The 2026 French budget was finally voted after many debates, delays and amendments. Certain measures were also reviewed by the Conseil Constitutionnel (“CC”) who recently confirmed that they were constitutional. This included the 20% annual wealth tax on certain “non-productive” and luxury assets held via holding companies although the final version was amended - November 2025 bulletin .
In the end, the Government agreed to index the income tax scale bands and the main tax thresholds for inflation by 0.9%.
However, as expected, the wealth tax scale asset value bands and those applicable to gift and inheritance tax remain the same.
The scale rates (barème) applicable to 2025 income:
| Income Bands (€) - Applicable to 2025 taxable income | % |
| Up to 11,600 | 0 |
| Between 11,600 and 29,579 | 11 |
| Between 29,579 and 84,577 | 30 |
| Between 84,577 and 181,917 | 41 |
| In excess of 181,917 | 45 |
The annual allowance for the over 65 or disabled taxpayers, is set at:
- €2,822 if their 2025 taxable income is below €17,670, and
- €1,411 if it is between €17,670 and €28,430.
The plan to uphaul the annual pension allowance was shelved. The 10% pension allowance is therefore maintained for now, and the new maximum deduction for the household is set at € 4,439 with a minimum of €454 per pensioner.
The 10% salary allowance is capped at €14,555 per person, with a minimum deduction of €509.
The tax treatment and regimes for furnished lettings was heavily reformed in 2024 through the Loi Le Meur - see the French Furnished Lettings Insight.
In addition, the conditions for the professional landlord status inadvertently caught many non-resident French property owners. As a reminder, these conditions are as follows:
- a. Taxpayers with an annual rental turnover in excess of €23,000 and
- b. If their furnished rental income represents over 50% of their total earnings (including pensions). For non- residents of France, this criteria applied by reference to any other French source income only. Therefore, if earning over €23,000 in rentals they fell, de facto, under the professional landlord regime with all the consequences outlined in our French Furnished Lettings Insight. This is no longer the case.
Non-residents who received French source income in 2025 are subject to a minimum income tax rate of 20% up to €29,579 and 30% thereafter.
The Contribution Différentielle sur les Hauts Revenus (CDHR) introduced by the 2025 Budget, is set to remain until the public deficit falls below 3% of GDP. Where the criteria are met, the CDHR applies to the prorated income received by taxpayers who arrive in or depart from France during the tax year. Please refer to our November 2025 French budget bulletin for further details on this tax.
The option for the scale rates instead of the flat rate of 12.8% on investment income and gains is no longer irrevocable. Taxpayers who realise at a later stage that they would have been better off applying one or the other regime may request a reassessment within the three-year statutory limitation.
Registered gites ruraux will benefit from an exemption from occupier’s rates (taxe d’habitation) with effect from 1 January 2027.
Town councils will also be given the option to award an exemption from this local tax in respect of properties let on a seasonal basis and registered as meublés de tourisme classés or chambres d’hôtes.
The property declaration of occupation (déclaration d’occupation des locaux d’habitation) which must be updated by French property owners every year before June, is subject to greater scrutiny. From February 2026, property agents must provide information to landlords enabling them to complete or update their online declaration. Agents may also be given access to update these forms.
Occupiers of furnished accommodation must include information relating to the property they occupy on their tax form or expose themselves to sanctions.
As part of the French Social security budget for 2026, the CSG was increased from 9.2% to 10.6% in respect of most investment income and gains for 2025 income not already taxed at source. The portion of deductible CSG when assessed under the scale rates remains 6.8%.
Self-employed professional income (subject to URSSAF levies), salaries, unfurnished rentals, property gains, gains on life assurance, and professional landlord rentals remain subject to the lower rate.
In practice, the increase concerns bank interest, dividends, gains on investments, gains subject to exit tax, furnished rentals when not registered under the URSSAF.
As stated above, the 20% annual wealth tax on holding companies will be implemented from 2027 but was slightly amended to apply to a reduced and exhaustive list of taxable assets. Broadly speaking it concerns the following:
- Entities liable to French corporation tax or an equivalent tax if registered outside France but extended to non corporation tax paying companies to include those established in low or no tax jurisdictions;
- Entities which hold over €5m in assets;
- which have at least one private individual with a 50% minimum holding in voting or financial rights or holding controlling powers. Where these rights are held indirectly, the minimum 50% holding would be determined by multiplying the holding rights in each interposed entity. The rights held by the individual, their spouse/civil partner or co-dweller, ascendants, descendants and siblings, are aggregated, and representing one individual holding to determine which corporate vehicles fall within the scope of this tax. The minimum holding threshold is deemed attained if held via a trust or through an entity registered in a blacklisted territory.
- which receive unearned or “passive” income amounting to 50% or more of their total operating and financial income (excluding provisions and depreciation reversals). Typically, this relates to dividends, interest, rents, royalties, and gains on the sale of assets which generate these types of revenues.
The taxable assets are limited to the following items:
- a. Assets used for hunting or fishing.
- b. Vehicles which are not used for a professional or commercial activity, including yachts, leisure boats, private plane, gliders.
- c. Jewellery, precious metals.
- d. Race and show horses.
- e. Wines & other alcohols.
- f. Properties occupied on a gratuitous basis or for a peppercorn rent by the taxpayer or family members.
Should you have any queries in relation to your French tax affairs please email French.tax@bdo.gg
This publication has been carefully prepared, but it has been written in general terms and should be seen as containing broad statements only. It cannot be relied upon to cover specific situations without obtaining professional advice. BDO is the brand name of the BDO network and for each of the BDO member firms.
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