France: Practical Steps for Hnwis, Trustees and Holdings After the 2026 Finance Act

The Loi de finances pour 2026, adopted by the French Parliament in early 2026, marks the most consequential shift in finance act France international tax policy in over a decade for cross-border wealth holders. The legislation simultaneously extends the exceptional contribution on high incomes, introduces a new tax targeting non-operational assets held through holding companies, transposes DAC9 reporting obligations for trustees and intermediaries, and completes France’s domestic implementation of the OECD Pillar Two global minimum tax framework. For single-family offices, expatriates considering a change in tax residency, and corporate groups with French holding structures, the compliance calendar has tightened sharply, and the audit risk attached to inaction has grown in parallel.

This guide is designed as a decision-oriented playbook. It distils the headline measures into practical checklists, worked examples and prioritised timelines for three core audiences:

• Trustees and fiduciaries, new DAC9 reporting obligations, due-diligence steps and penalty exposure.
• HNWIs and expatriates, changes to high net worth taxation France rules (exceptional contribution, social charges, exit tax triggers) and immediate pre-move planning steps.
• Holding companies and family groups, the patrimonial-asset tax, Pillar Two top-up mechanics, and restructuring options that can be implemented without triggering abuse-of-law challenges.

Headline Changes in the 2026 Finance Act That Affect Cross-Border Wealth

The 2026 finance law France package contains six headline measures that directly touch international tax planning and compliance. Industry observers expect each of them to generate immediate advisory demand from private-client practitioners and corporate tax directors alike.

• Extension and broadening of the Contribution Exceptionnelle sur les Hauts Revenus (CEHR). Originally scheduled to expire, the exceptional contribution on high incomes has been made permanent and its thresholds recalibrated. Single taxpayers with reference income exceeding EUR 250,000 and couples exceeding EUR 500,000 continue to face a surcharge of 3% on the portion between these thresholds and EUR 500,000 / EUR 1,000,000 respectively, rising to 4% above those ceilings. The 2026 text also introduces anti-avoidance provisions that smooth income over multiple years for the purpose of applying the surcharge, targeting arrangements that previously allowed taxpayers to concentrate income in a single year.
• New tax on non-operational (patrimonial) assets of holding companies. A much-debated measure imposes a specific levy on French and foreign companies with a French nexus that hold a material proportion of non-professional assets, principally real estate, financial portfolios and luxury assets not directly used in an active trade. The tax applies at a rate of 20% to the company’s share of net income attributable to those patrimonial assets, distinct from the standard corporate income tax. Entities that can demonstrate a genuine operational purpose for the assets, or that hold them for less than a de minimis threshold, benefit from a carve-out.
• Increased social charges (prélèvements sociaux) on investment income. The aggregate social-charge rate on capital income (dividends, interest, capital gains) for French-resident taxpayers remains at 17.2%, but the 2026 Act narrows certain exemptions previously available to EU/EEA residents affiliated with foreign social-security systems, a change that broadens the taxable base in practice.
• DAC9 transposition. France has transposed the EU Directive on Administrative Cooperation (DAC9), which requires intermediaries, trustees and fiduciaries to report specified cross-border arrangements involving beneficial ownership and income flows. The reporting obligations take effect from mid-2026, with first filings expected before year-end.
• Pillar Two / GloBE implementation. The Finance Act completes France’s transposition of the OECD/G20 Global Anti-Base Erosion (GloBE) rules, including the Income Inclusion Rule (IIR) already effective for fiscal years beginning on or after 31 December 2023, the Undertaxed Profits Rule (UTPR), and a Qualified Domestic Minimum Top-Up Tax (QDMTT). Groups with consolidated revenue of EUR 750 million or more are in scope.
• Enhanced audit powers and penalty provisions. The Act grants the French tax administration expanded data-matching capabilities and introduces graduated penalties for late or incomplete filings under the new patrimonial-asset tax and DAC9 regimes.

For a summary of the corporate income tax rate adjustments that were also included in this legislation, see the France Finance Act 2026 corporate tax alert published separately.

What HNWIs and Expatriates Must Know: Personal Taxation, Social Charges and the Exceptional Contribution

The 2026 changes to high net worth taxation France rules operate on three interconnected levels: income tax, social charges and the exceptional contribution. For expatriates who are French tax residents, or who risk being treated as such, the combined marginal effective rate on investment income now exceeds 60% at the top bracket once the CEHR, social charges and standard income tax are layered together.

The exceptional contribution: permanent status and income-smoothing rule

The CEHR was originally introduced in 2012 as a temporary measure. Its inclusion in the 2026 finance law France package on a permanent footing removes any remaining planning assumption that it would lapse. More significantly, the new income-smoothing anti-avoidance rule averages reference income over two or (in some cases) four years when applying the CEHR thresholds. The practical effect will be to limit the traditional strategy of deferring income realisation into a single low-income year.

Worked example, dual-status individual. Consider a French-resident individual who also maintains a UK domicile and receives EUR 400,000 in French-source dividends plus GBP 200,000 (approximately EUR 230,000) in UK rental income. Under the France–UK double tax treaty, the UK rental income is taxable in the UK, but it must still be included in French reference income for purposes of computing the CEHR. The individual’s reference income of EUR 630,000 exceeds the single-taxpayer threshold of EUR 250,000, triggering a 3% surcharge on the band between EUR 250,000 and EUR 500,000 (EUR 7,500) and a 4% surcharge on the EUR 130,000 above EUR 500,000 (EUR 5,200), a total CEHR liability of EUR 12,700.

If France applies the income-smoothing rule and the taxpayer’s prior-year reference income was materially lower, the smoothed figure may reduce or increase the liability depending on direction.

Social charges on investment income: narrowed exemptions

The narrowing of social-charge exemptions principally affects EU/EEA nationals who live in France but remain affiliated with a foreign social-security system. Under prior rules, reinforced by CJEU case law, such individuals could claim exemption from certain components of the prélèvements sociaux. The 2026 Act confines this exemption to individuals who can produce a current A1 certificate or equivalent, reducing the population eligible for relief. For non-EU nationals, the full 17.2% rate continues to apply without exception.

Exit Tax France: Triggers, Calculations and Practical Mobility Steps

France’s departure tax, the exit tax, applies to individuals who transfer their tax residence outside France and hold significant participations or unrealised capital gains. The 2026 Act does not fundamentally redesign the exit tax, but it strengthens enforcement and narrows certain deferral conditions, making careful pre-move planning more important than ever for those considering relocation.

The exit tax France regime catches individuals who have been French tax residents for at least six of the ten years preceding the transfer of residence, and who hold direct or indirect participations representing at least 50% of a company’s profits, or whose portfolio of securities, rights and shares exceeds EUR 800,000 in aggregate value. On departure, unrealised gains are deemed realised and subject to income tax at the applicable rate (generally 12.8% flat tax, or progressive scale if elected) plus social charges of 17.2%.

The 2026 Act introduces a specific reporting obligation for intermediaries (banks, custodians, wealth managers) who are aware of a client’s change of residence and hold securities in custody. This creates a cross-check mechanism that increases the likelihood of detection if the exit-tax return is not filed.

Holding Companies: New Patrimonial / Non-Operational Asset Rules and Practical Restructuring Options

The most structurally significant change in the 2026 Finance Act for corporate groups and family offices is the introduction of a dedicated holding company tax France measure aimed at entities that function primarily as patrimonial vehicles rather than active businesses.

Who is caught: the patrimonial-asset test

The new levy targets companies, whether French-incorporated or foreign entities with a French permanent establishment or French-situs assets, where more than 50% of total assets (by fair-market value) are classified as non-operational. Non-operational assets include residential and commercial real estate not used in the company’s own trade, financial portfolios (listed and unlisted securities, bonds, money-market instruments), art and luxury movable assets, and cash balances exceeding working-capital needs.

The tax is assessed at a rate of 20% on the company’s net income attributable to those non-operational assets. Industry observers expect the French tax administration to adopt a substance-over-form approach when evaluating whether an asset is genuinely operational, closely mirroring the criteria already used in the abus de droit doctrine. A de minimis exclusion applies where the total fair-market value of non-operational assets does not exceed EUR 150,000.

Restructuring options that minimise exposure, and those that carry risk

Practitioners are already examining several restructuring pathways in response to the new holding company tax France rules:

• Operational substance injection. Converting passive investment holdings into assets directly used in the group’s trade, for example, leasing real estate at arm’s length to an operating subsidiary, may reclassify assets from patrimonial to operational, provided the arrangement has genuine commercial substance and is not a circular transaction.
• Distribution planning. Distributing non-operational assets to shareholders (individuals or trusts or foundations) before the first assessment date removes them from the holding company’s balance sheet, although the distribution itself may trigger withholding tax and exit-tax consequences at the shareholder level.
• Asset carve-outs and MBOs. Transferring patrimonial assets to a dedicated special-purpose vehicle and selling the SPV to family members or a management team may be effective, but only if executed at fair market value with independent valuation support. Below-market transfers risk recharacterisation under anti-avoidance provisions.
• Capital reductions. Returning surplus cash or non-operational financial assets to shareholders through a formal capital reduction may reduce the asset base below the 50% threshold. The tax treatment of the reduction (return of capital vs. deemed dividend) depends on the company’s distributable reserves.

Early indications suggest that aggressive restructurings completed solely to avoid the patrimonial-asset tax, without independent commercial justification, will attract scrutiny under France’s general abuse-of-law provision (Article L. 64 of the Livre des procédures fiscales). Taxpayers who implement restructuring steps should ensure that board minutes, independent valuations and contemporaneous documentation clearly evidence the commercial rationale.

Trustees, Fiduciaries and DAC9 France: Reporting Obligations and Timelines

The transposition of DAC9 into French domestic law represents a significant expansion of the information that trustees and fiduciaries must provide to the French tax administration. For trusts and France tax advisers, the new regime layers on top of existing obligations under France’s trust-reporting framework (Articles 792-0 bis and 1649 AB of the Code général des impôts) and international automatic exchange regimes (FATCA/CRS).

Under the DAC9 framework, the following categories of information must be reported by intermediaries and fiduciaries with a French nexus:

1. Beneficial ownership data. Full identification of all beneficial owners of the arrangement, including settlors, protectors, beneficiaries and any other natural person exercising effective control.
2. Cross-border income flows. Details of income, distributions and capital movements passing through or from the trust/arrangement to or from French-resident parties.
3. Arrangement structure. Jurisdictional details of the trust/entity, identity of all intermediaries, and description of any cross-border element.
4. Due-diligence confirmation. A declaration that the intermediary has completed customer due-diligence procedures compliant with French anti-money-laundering standards (transposing AMLD requirements).

The French tax administration has indicated that first DAC9 filings will be required before 31 December 2026 for arrangements in existence at the date of entry into force, and within 30 days of creation for new arrangements established after that date. Penalties for non-compliance include fixed fines per undisclosed arrangement and, in serious cases, referral for fiscal criminal proceedings. Trustees who are not established in France but manage arrangements with French-resident beneficiaries should take particular note: the reporting obligation follows the French-resident beneficiary, and the administration may request information directly from the trustee via mutual-assistance channels.

Pillar Two / GloBE France Transposition: What Holding Groups Must Do Now

France’s 2026 Finance Act completes the domestic legislative framework for the OECD Pillar Two global minimum tax. The pillar two GloBE France implementation encompasses three interlocking mechanisms that apply to multinational enterprise (MNE) groups and large-scale domestic groups with consolidated revenue of at least EUR 750 million in at least two of the four fiscal years immediately preceding the tested year.

• Income Inclusion Rule (IIR). Already effective for fiscal years beginning on or after 31 December 2023, the IIR requires a French ultimate parent entity (or intermediate parent in certain cases) to compute a top-up tax on low-taxed income of constituent entities in jurisdictions where the effective tax rate falls below the 15% minimum.
• Undertaxed Profits Rule (UTPR). The UTPR acts as a backstop where the IIR is not applied by the parent jurisdiction. Under the 2026 Act, French constituent entities may be required to bear an allocated share of the top-up tax attributable to low-taxed entities elsewhere in the group.
• Qualified Domestic Minimum Top-Up Tax (QDMTT). France has implemented a QDMTT that applies to French constituent entities whose domestic effective tax rate is below 15%, allowing France to collect the top-up tax domestically before another jurisdiction can claim it under the IIR or UTPR.

The practical compliance roadmap for affected groups involves several immediate tasks: collecting jurisdictional financial data in the format required by the GloBE information return, computing effective tax rates using the GloBE rules (which differ from domestic tax computations), identifying transitional safe-harbour elections available under OECD guidance, and filing the GloBE information return within 15 months of the end of the relevant fiscal year (18 months for the first year). Groups should also evaluate whether advance pricing arrangements (APAs) or mutual agreement procedures (MAPs) may be needed to resolve disputes arising from top-up tax allocations.

Audit, Enforcement and Fiscal-Criminal Risk Under the Finance Act France International Tax Package

The expanded scope of the finance act France international tax measures creates new audit triggers. The French tax administration (Direction générale des Finances publiques, DGFiP) has publicly signalled that it will prioritise verification of patrimonial-holding tax compliance, DAC9 reporting and exit-tax declarations during the 2026–2027 audit cycle.

Key audit triggers that practitioners should monitor include:

• First-year patrimonial-asset declarations. The administration will cross-check holding-company balance sheets against real-estate registries and securities databases. Entities that fail to file the new declaration or that classify assets as operational without supporting documentation are likely to receive early-stage audit notices.
• DAC9 cross-matching. Information received through DAC9 exchanges will be matched against individual income-tax returns and trust-reporting filings. Discrepancies, particularly around undisclosed beneficial ownership, may trigger both a fiscal audit and a referral to the parquet national financier for fiscal criminal investigation.
• Exit-tax non-compliance. The new intermediary-reporting requirement for changes of residence creates a data trail that the administration will match against exit-tax filings. Taxpayers who relocate without filing Form 2074-ETD should expect a rapid inquiry.

The response protocol for an audit notice linked to 2026 measures follows a structured sequence: (1) acknowledge receipt within the statutory deadline; (2) assemble all supporting documentation (board minutes, independent valuations, A1 certificates, trust deeds); (3) appoint specialist tax counsel with experience in tax audits France proceedings; (4) evaluate whether a voluntary disclosure under the administration’s current regularisation practice may reduce penalties; and (5) prepare a written response within the 30-day (or 60-day, if extended) reply period. Penalties under the new regimes range from 10% for late filing to 80% for deliberate concealment, with fiscal criminal prosecution reserved for cases involving fraudulent schemes.

Practical Action Plan: 90-Day, 6-Month and 12-Month Checklists

Within 90 days (immediate priorities)

1. Obtain independent fair-market-value appraisals of all assets held in holding companies and trusts with French exposure.
2. Classify each asset as operational or non-operational using the criteria set out in the 2026 Finance Act, and document the rationale in a board resolution or trustee minute.
3. For individuals considering a change of tax residency, commission a portfolio valuation and begin preparation of Form 2074-ETD.
4. Confirm whether existing trust-reporting filings (Forms 2181-TRUST1 and 2181-TRUST2) are up to date; gather DAC9-required beneficial-ownership data.
5. Review the CEHR income-smoothing rule against the last four years of reference income to estimate exposure.

Within 6 months

1. Complete structural reviews of all French holding companies: assess whether the 50% patrimonial-asset threshold is breached and whether any safe-harbour or de minimis exclusion applies.
2. File first DAC9 reports with the French tax administration for existing arrangements.
3. For MNE groups, complete jurisdictional effective-tax-rate computations under Pillar Two/GloBE rules and identify transitional safe-harbour elections.
4. Implement any restructuring steps (operational substance injection, distributions, capital reductions) with supporting board minutes and independent valuations.

Within 12 months

1. File the GloBE information return for the first applicable fiscal year (within 18 months of year-end for the first filing, 15 months thereafter).
2. Review and update all transfer-pricing documentation to reflect new intra-group arrangements arising from restructurings.
3. Evaluate whether advance pricing arrangements (APAs) or mutual agreement procedures (MAPs) should be initiated to manage Pillar Two disputes.
4. Conduct an internal audit simulation to test readiness for a DGFiP examination of patrimonial-holding tax, DAC9 and exit-tax filings.

Key Documents, Forms and Contacts

The following resources and filing portals are essential for compliance with the 2026 finance law France package:

• Legifrance, full text of the Loi de finances pour 2026, including article-by-article provisions for the patrimonial-asset tax, CEHR extension and DAC9 transposition. Available at legifrance.gouv.fr.
• Impots.gouv.fr, the official portal for filing income-tax returns, trust-reporting forms (2181-TRUST1/2), exit-tax declarations (2074-ETD), and the new patrimonial-holding-tax declaration. Available at impots.gouv.fr.
• Forms 3916 and 3916-bis, for disclosure of foreign bank accounts and trust interests (individual taxpayers).
• Form 2074-ETD, exit-tax declaration, to be filed with the departure-year income-tax return.
• GloBE Information Return, format and filing instructions published by the OECD Inclusive Framework; French-specific guidance expected from the DGFiP.
• Fiscal representative appointment, required for non-EU/EEA individuals who elect exit-tax deferral; contact the Service des impôts des non-résidents (SIPNR) for appointment procedures.

For expatriates evaluating their citizenship and residency options, coordinating tax-filing obligations with immigration steps is critical to avoid triggering unintended dual-residency exposure.

Conclusion and Recommended Next Steps

The 2026 Finance Act represents a material tightening of the finance act France international tax landscape for HNWIs, trustees and holding companies. The simultaneous introduction of the patrimonial-asset tax, permanent CEHR, DAC9 transposition and completed Pillar Two framework means that compliance windows are short and the cost of inaction, in both penalties and lost planning opportunities, is significant. Early indications suggest that the DGFiP will pursue verification aggressively during the first audit cycle, making contemporaneous documentation and proactive filings the most effective defence. Readers with French-connected wealth structures, trust interests or corporate holdings should begin the 90-day priority checklist immediately and seek specialist international tax counsel to navigate the interlocking obligations.

Sources

1. Legifrance, Loi de finances pour 2026
2. Impots.gouv.fr, Official French Tax Administration
3. OECD / Inclusive Framework on BEPS, Pillar Two
4. EY TaxNews, France: Finance Bill for 2026
5. KPMG France, Tax Measures in Finance Act 2026
6. PwC Tax Summaries, France 2026 Developments
7. European Commission, DAC9 / International Tax Cooperation