How France's 2026 Finance Act & Simplification Bill Change M&A Tax and Deal Structuring

Three pieces of legislation adopted in rapid succession during early 2026 have fundamentally reshaped M&A tax in France, touching everything from purchase price allocation to merger-control notifications. The Loi de finances pour 2026 (Finance Act 2026), adopted on 2 February 2026, rewrites key rules on interest deductibility and goodwill amortisation that directly affect deal economics. The Projet de loi de simplification de la vie économique (Economic Life Simplification Bill), adopted by Parliament on 14–15 April 2026, streamlines corporate formalities and post-closing reorganisation procedures. Finally, the merger-control threshold reform, enacted on 26 May 2026 and published in the Journal Officiel, raises the turnover triggers for mandatory Autorité de la concurrence notifications, altering the clearance calculus for mid-market transactions across every sector.

What Changed in the Finance Act 2026 France That Matters for M&A

The Finance Act 2026, formally adopted on 2 February 2026 and published in the Journal Officiel de la République Française, contains several provisions that directly impact deal structuring in France. Two sets of amendments carry the greatest weight for M&A practitioners: the revised interest deductibility framework and the modified goodwill amortisation regime. Together, they alter the tax shield available to leveraged acquisitions and the economics of asset-deal purchase price allocations.

Interest Deductibility, Rule Changes and Practical Examples

The Finance Act 2026 amends the Code général des impôts (CGI) provisions governing the deductibility of interest on related-party loans. Under the revised rules, interest paid on loans advanced by shareholders, including minority shareholders, is deductible only to the extent it does not exceed a rate determined by reference to arm’s-length market conditions, replacing the former fixed statutory rate ceiling tied to the average annual rate published by the French tax authorities (the taux de référence). The practical effect is that intercompany acquisition financing must now be documented against verifiable market benchmarks, comparable credit facilities, bank quotes or independent pricing analyses, rather than simply measuring against the statutory safe-harbour rate.

This change interacts with France’s existing earnings-stripping rules (the ATAD-transposed limitation capping net borrowing costs at 30 % of tax EBITDA or €3 million, whichever is higher). Industry observers expect the combined effect to reduce the effective interest deduction available in highly leveraged buyouts, particularly where acquisition debt is pushed down to the target level through merger or debt push-down structures.

Practitioner takeaway: Ensure every intercompany loan agreement entered into for deal-financing purposes includes a market-rate appendix with at least two independent comparables. Update existing facilities to reflect the new standard before the first fiscal year-end filing under the amended rules.

Goodwill Amortisation France, Mechanics and Tax Timing

The Finance Act 2026 introduces a limited tax-amortisation regime for goodwill (fonds commercial) acquired in asset deals and certain business-combination transactions. Under the previous regime, goodwill was generally not tax-deductible in France; impairment provisions were permitted only where a durable decline in value could be demonstrated. The 2026 amendment permits amortisation of acquired goodwill over a fixed period for tax purposes, subject to conditions relating to the acquisition date and the nature of the goodwill.

This is a significant shift for deal structuring in France. Asset deals, historically disfavoured for large transactions because of the absence of goodwill amortisation, now carry a meaningful tax benefit that must be modelled into PPA and bid pricing. Early indications suggest that financial sponsors and strategic acquirers alike are revisiting asset-deal structures for mid-market targets where goodwill represents a substantial portion of enterprise value.

Economic Life Simplification Bill, What It Changes for M&A and Corporate Procedures

The Simplification Bill adopted on 14–15 April 2026 is the most sweeping reform of French corporate administrative procedures in over a decade. While its scope extends well beyond M&A, several provisions have direct relevance to transaction execution and post-closing integration.

Formality Changes for Post-Closing Reorganisations

The Bill reduces the number of mandatory publication and registration steps required for intra-group mergers, spin-offs and universal transfers of assets (transmission universelle de patrimoine, TUP). Previously, each such reorganisation required separate notices in a legal gazette (journal d’annonces légales) and filings with the greffe of the relevant commercial court. The Simplification Bill consolidates certain of these requirements, permitting a single filing for linked reorganisation steps and reducing the mandatory creditor-opposition period in specific circumstances.

For M&A practitioners structuring post-closing carve-outs, debt push-downs or asset migrations within a group, the likely practical effect will be a reduction in timeline by several weeks, lower administrative cost and fewer opportunities for procedural challenge by minority creditors.

Administrative Simplifications Affecting Share Transfers

The Bill also simplifies the registration and notification requirements for share transfers in sociétés par actions simplifiées (SAS) and sociétés à responsabilité limitée (SARL), which together account for the vast majority of French M&A target entities. Certain duplicate filings and notarisation requirements have been removed, and electronic filing has been expanded. While these changes do not alter substantive transfer taxes, they smooth execution timelines and reduce the administrative burden at signing and closing.

Merger Control Reform (26 May 2026), Thresholds, Tests and Timing

The merger-control threshold reform enacted on 26 May 2026 represents the most significant revision of France’s notification triggers since the last major overhaul. Published in the Journal Officiel and effective immediately, the reform raises the aggregate and individual turnover thresholds that trigger a mandatory filing with the Autorité de la concurrence. The stated policy objective is to focus the Autorité’s resources on transactions with genuine competitive significance, while relieving mid-market deals from a filing requirement that had become disproportionate by international standards.

When You Still Must Notify the Autorité de la Concurrence, Worked Examples

The raised thresholds do not eliminate the notification requirement; they recalibrate it. Transactions involving parties with combined worldwide turnover above the new aggregate threshold and individual French turnover above the revised domestic threshold remain notifiable. Crucially, sector-specific thresholds, particularly in retail, media and certain regulated industries, may still apply at lower levels.

Worked example, Mid-market industrial acquisition: A buyer with €200 million worldwide turnover acquires a French target with €40 million French turnover. If the new aggregate worldwide threshold exceeds these combined figures and the domestic threshold exceeds the target’s individual French turnover, no filing is required. However, if the target operates retail outlets, a lower sectoral threshold may apply.

Scoping checklist for counsel:

• Calculate combined worldwide turnover of all parties (including affiliates) on a consolidated basis.
• Calculate individual French-source turnover for at least two parties to the concentration.
• Test against the new general thresholds enacted 26 May 2026.
• Test against any applicable sector-specific thresholds (retail, media, digital platforms).
• Document the analysis in a file memorandum, the Autorité may request evidence of non-notifiability.

Drafting Timing Covenants and Termination Rights (Merger Clearance Timing)

Where Autorité de la concurrence notification remains required, merger clearance timing continues to be a critical deal variable. Phase I review typically takes 25 working days; Phase II can extend to 65 working days or longer with remedies. The raised thresholds may marginally reduce the Autorité’s caseload, which industry observers expect could shorten informal pre-notification discussions. Deal documentation should reflect this by including:

• A clear obligation on both parties to make the filing within a specified number of business days after signing.
• A long-stop date calibrated to Phase II timing plus a buffer for remedy negotiations.
• A reverse break fee or cost-reimbursement clause triggered by regulatory non-clearance.

Transaction Mechanics, M&A Tax Structuring Consequences for France Deals

The combined effect of the Finance Act 2026 and the Simplification Bill forces a reassessment of the fundamental share-deal versus asset-deal analysis that underpins every French acquisition. Under the prior regime, share deals were overwhelmingly favoured for larger transactions because they avoided transfer taxes on individual assets, preserved carry-forward tax losses in the target and side-stepped the non-deductibility of goodwill. The introduction of goodwill amortisation for tax purposes in asset deals now shifts the calculus.

Purchase Price Mechanics and Tax Leakage Clauses

In asset deals, the newly available goodwill amortisation creates a tax shield that should be modelled into the buyer’s bid price. Sellers, in turn, may seek to capture a portion of that benefit through purchase price adjustment mechanisms or tax gross-up clauses. Recommended drafting points include:

• Locked-box or completion-accounts mechanism: Specify whether the tax benefit of goodwill amortisation accrues to the buyer or is factored into the locked-box price.
• Tax leakage definition: Expand the definition to capture any tax charge arising from the transaction structure itself (registration duties, CGT on asset transfers) and set off against the goodwill tax benefit.
• Tax covenant scope: Extend the seller’s tax covenant to cover pre-completion periods and any clawback risk on goodwill amortisation if conditions are not met.

Earn-Out Drafting to Address Tax Amortisation Differences

Earn-out formulas that reference EBITDA, net profit or free cash flow must now account for the impact of goodwill amortisation on reported earnings. If the earn-out metric is calculated before amortisation, the seller benefits; if after, the buyer captures the upside. The M&A tax treatment in France following the 2026 changes makes it essential to define the earn-out calculation basis with precision.

• Specify whether the earn-out metric is calculated on a pre- or post-amortisation basis.
• Include a normalisation clause that strips out the effect of any change in tax law during the earn-out period.
• Align the earn-out calculation with the accounting treatment of goodwill under French GAAP or IFRS, as applicable.

Financing and Interest Deductibility France M&A, Documentation Tests

The Finance Act 2026 changes to interest deductibility create a documentation-intensive compliance regime for acquisition financing. Every intercompany loan used to fund a French acquisition must satisfy the arm’s-length rate test, and the borrower must maintain contemporaneous documentation to support the deduction.

Intercompany Loans (Minority Shareholder Loans) and the Market-Rate Approach

The revised rules apply to loans from all related parties, including minority shareholders holding as little as a blocking minority stake. The market-rate approach requires the borrower to demonstrate that the interest rate charged is consistent with what an independent lender would charge on comparable terms. Relevant factors include the borrower’s credit profile, loan tenor, security package and prevailing market rates at the time of drawdown.

Practitioners should assemble the following documentation at the time of loan origination:

• At least two bank quotes or indicative term sheets from independent lenders.
• A transfer-pricing benchmark study covering comparable debt instruments.
• Board minutes approving the loan terms and referencing the market-rate analysis.
• A signed loan agreement with arm’s-length covenants, repayment schedule and default provisions.

Lender Warranties and Tax Gross-Up Clauses

Lender-side documentation should also be updated. Where the acquisition is funded partly by external bank debt and partly by shareholder loans, the intercreditor agreement should address the risk that the borrower’s interest deduction is denied or reduced on audit. Recommended provisions include a tax gross-up clause obliging the borrower to compensate the lender if withholding tax is imposed, and a warranty that the loan terms have been structured to comply with the Finance Act 2026 deductibility requirements.

Cross-Border M&A France, VAT, Withholding, Repatriation and Treaty Considerations

Inbound acquirers face an additional layer of complexity when structuring cross-border M&A into France under the 2026 regime. The interaction between domestic tax changes and France’s extensive treaty network requires careful planning at the pre-bid stage.

Quick Checklist for Inbound Bidders

• VAT on asset deals: Transfers of a going concern (cession de fonds de commerce) are generally exempt from VAT under the universality-of-assets exemption, but partial asset transfers may trigger VAT on individual assets. Confirm the scope of the exemption before structuring.
• Withholding tax on dividends: The standard rate is 25 % for non-treaty jurisdictions. Treaty rates (typically 5–15 %) apply where beneficial ownership and substance requirements are met. Model repatriation costs into the bid.
• Interest withholding: Generally exempt for arm’s-length interest paid to EU/EEA lenders. Non-EU lenders should verify treaty relief and France exit tax implications on any future disposal.
• Post-deal restructuring risk: Intra-group migrations of assets or IP out of France within the first years after acquisition may trigger exit taxation or transfer-pricing adjustments. Plan restructuring timelines carefully.
• Real estate-heavy targets: Acquisitions of entities deriving more than 50 % of value from French real estate may be subject to the taxe sur les plus-values immobilières. Cross-reference with the latest France property tax changes.

Timing, Clearances and Representations, Negotiating Covenants Under the 2026 M&A Tax France Regime

The 2026 legislative trifecta changes the optimal sequencing of a French M&A transaction. The table below illustrates a sample timeline incorporating the new merger-control and tax regimes.

Sample Conditionality and Long-Stop Drafting

Recommended representations and covenants for SPAs signed under the 2026 regime include:

• Notification covenant: “The Buyer shall make all necessary filings with the Autorité de la concurrence within [10] Business Days of signing, applying the notification thresholds as enacted on 26 May 2026.”
• Tax representation: “The Seller represents that the Target’s intercompany loan documentation complies with the arm’s-length requirements of the CGI as amended by the Finance Act 2026.”
• Long-stop date: Set at [6] months from signing, extendable by [2] months if Phase II review is initiated. Include a reverse break fee of [2–3] % of enterprise value payable if regulatory clearance is not obtained.
• Tax indemnity: Capped basket structure with a de minimis threshold, a tapered survival period aligned with the French tax audit statute of limitations, and escrow or holdback mechanics for identified tax exposures.

Practical Due Diligence Checklist, Tax Red Flags Tied to the 2026 Changes

Tax due diligence on French targets should now prioritise the following items, directly linked to the 2026 legislative changes:

• Goodwill history: Has the target acquired goodwill in prior transactions? If so, was any amortisation claimed under the prior regime (impairment only) or does the acquisition create new amortisation potential under the Finance Act 2026?
• Intercompany loan documentation: Are all related-party loans supported by market-rate evidence? Have board minutes been maintained? Are there any outstanding loans at rates that exceed the arm’s-length benchmark under the new test?
• Interest deductibility compliance: Has the target fully utilised its interest deduction capacity under the earnings-stripping rules? Are there carry-forward unused interest amounts that could benefit the buyer post-closing?
• Management packages: Review the tax treatment of any carried interest, free shares (actions gratuites) or stock option plans in light of Finance Act and social security financing amendments. Verify withholding compliance.
• Merger-control filing history: Confirm whether any prior acquisitions by the target group were notifiable but not filed, or whether clearance conditions remain outstanding.
• Disclosure letter completeness: Ensure the seller’s disclosure letter addresses each tax risk area introduced by the 2026 changes, including specific disclosures on goodwill, interest and management incentive taxation.

Conclusion, Three Actions for Every Deal Team

France’s 2026 legislative wave, the Finance Act, the Simplification Bill and the merger-control threshold reform, collectively rewrite the M&A tax playbook for France. Deal teams that adapt quickly will capture structuring advantages; those that rely on pre-2026 assumptions risk mispricing transactions, overpaying for financing and triggering avoidable regulatory complications.

The three non-negotiable actions are: first, re-run every pipeline deal against the new Autorité de la concurrence notification thresholds; second, recalibrate PPA models and earn-out mechanics to reflect goodwill amortisation and revised interest-deduction capacity; and third, upgrade financing and SPA documentation to meet the arm’s-length evidence standard now required by law. Practitioners seeking specialist guidance on M&A tax in France can consult the Global Law Experts lawyer directory for qualified advisers with transactional experience under the 2026 regime.

Sources

1. Legifrance, Loi de finances pour 2026 (Finance Act 2026 official text)
2. Legifrance, Projet de loi de simplification de la vie économique (Economic Life Simplification Bill)
3. Autorité de la concurrence, Merger control thresholds and notification guidance
4. Journal Officiel de la République Française, Publication notices
5. KPMG Avocats, France: Tax measures in Finance Act 2026 adopted
6. EY Tax News, French Parliament approves Finance Bill for 2026
7. Valoris Avocats, Tax aspects of M&A in France