France's Finance Act 2026 (Law 2026-103 of 19 February 2026) has extended an exceptional corporate income tax surtax for a second financial year, pushing effective tax rates to approximately 30.98% for large groups with turnover between EUR 1.5 billion and EUR 3 billion, and to approximately 36.13% for those exceeding EUR 3 billion. The measure applies on top of the standard 25% corporate income tax rate and represents a significant, if temporary, increase in the French tax burden for affected international groups. Companies with operations or holding structures in France should assess their exposure without delay.
| Turnover threshold | Surtax rate (% of CIT liability) | Approximate overall effective rate | Standard CIT rate (reference) |
|---|---|---|---|
| Below EUR 1.5 billion | Not applicable | 25% (standard rate) | 25% (art. 219 CGI) |
| EUR 1.5 billion – EUR 3 billion | 20.6% of CIT | ~30.98% | 25% (art. 219 CGI) |
| Above EUR 3 billion | 41.2% of CIT | ~36.13% | 25% (art. 219 CGI) |
| SMEs – turnover below EUR 10 million | Not applicable | 15% on first EUR 42,500 of profit; 25% thereafter | Art. 219 CGI |
What Changed and When
The exceptional contribution was originally introduced as a one-year measure. The Finance Act 2026, enacted on 19 February 2026, extended it for a further financial year under article 12 of Law 2026-103. The surtax is calculated as a percentage of the corporate income tax liability itself, not as a surcharge on taxable profit, which means its impact scales directly with a group's French CIT exposure before credits and reliefs.
The standard French corporate income tax rate remains 25% under article 219 of the Code général des impôts (CGI). Small and medium-sized enterprises with turnover below EUR 10 million continue to benefit from a reduced 15% rate on the first EUR 42,500 of taxable profit. Neither of these parameters has been altered by the Finance Act 2026.
On the local business tax front, the abolition of the Cotisation sur la valeur ajoutée des entreprises (CVAE) remains scheduled for 2030. A legislative proposal to bring that date forward to 2028 was not adopted in the final text of the Finance Act.
Who Is Affected
The surtax applies to companies subject to French corporate income tax whose turnover reaches or exceeds EUR 1.5 billion. In practice, this captures French-incorporated entities, French branches of foreign companies, and members of French tax-consolidated groups (intégration fiscale) whose aggregate revenue meets the threshold. Groups that fall just below the EUR 1.5 billion mark but are growing towards it should monitor their position closely, as crossing the threshold triggers the lower surtax band immediately.
For international groups operating in France through subsidiaries or permanent establishments, the interaction between the surtax and applicable tax treaty provisions, existing transfer pricing policies, and broader tax structuring arrangements warrants careful review. An increase of this magnitude in the effective French rate can materially affect group-level tax charges, financing structures, and the allocation of costs and profits between jurisdictions.
Groups subject to the OECD Pillar Two global minimum tax rules should also model whether the surtax affects their top-up tax calculations under the Income Inclusion Rule or Qualified Domestic Minimum Top-up Tax frameworks, as the interaction is not straightforward. Our team advises on tax structuring in France, including the implications of the 2026 changes for inbound and outbound investment structures.
Immediate Action Items for International Companies
Given that the Finance Act 2026 was enacted on 19 February 2026, affected groups should treat the following steps as urgent priorities for the remainder of the 2026 financial year and planning cycles beyond it.
- Quantify the exposure. Calculate the additional surtax liability based on your projected French CIT charge for the financial year affected. This figure should flow into group cash-flow forecasts and any current-year provisions.
- Review instalment payments. French corporate income tax is paid in quarterly instalments. Groups that have not yet adjusted their instalment schedule to reflect the surtax risk underpayment interest. Verify that instalments account for the applicable surtax band.
- Assess transfer pricing and profit allocation. A higher effective rate in France increases the sensitivity of intra-group pricing decisions. Review whether existing transfer pricing documentation and policies remain fit for purpose in light of the revised rate. Any adjustments must be defensible and consistent with the arm's length standard, given the heightened risk of a tax audit where reported French profits appear low relative to the group's overall performance.
- Consider anti-avoidance exposure. France maintains robust anti-avoidance rules, including the general anti-abuse provision (abus de droit) and specific rules targeting artificial arrangements. Any restructuring undertaken in response to the surtax must be driven by genuine commercial substance to withstand challenge.
- Model treaty interactions. Where the group benefits from a reduced withholding tax rate or profit repatriation mechanism under an applicable tax treaty, model how the increased effective rate in France affects the overall post-tax return and whether any treaty election or relief claim should be revisited. Further detail on withholding tax considerations is available in our France withholding tax 2026 guide.
Companies that have not yet reviewed their French corporate law and governance structures in light of the broader 2026 legislative changes may also wish to consult our corporate law practice for France.
Tax Risk Management and Audit Exposure
An extension of an exceptional levy for a second year, at rates significantly above the standard CIT, is likely to attract scrutiny from the French tax administration (Direction générale des finances publiques) with respect to the accuracy of reported turnover and the application of the correct surtax band. Groups near the EUR 1.5 billion or EUR 3 billion thresholds should ensure that turnover is calculated on a consistent and defensible basis, and that supporting documentation is readily available in the event of a tax audit.
Effective tax risk management in this environment includes maintaining contemporaneous records of the group's turnover calculation methodology, documenting any intra-group transactions that affect the French entity's reported figures, and ensuring that internal tax functions and external advisers are aligned on the applicable rules. Where the group has previously obtained a tax ruling (rescrit fiscal) in France, it is worth confirming whether the ruling remains valid in light of the 2026 legislative changes.
If your group is facing a French tax audit or has received a preliminary reassessment notice, prompt legal and tax advice is essential. We invite you to reach out to our team at info@ferrazwhitmore.com or via our contacts page to discuss the specifics of your situation.
Outlook
The Finance Act 2026 frames the surtax as an exceptional and time-limited measure, consistent with the government's stated fiscal consolidation objectives. However, the extension from one to two years illustrates that measures presented as temporary can persist. Groups should plan on the basis of the current law while monitoring legislative developments closely. The CVAE abolition timeline – now fixed at 2030 following the rejection of the 2028 acceleration proposal – provides some medium-term certainty on local business taxation, but the overall French tax environment for large groups remains dynamic.
Ferraz & Whitmore monitors French legislative and regulatory developments on an ongoing basis. If you would like to discuss how the 2026 surtax affects your group's French operations, tax structuring, or compliance position, please contact us at info@ferrazwhitmore.com or visit our contacts page.
Sources
- BDO, France 2026 Budget – Finally Passed, available at bdo.global.
- PwC Tax Summaries, France – Taxes on Corporate Income, available at taxsummaries.pwc.com.
- French Ministry of Economy, Finance Act 2026 (Law 2026-103 of 19 February 2026), available at economie.gouv.fr.
Facts last verified: 22 September 2026.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.