After more than two months of heated debate and hundreds of amendments examined, French parliamentarians (MPs and senators) were unable to reach a compromise on the 2026 finance bill. The government was therefore forced, as in 2025, to rush through a ‘special’ three-article bill to avoid a French-style shutdown.
However, parliamentary work will resume at the beginning of January, based on the latest version of the finance bill, namely the one adopted by the Senate (which could not be adopted during the inconclusive Joint Committee meeting on 19 December).
At this stage of the discussions, the main measures adopted are as follows:
Adjustment of the methods for calculating the differential contribution on high incomes (CDHR)
It should be noted that in February 2025, the CDHR was introduced, with the aim of establishing a minimum effective tax rate of 20% on high incomes (over EUR 250,000 for single taxpayers and over EUR 500,000 for taxpayers subject to joint taxation). The CDHR has been renewed for 2026 and several technical adjustments have been voted through. Special application rules are also provided for in the event of departure from France during the year.
Introduction of a tax on the non-operating assets of holding companies
A tax on asset holding companies was discussed and amended during parliamentary debates and finally adopted in the latest version of the Senate bill. However, senators limited the assets covered by the tax to unlet real estate and assets considered ‘luxury items’ (yachts, works of art, racehorses and sports cars, in particular). The company’s cash holdings were ultimately excluded from this tax. In return, and in order to emphasise the ‘anti-tax optimisation’ objective, the tax rate was raised from 2% to 20% at this stage of the debates. The tax is payable by shareholders who (together with their family circle) hold more than 50% of the financial or voting rights in the company.
Introduction of a tax on high net worth individuals (replacing the IFI)
Since 2022, the Senate has regularly adopted an amendment replacing the current property wealth tax (IFI) with a tax on ‘non-productive’ wealth, now known as the ‘contribution for high net worth individuals’, with an entry threshold set at EUR 2,570,000.
The aim of this new provision is to tax only non-productive assets that do not contribute to economic growth. This would therefore apply in particular to properties reserved for the taxpayer’s own use (main or secondary residences) or unoccupied or vacant, cash (all types of cash accounts) and all similar financial investments (money market funds). Digital assets (such as Bitcoins) are also included in the scope of this new tax, as are all tangible movable property (valuables, cars, yachts, aeroplanes), with the notable exception of antiques, works of art and collectors’ items.
Tax rates would remain those of the current IFI, set between 0.50% and 1.50%.
Amendment of the Dutreil pact
In response to the recommendations of a recent report by the Court of Auditors, the conditions of the Dutreil pact (which allows a company to be transferred free of charge under very advantageous conditions) would be tightened on the following points: extension of the individual retention commitment period from 4 to 6 years and exclusion of digital assets, passenger vehicles, works of art, racehorses and real estate not used exclusively for professional purposes from the exemption. A new anti-abuse clause would also regulate transfers financed mainly by debt (family buy-outs).
Reform of the capital gains tax regime for property sales (effective 1 January 2027)
In order to boost the volume of property transactions, it is proposed to reduce the tax rate from 36.2% to 15% for sales after more than two years of ownership (the rate would be 30% for less than two years). In return, the system of allowances for length of ownership would be abolished. In order not to penalise owners who would be totally exempt from capital gains tax under the old system, it has been proposed to postpone the entry into force of the new regime until 1 January 2027, to allow them to sell their property during 2026.
January will be another busy month for budget discussions, which may amend the measures already passed by the Senate on 15 December, but also add new tax revenues in order to achieve the announced target of a 5% deficit.
Alain Moreau
Partner, Paris
