Tax planning is part of every entrepreneur’s and investor’s strategy. But in France, there is a fine line between legitimate structuring and arrangements that are considered abusive. To police that boundary, the French tax administration relies on a powerful legal tool: the doctrine of abus de droit fiscal, or abuse of law.

This doctrine allows the authorities to disregard transactions that they consider artificial and aimed primarily, or even exclusively, at securing a tax benefit. In 2025, with the extension of the rules through the so-called mini-abus de droit mechanism, the scope of risk has significantly expanded. For foreign groups, entrepreneurs relocating to France, or wealthy individuals holding French assets, understanding how this doctrine works — and how to stay on the safe side — has become essential.

What is “abus de Droit ”?

The French abuse of law doctrine covers two main categories :

• Sham transactions : when the act is fictitious and conceals the real operation (for example, a false transfer of shares to avoid a taxable capital gain) ;

• Fraud against the spirit of the law : when the act is genuine but is carried out with no real economic or patrimonial purpose, solely to obtain a tax advantage contrary to the legislator’s intent.

Traditionally, the administration had to prove that the purpose was exclusively tax-driven. Since 2019, however, the “mini-abus de droit” regime allows it to intervene whenever the main purpose of a transaction is tax-driven. This seemingly subtle change has considerably broadened the scope of requalification.

The procedure

The abuse of law mechanism is not automatic. The French tax administration must follow a specific procedure: the taxpayer is formally notified, the reasons for the requalification are set out, and the taxpayer can respond. Importantly, the taxpayer may refer the case to the Committee for Abuse of Law, an independent advisory body made up of magistrates and experts.

While its opinion is not binding, it plays a crucial role: if the committee sides with the taxpayer, the burden of proof remains with the administration. If it supports the administration, it is then up to the taxpayer to prove the opposite.

Penalties and consequences

The sanctions are among the harshest in French tax law. Where an abuse of law is confirmed:

• The tax advantage is cancelled and the tax reassessed.

• A surcharge of up to 80% is applied, in addition to late payment interest.

• A reduced 40% penalty may apply where the taxpayer was not the main initiator of the scheme.

• In the most serious cases, matters can be referred to the Public Prosecutor for criminal prosecution of tax fraud, exposing company directors or individuals to heavy fines and even imprisonment.

Current trends in 2025

In recent years, the French tax administration has made growing use of this doctrine. Restructurings within groups, donation-cession schemes designed to “purge” capital gains, and certain intragroup financings have increasingly been challenged.

The “mini-abus de droit” in particular has become a key weapon, allowing the administration to disregard structures that, while not entirely artificial, appear primarily motivated by tax considerations.

This trend is reinforced by digital monitoring tools, data mining, and international information exchange, which make it easier for the authorities to identify transactions that deviate from standard patterns.

How to prevent abuse of law risks

For international groups and private clients with French connections, prevention is key. A few principles are essential:

• Substance matters: every transaction must be grounded in genuine economic or patrimonial rationale.

• Document everything: minutes of board meetings, consolidated reports, valuation studies, and service agreements should demonstrate that tax was not the only driver.

• Consider advance rulings (rescrits): French law allows taxpayers to seek the administration’s view on whether a contemplated structure constitutes an abuse of law. A positive response shields the taxpayer.

• Seek expert advice: local legal counsel can help test structures, anticipate risks, and defend them if challenged.

Conclusion

France is not hostile to legitimate tax planning, but it requires that structures have real economic or family substance. In 2025, the doctrine of abuse of law — and especially its extension to “main purpose” transactions — is a powerful reminder that purely tax-driven arrangements are likely to be set aside, with severe financial and legal consequences.

For foreign investors, family businesses, and entrepreneurs, the lesson is clear: plan ahead, document carefully, and seek professional support before implementing any structure with significant tax effects.

At Qualifisc, we assist international clients in securing their French operations and defending against abuse of law claims. Contact us for a confidential consultation.