1. Introduction
1.1 Article 7 of the 2026 French budget created a tax on non-commercial “luxury” assets held through “patrimonial” holding companies by French tax residents.
1.2 The tax is codified in the new French tax code Article 235 ter C, which refers to “taxable companies” rather than “société holding patrimoniale” (personal and family assets holding company) since there is no legal definition within French tax law for the latter.
2. Taxable Entities – Scope Criteria
The holdings companies’ wealth tax applies to entities which fulfil all the conditions listed below:
a) Companies registered in France and subject to French corporation tax, and those registered outside France with at least one “controlling” individual resident in France, and which are subject to taxation e.g. French corporation tax. Nevertheless, to avoid the exemption of any corporate asset-holding vehicle which are not subject to corporation tax, the scope extends to include these also, for instance, Luxembourg-corporate family offices or other similar wealth-holding corporate vehicles.
b) and, the French resident controlling individual who holds, directly or indirectly, at least 50% of voting rights even if not holding at least 50% in financial rights or vice versa. It also includes anyone who holds controlling decision making powers for the entity. To determine if this condition is fulfilled the holding or rights held by members of an individual’s immediate family, including parents, unmarried partners, children who are not part of the tax household, and siblings, are taken into account thus they are all presumed to constitute “one controlling person” (regardless of their tax residence). In the event of an agreement with other associates in terms of voting or financial rights, the other’s “shares” are also considered under this heading.
This minimum “holding” criteria is deemed attained where these voting or financial rights are held via a trust or an entity registered in a blacklisted territory. The legislation makes no reference to a minimum deemed holding level, so this presumption applies even if one voting right or a minimal financial right is held. There is currently no reference to the “power of decision” being deemed held by the French resident in the context of a trust or backlisted territory. It is possible for the taxpayer to provide evidence that the rights held directly or indirectly do not achieve the minimum 50% threshold. However, they cannot solely rely on the irrevocability or discretionary nature of a trust to do so.
c) and, the entities own non-commercial assets worth at least € 5M on 1st January; this value threshold is not cumulative and therefore considered independently for each entity.
d) and, the assets held by the corporation mainly generate “passive” income (50% or more of their income), as opposed to professional, commercial, agricultural or industrial income. Dividends, interest, royalties, and rent all fall into the category of “passive” income for the purpose of this wealth tax.
3. Taxable Assets
3.1 If all the conditions are met, the wealth tax applies to the following assets held by the entity:
a) Assets used for hunting or fishing.
b) Vehicles which are not used for a professional or commercial activity, including yachts, leisure boats, private planes, gliders.
c) Jewellery, precious metals.
d) Racing 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.
3.2 The is an exhaustive list so any assets which are not listed are outside the scope of the corporate wealth tax.
4. Tax Calculation and payment
4.1 The rate is fixed at 20% of the market value as at 1st January of the assets listed in section 3 above. The taxable basis is prorated to the direct or indirect ownership percentage by the French resident taxpayer or by the French entity. Any similar taxes paid outside France in respect of these assets by the entity or the taxpayer may be allowable as a deduction from the taxable value.
4.2 French resident taxpayers who may already be personally reporting certain real estate assets for their “impôt sur la fortune immobilière” or “IFI” (personal French wealth tax on real estate), will simply provide details of these assets on an annexe to their personal wealth tax return, to claim an exemption from the 20% corporate holding wealth tax.
4.3 If in scope, the tax is payable by the French resident entities and the information necessary to compute the tax liability is reported along with the company’s corporation tax return.
4.4 For entities in scope and with a registered office outside France, the tax is payable by the French resident taxpayer who meets the criteria in para. 2(b). Much like the personal wealth tax or “IFI”, the information to calculate the corporate holding wealth tax is reported as an annexe to the personal income tax return. The tax liability is payable within 30 days from the date of the assessment, issued when the authorities have processed the relevant tax return.
4.5 The statuary limitation is fixed to three years, which means that the French tax authorities may query or challenge the reporting and attempt to re-assess up to 31 December of the third year following the year of assessment.
4.6 A capping mechanism such as that for personal wealth tax (“IFI”) is applied to limit the total tax liability of a taxpayer to 75% of available income.
4.7 Where applicable the tax liability becomes due for the first time in 2027.
Should you have any queries in relation to your French tax affairs please email French.tax@bdo.gg
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