises decision-making power in the company.
3. Passive income accounts for more than 50% of the combined operating income and financial income for the financial year, excluding reversals of provisions and depreciation.

Ownership is calculated under aggregation rules. An individual and their spouse, PACS partner (French civil partnership) or recognised cohabiting partner (concubin notoire), their ascendants, their descendants and their brothers and sisters are deemed to form a single person: their rights are aggregated. The same applies to shareholders bound by an agreement committing them to vote as one on distribution policy. For indirect ownership, the successive percentages are multiplied, but ownership of at least 50% is deemed to be total.

The ownership condition is also presumed to be met where the rights are held by a trust within the meaning of Article 792-0 bis of the CGI or by an entity located in a non-cooperative State or territory within the meaning of Article 238-0 A. Proof to the contrary is admitted, but it cannot result solely from the irrevocable nature of the trust or solely from the discretionary power of its trustee.

What counts as passive income?

The text lists them: dividends; interest and income from bonds, receivables, deposits and guarantees; royalties from the sale or licensing of patents, trade marks, processes or similar rights; income from copyright; rents; and proceeds from the sale of an asset generating any of this income where they constitute operating or financial income.

A useful exclusion is provided: where a company manages a group’s cash on a centralised basis under an agreement authorised by the French Monetary and Financial Code (code monétaire et financier), the income from investing and lending the sums concerned is not taken into account. A group parent company that centralises cash therefore does not automatically fall within the scope.

Which assets are included in the tax base?

The list is exhaustive. The following are included, at their market value at the closing date:

• assets used for hunting and assets used for fishing;
• vehicles not used for a business activity, passenger cars, yachts, sailing or motor pleasure boats and aircraft;
• jewellery and precious metals, excluding those used to run a museum or a historic monument, or displayed in a place open to the public or to the company’s employees, other than offices;
• racehorses or competition horses;
• wines and spirits;
• residential properties reserved for the individual’s own use, i.e. occupied free of charge or for a rent below the market price, whether as a main residence or not, as well as properties let on a sham basis.

For these properties, the debts relating to loans taken out by the company to buy them, outstanding at the closing date, are taken into account under the conditions laid down by the text.

Anything not on this list remains outside the tax base: equity investments, securities portfolios, cash, buildings let at market price, operating premises. In addition, the assets on the list are not included to the extent that, during the financial year, they were used for an industrial, commercial, craft, agricultural or professional activity carried on by the company, by a related company or by the individual under the conditions laid down by the text.

A worked example

A family holding company owned 100% by a couple and their two children closes its financial year on 31 December 2026. Its assets total €9,000,000 and 95% of its income comes from dividends and rents.

All three conditions are met: assets above €5,000,000, family ownership deemed held by a single individual above 50%, mainly passive income.

Two levers appear immediately, and neither is an artificial device: letting the villa at market price takes it out of the tax base, and removing the yacht from the company’s assets eliminates the heaviest line. A third lever is opened by the text itself: raising the share of operating income above 50% takes the company out of the scope.

Who pays, and how to file

Where the registered office is in France, the tax is payable by the company. It is declared under the same rules as corporate income tax, with an appendix detailing the calculations, and is paid on a self-assessment basis no later than the date of the final settlement of corporate income tax.

Where the registered office is outside France, the tax is payable by the individuals domiciled in France, on the portion of the value of their holdings that represents the taxable assets. It is declared on the annual income tax return under Article 170 of the CGI. Where ownership is split (démembrement), Article 968 applies.

Where the company has its registered office outside France, the text provides three forms of relief for the individuals liable. Similar taxes paid outside France are credited against the tax. A cap reduces the tax where its total, added to the taxes due on the previous year’s income, exceeds 75% of that year’s worldwide income. Above all, a safeguard clause disapplies the tax where the taxpayer shows that the choice of the company’s registered office and the holding of the shares do not have as their main purpose the circumvention of French tax legislation.

Key points

• Three cumulative conditions at the closing date: €5 million of assets, 50% ownership by an individual or their family group, mainly passive income.
• The tax base is exhaustive: neither securities, nor cash, nor buildings let at market price are included.
• The rate is 20% of the market value of the assets concerned, for financial years ending on or after 31 December 2026.

Asset-holding or active holding company (holding animatrice), business or non-business assets: the classification determines the tax treatment. Our tax lawyer audits the structure and the documentation of the active management role.

Frequently asked questions

Is my holding company affected?
Only if the three conditions of Article 235 ter C are met at the closing date: €5 million of assets, at least 50% ownership by an individual or their family group, and passive income representing more than half of operating and financial income.

Is a securities portfolio included in the tax base?
No. The list of taxable assets is exhaustive and includes neither securities, nor cash, nor operating premises or buildings let at market price.

Is a home made available to the shareholders taxed?
Yes, where it is occupied free of charge or for a rent below the market price, whether as a main residence or not, and also in the case of a sham letting. Outstanding acquisition debts are taken into account.

From which financial year does the tax apply?
To financial years ending on or after 31 December 2026. A company with a 30 June year end is subject to it for the first time for the financial year ending 30 June 2027.

Does a foreign holding company escape the tax?
No. Where the registered office is outside France, the tax is payable by the individuals domiciled in France, on the portion of their holdings that represents the assets concerned. A safeguard clause applies if the taxpayer shows that the choice of registered office does not have as its main purpose the circumvention of French tax legislation.

Have your structure audited

We check the three conditions for liability, the composition of the tax base and the room for manoeuvre opened by the text. See our article on tax deferral on a contribution of shares (in French), the one on abuse of law in tax matters and the one on protecting your wealth before 2027 (in French). Every situation is different and deserves a dedicated analysis.

Official sources

• Article 235 ter C of the French Tax Code (code général des impôts), tax on assets of asset-holding companies not used for an operational activity – Légifrance (in French)
• Law no. 2026-103 of 19 February 2026, Finance Act for 2026 (loi de finances) – Légifrance (in French)
• Article 792-0 bis of the French Tax Code, definition of a trust – Légifrance (in French)
• Article 238-0 A of the French Tax Code, non-cooperative States and territories – Légifrance (in French)
• Article 968 of the French Tax Code, assets with split ownership – Légifrance (in French)
• Article 170 of the French Tax Code, annual income tax return – Légifrance (in French)

This article presents the state of the law for general information purposes, verified at the date of publication. It does not constitute legal advice. Every situation is different and deserves a dedicated analysis. Content compliant with the professional ethics rules of the legal profession.