Executive summary

On 14 October 2025, the French Government presented the draft Finance Bill for 2026 (draft Bill). The French Parliament will discuss and potentially amend the draft Bill over the coming weeks and is expected to vote on the final version by the end of December 2025.

This Global Tax Alert summarizes some of the key tax changes included in the draft Bill that may affect corporations, including:

• A prorogation of the exceptional contribution based on Corporate Income Tax (CIT) owed by large companies
• Revised Pillar Two rules
• An advance repeal of the Business Contribution on the Added Value (BCAV)
• A new 2% tax on non-professional assets held by French and non-French patrimonial/holding companies

Detailed discussion

Prorogation of the exceptional contribution based on CIT owed by large companies

The Finance Bill for 2025 provided for the creation of a temporary CIT surcharge to be imposed on standalone companies, or tax-consolidated groups, with revenue realized in France equal to at least €1b. (For background, see EY Global Tax Alert, French Parliament approves Finance Bill for 2025, dated 14 February 2024.)

This surcharge was only supposed to apply to the first fiscal year (FY) ending on or after 31 December 2025, yet the draft Bill provides for its continuation to the second FY ending on or after 31 December 2025.

The corresponding rate for this second FY would be equal to:

• 10.3% for standalone companies or tax-consolidated groups with revenue realized in France equal to or greater than €1b, but less than €3b
• 20.6% for standalone companies or tax-consolidated groups with revenue realized in France equal to or greater than €3b

The draft Bill also adjusts the existing smoothing mechanism applicable to these rates, to take into account taxpayers with revenue below the €1b or €3b thresholds for one of the two FYs with respect to which the surcharge is due, but with revenue exceeding these thresholds by less than €100m for the other FY.

Revised Pillar Two rules

The Finance Bill for 2024 provided for a transposition into French domestic law of the European Union (EU) Pillar Two Directive ensuring a 15% minimum tax on the profits of multinational enterprise (MNE) groups that operate in France and have consolidated revenue of at least €750m generated during at least two of the last four FYs.

The draft Bill revises the French legislation notably to: (1) consider the Pillar Two guidelines of the Organisation for Economic Co-operation and Development (OECD) published in June 2024 (addressing the treatment of deferred tax liabilities): (2) adjust some terms and definitions to the specificities of certain industries; and (3) adjust some rules concerning the French Qualified Domestic Minimum Top-Up Tax (QDMTT) and, more specifically, address the case of undertaxed investment companies or insurance investment companies.

The draft Bill also provides for the transposition into French domestic law of the EU DAC 9 Directive extending administrative cooperation and the exchange of information under the Pillar Two rules.

Advance repeal of the BCAV

The BCAV is a local tax applicable to any person carrying out a trade or business in France and is levied on the added value that the trade or business generates.

The Finance Bill for 2025 postponed repeal of the BCAV, allowing the tax to be completely abolished as of 2030.

The draft Bill modifies this timeline, so the tax would be completely abolished as of 2028, with the following applicable maximum BCAV rates: 0.19% in 2026 and 0.09% in 2027.

New 2% tax on non-professional assets held by French and non-French patrimonial/holding companies

For FYs ending on or after 31 December 2025, the draft Bill adds a 2% tax on non-professional assets to be imposed on companies headquartered in France and subject to French CIT, if the following conditions are met:

• An individual holds, directly or indirectly, alone or with their relatives (and potentially with the other shareholders if, all together, they act in concert), 33.33% of the voting rights or the economic rights of the company or has de facto the decision-making power within this company.
• More than 50% of the company's operating and financial income derives from passive income.
• The fair market value of the company's assets is equal to or greater than €5m.
• The company is not controlled, directly or indirectly, by another company subject to this new tax.

For FYs ending on or after 31 December 2026, this new tax would also apply to companies that are headquartered outside France and subject to a tax equivalent to French CIT if (1) the above-mentioned conditions are met and (2) the individual shareholder is domiciled in France (in this situation, the individual shareholder would be liable for the 2% tax).

Implications

Corporations with interests in France should consider the above changes and consult with their tax advisors as needed.