Special Act 49.3 invoked twice, motions of no confidence rejected, the Constitutional Council referred to by the Prime Minister himself… The Finance Act for 2026 has finally been enacted. Here is an overview of the key measures.
For the second time in a row under the Fifth Republic, France had to wait until mid-February to adopt a budget. The draft Finance Bill for 2026 underwent a particularly chaotic parliamentary process: the first part was rejected by the National Assembly in November, the Joint Committee failed to reach an agreement, and Sébastien Lecornu invoked Article 49.3 on two occasions – during the second reading and then during the final reading – despite having solemnly declared that he would not resort to it. In the meantime, a special law had been passed at the end of December 2025 – an almost perfect replica of the previous year’s scenario [see our article from last year] – to enable the State to collect its taxes and borrow money whilst the saga played out. Following the rejection of the two motions of no confidence, the budget was finally passed on 2 February.
Having received four separate petitions – including the extremely rare one from the Prime Minister himself – the Constitutional Council handed down its ruling on 19 February, upholding the bulk of the text. Procedural objections, as well as criticisms regarding the accuracy of the forecasts, were dismissed: the Constitutional Council took this opportunity to point out that budgetary accuracy is assessed in terms of the absence of any intention to distort the broad outlines of fiscal balance, rather than in terms of perfect accounting precision. As a reminder, this budget aims to reduce the public deficit to 5 % of GDP, down from 5.4 % in 2025, with debt projected to stand at over 118 % of GDP by the end of 2026.
Major corporations are bearing the brunt of the corporation tax surcharge
The exceptional levy on the profits of large companies (CEBGE) is ‘exceptional’ in name only, as it is being extended to 2026 with a significantly revised scope: the threshold for liability has risen from €1 billion to €1.5 billion in turnover, allowing medium-sized enterprises (ETIs) that were liable in 2025 to be exempted. Some 300 groups now remain subject to the levy, with expected revenue of around €7.5 billion. For these large groups, effective corporation tax rates may rise to between 30 and 35 % depending on their size, with a 98 % advance payment due from 15 December 2026. Regarding the CVAE, the government has had to abandon plans to bring forward its phasing out: the timetable set out in the 2025 Finance Act remains unchanged, with complete abolition scheduled for 2030.
Business succession, holding companies, asset transfers: a trio under pressure
This is undoubtedly the part of the budget scrutinised most closely by executives and shareholders, and it has given rise to a constitutional episode that is, to say the least, unusual. The Prime Minister himself referred Articles 7, 8 and 11 to the Council, without raising any claim of unconstitutionality – a move which led the Council to confine itself to a formal review, without ruling on the substance of the matter. Consequently, these three articles have been declared neither in conformity with nor contrary to the Constitution, leaving the possibility open for the taxpayers concerned to raise a preliminary ruling on constitutionality (QPC).
The scope of the Dutreil inheritance tax relief scheme, which allows for a 75 % reduction in the value of a family business being transferred, has been narrowed. Assets that have not been used exclusively for industrial, commercial, craft, agricultural or professional purposes for a period of at least three years prior to the transfer are now excluded from the exemption: hunting and fishing equipment, passenger cars, yachts and aircraft, jewellery and precious metals, racehorses, wines and spirits, and residential properties. Furthermore, the individual commitment to retain the shares has been extended from four to six years. A preliminary audit of the composition of the assets is now required prior to any transfer.
The rules governing the ‘contribution-disposal’ regime (Article 150-0 B ter of the General Tax Code) have been substantially tightened for disposals of contributed securities taking place on or after 20 February 2026, the day following the enactment of the legislation. The time limit for reinvesting the proceeds of the disposal has been extended from two to three years – which is favourable – but the minimum reinvestment threshold has risen from 60 % to 70 %, and the holding period for assets acquired through reinvestment has been extended from two to five years. This last point appears particularly restrictive. Furthermore, the scope of activities eligible for reinvestment has been narrowed, with the explicit exclusion of the management of movable or immovable assets: it is now necessary, even more so than in the past, to demonstrate reinvestment in a genuine and operational economic activity in order to retain the benefit of the tax deferral.
The 2026 Finance Act introduces a new 20 % tax on certain assets held in ‘asset holding companies’. The tax applies where the company meets all three of the following conditions: a threshold of 5 million euros in terms of the market value of the assets held; a requirement that at least 50 % of the voting rights are held by at least one natural person; and the generation of predominantly passive income, such as dividends and interest. The tax base for this tax comprises luxury goods and certain residential properties exhaustively listed in the new Article 235 ter C of the General Tax Code. This tax, which is not deductible for corporation tax purposes, is payable in respect of financial years ending on or after 31 December 2026.
Flat tax, BSPCE, management packages: other changes not to be overlooked
Although it is set out in the Social Security Financing Act for 2026 rather than in the Finance Act itself, the increase in the CSG on investment income is worth mentioning given its significant impact on senior executives. This contribution is rising from 9.2 % to 10.6 %, bringing social security contributions from 17.2 % to 18.6 % and the flat tax from 30 % to 31.4 %. For households subject to the differential contribution on high incomes (CDHR), the overall rate can now reach 38.6 %.
The dates on which the changes come into force vary depending on the nature of the income. For capital gains (including capital gains on the disposal of securities), the increase applies from 1 January 2025 and will therefore affect disposals made in that year. For investment income (including dividends), it does not take effect until 1 January 2026. Finally, certain types of income remain subject to the social security contributions rate of 17.2 %: property income, capital gains on property, income from life assurance and capitalisation policies, as well as income from CEL, PEL and PEP savings schemes. It should be noted, however, that capital gains subject to tax deferral under the ‘apport-cession’ scheme (Article 150-0 B ter of the General Tax Code) remain subject to the social security contribution rate in force in the year in which they are realised. For business owners who are partially remunerated through dividends, the salary-versus-dividend trade-off should, in all cases, be recalculated.
As regards BSPCE shares, the conditions governing their issue and allocation will be relaxed with effect from 1 January 2026: the threshold for shareholding by individuals is lowered from 25 % to 15 %, and the allocation of warrants is extended to directors and employees of sub-subsidiaries, provided that the aggregate shareholding ratio reaches at least 75 %. Furthermore, the length of service within the intermediate subsidiary is taken into account when assessing the three-year requirement entitling the holder to the reduced rate of 12.8 %.
With regard to management packages, Article 24 restructures the tax regime for net gains by clarifying the distinction between the portion taxable as a capital gain and the excess portion, which is taxable as remuneration and salary. For the latter category, tax deferral is now possible, subject to certain conditions, where it is reinvested in the group via a contribution or exchange of securities. The rules applicable to gifts have also been revised: the gain is taxed in the name of the donor in the year of the transfer, rather than in the name of the donee in the year of the subsequent disposal. These provisions apply to transactions carried out on or after 15 February 2025, which necessitates a prompt review of existing contracts.
The new ‘Jeanbrun’ scheme introduces a tax status for private landlords, enabling individuals – and partners in companies not subject to corporation tax – to write off up to 80 % of the purchase price of properties intended for unfurnished letting as a main residence. The rates vary according to the type of let: 3.5 % for intermediate-rent accommodation, 4.5 % for social housing and 5.5 % for very low-rent housing in the case of new-build properties; 3 %, 3.5 % and 4 % for refurbished existing properties, provided that the renovation work accounts for at least 30 % of the purchase price. The deduction is capped at €8,000 per year per tax household, increased to €12,000 where the property is predominantly let as social or very social housing. The letting commitment is for nine years. The scheme applies to purchases made up to 31 December 2028. Finally, the C3IV and JEI schemes have been extended until 2028.
What now? QPCs lying in wait
The enactment of the law does not mark the end of the tax debate. Having been unable to rule on the merits of the case due to a lack of grounds for complaint, the Council leaves the door open for anyone who finds themselves confronted with these provisions in a legal dispute to bring a preliminary ruling on constitutionality (QPC). The definition of the tax base for the holding company tax, the proportionality of the impact on family succession, and the restriction on reinvestment in the ‘contribution-transfer’ arrangement are among the most likely areas to be challenged. Whilst these disputes are still developing, practitioners have a busy agenda: securing ongoing transfers and restructurings, reviewing the structure of asset-holding companies, and rethinking contribution-and-transfer arrangements in light of the new applicable rules. Tax instability remains, for the time being, the primary risk to be managed.
