What Are the Tax Changes for France in 2026? Finance Act, Pillar Two, DAC9, What Fund Managers Must Do

The tax changes France introduced through the Loi de finances pour 2026 (Finance Act 2026) represent the most consequential package for investment funds in over a decade, touching corporate surtax rates, social charges on investment income, and the regulatory architecture governing cross-border transparency. Simultaneously, France’s transposition of the OECD Pillar Two global minimum tax and the EU’s DAC9 and DAC7 reporting directives have created a compliance environment that demands immediate, coordinated action from fund managers, tax directors and platform operators. This guide consolidates every material change into a single, fund-focused compliance resource, covering what changed, who is affected, the precise deadlines, and the practical steps required to remain compliant.

Whether you manage a Paris-domiciled UCITS, oversee a pan-European fund-of-funds structure, or operate a digital investment platform with French-source income, the measures outlined below require board-level attention before the end of Q3 2026.

Executive Summary, What Changed in 2026 (Quick Read for Decision-Makers)

What you must do: Review the headline changes below, identify which apply to your fund structure, and initiate the three immediate actions at the end of this section.

What are the tax changes for France in 2026? The Finance Act 2026, combined with EU-driven reporting reforms and the Pillar Two transposition, introduced a broad set of tax changes France had been signalling since mid-2025. The headline measures that matter most for fund managers are:

• Corporate surtax extension. The exceptional surtax on corporate income tax for the largest companies has been extended for one additional year into 2026, rather than being halved as originally planned.
• Social charges increase on investment income. The rate of social security contributions (prélèvements sociaux) on investment income rose to 18.6% from 1 January 2026, up from the prior rate of 17.2%.
• PFU flat-rate levy preserved. The income-tax component of the prélèvement forfaitaire unique (PFU) remains at 12.8% for 2026, maintaining the headline PFU rate, though total levies on investment income have effectively increased due to the social charges rise.
• Pillar Two transposition. France has transposed the OECD/G20 GloBE rules, applying the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) to in-scope multinational groups, including qualifying fund management structures.
• DAC9 and DAC7 reporting obligations. New and expanded EU reporting requirements for platforms (DAC7) and intermediaries (DAC9) are now in effect, with France-specific implementation timelines and penalties.
• Parcel import tax. A new tax of €2 per item in parcels valued under €150 imported from third countries has been introduced, relevant to portfolio companies in e-commerce and logistics sectors.
• Management incentive plan reforms. Updated rules clarify social security and capital gains treatment for management packages, with a 4-percentage-point increase in the contribution sociale généralisée (CSG) on most capital gains linked to management incentive plans.

Three immediate actions for fund managers:

1. Brief your board and investor relations team on the financial impact of the social charges increase and the effective tax rate on fund distributions.
2. Confirm whether your group meets the Pillar Two consolidated revenue threshold (€750 million) and begin top-up tax modelling.
3. Map your DAC7 and DAC9 data-collection requirements and assign a responsible compliance officer with a 30-day deadline.

Detailed Tax Changes in the Finance Act 2026 France That Affect Funds

What you must do: Assess each Finance Act 2026 France measure below against your fund’s structure, investor base and portfolio holdings, then quantify the financial impact for investor reporting.

Corporate Tax and Surtax Changes

The Finance Act 2026 extends the exceptional surtax on corporate income tax (contribution exceptionnelle sur l’impôt sur les sociétés) for one additional fiscal year. This surtax, originally introduced as a temporary measure targeting the largest companies with significant profits, was scheduled to be halved in 2026. Instead, it has been maintained at its full rate. The standard corporate income tax rate in France remains 25%, but entities subject to the surtax face an incremental levy that materially increases their effective rate.

For fund management companies structured as French-resident corporate entities, particularly those with annual turnover or taxable profits exceeding the surtax thresholds, this extension means that corporate tax projections made during 2025 budgeting cycles must be revised. Fund groups with French-resident sociétés de gestion earning management fees, performance fees or carried interest at the entity level should recalculate their effective tax rate and update investor-facing materials accordingly.

Changes to Investment Income, PFU and Social Charges

Has the PFU (flat-rate levy) changed for 2026? The income-tax component of the PFU 30% France regime remains at 12.8% for 2026. This rate applies to interest, dividends and capital gains on the sale of shares and securities. Taxpayers may still elect to be taxed under the progressive income tax scale if that produces a lower overall liability, a choice that should be modelled annually given the social charges increase.

The significant change lies in the social charges layer. From 1 January 2026, the rate of social security contributions on investment income has increased to 18.6%. This rate applies to residents without an EU S1 certificate. For investors holding an S1 certificate, the applicable social charges rate is lower, industry observers expect the effective combined rate for S1 holders to be approximately 7.5%, though individual circumstances vary.

The practical effect for the taxation of investment funds in France is that the total levy on qualifying investment income for most resident investors has risen from 30% (12.8% + 17.2%) to 31.4% (12.8% + 18.6%). For fund managers, this recalibration should be reflected in net-return projections, investor factsheets, and any tax-equivalent yield calculations used in marketing materials.

Changes to Management and Employee Incentive Taxation

The Finance Act 2026 also updated the tax and social security framework for management incentive plans (management packages). The CSG applicable to most capital gains arising from these arrangements has increased by 4 percentage points. Additionally, the legislation provides a more structured framework for determining whether gains from management packages are classified as employment income or capital gains, a distinction that directly affects carried interest structures and co-investment arrangements commonly used in private equity and real estate fund structures.

Other Measures Relevant to Portfolio Companies

The introduction of a €2-per-item import tax on small parcels valued under €150 from third countries is targeted at e-commerce supply chains. While this measure does not directly affect fund management operations, it may have a material impact on the profitability of portfolio companies in retail, logistics and consumer sectors. Fund managers with concentrated exposure to these sectors should model the cost impact.

Pillar Two (GloBE), French Transposition and What Fund Groups Must Do

What you must do: Determine whether your fund group meets the €750 million consolidated revenue threshold, identify all French constituent entities, and initiate effective tax rate calculations for each jurisdiction.

Overview of Pillar Two Core Mechanics

What is the Pillar Two legislation in France and how does it apply? Pillar Two, formally the Global Anti-Base Erosion (GloBE) rules developed by the OECD/G20 Inclusive Framework, establishes a global minimum effective tax rate of 15% for multinational enterprise (MNE) groups with consolidated annual revenue of at least €750 million. The framework operates through three interlocking mechanisms:

• Income Inclusion Rule (IIR). The parent entity of an MNE group includes top-up tax in its own jurisdiction for any constituent entity taxed below 15% in another jurisdiction.
• Undertaxed Profits Rule (UTPR). A backstop mechanism that allocates top-up tax to jurisdictions where constituent entities are located, if the IIR has not been applied by the ultimate parent.
• Qualified Domestic Minimum Top-Up Tax (QDMTT). A domestic top-up tax that a jurisdiction may impose on its own low-taxed constituent entities, preserving taxing rights locally rather than ceding them to another jurisdiction under the IIR or UTPR.

France’s Transposition Approach and Effective Dates

France has transposed the Pillar Two rules into domestic law, aligning with the EU Minimum Tax Directive (Council Directive 2022/2523). The IIR took effect for fiscal years beginning on or after 31 December 2023 for the largest groups, with the UTPR provisions following for fiscal years beginning on or after 31 December 2024. For the 2026 fiscal year, both rules are fully operational. The Finance Act 2026 has also established a safeguard mechanism to secure the benefit of the capital gains exemption regime in connection with Pillar Two calculations, ensuring that France’s participation exemption regime operates consistently alongside the GloBE rules.

Industry observers expect that France will monitor whether a QDMTT is necessary to preserve domestic taxing rights, particularly where French constituent entities benefit from R&D tax credits or regional incentives that temporarily reduce their effective tax rate below the 15% floor. At the time of writing (20 May 2026), France has not enacted a standalone QDMTT, relying instead on the IIR and UTPR mechanisms.

Practical Steps for Fund Groups and Constituent Entities

For fund groups, the Pillar Two framework raises specific questions. The GloBE rules contain exclusions for certain investment funds and real estate investment vehicles at the ultimate parent level. However, fund management companies, particularly those structured as corporate entities within a larger MNE group, may themselves be constituent entities subject to the rules. The key compliance steps are:

• Scope assessment. Confirm whether the fund group’s consolidated revenue exceeds €750 million in at least two of the four preceding fiscal years.
• Entity mapping. Identify all constituent entities in each jurisdiction, including fund management companies, advisory SPVs, co-investment vehicles and carried interest partnerships.
• Effective tax rate (ETR) calculation. Compute the GloBE ETR for each jurisdiction using the GloBE income and adjusted covered taxes, following the OECD’s computational guidance.
• Top-up tax allocation. Where any jurisdiction’s ETR falls below 15%, calculate the top-up tax amount and determine the allocation mechanism (IIR at the parent level or UTPR allocation).
• GloBE Information Return (GIR). File the standardised GloBE Information Return within 15 months of the end of the fiscal year (18 months for the first transitional year).

Worked Example, Fund Management Company and Portfolio SPV

Consider a French-resident fund management company (société de gestion) within an MNE group that also owns a Luxembourg advisory SPV. The Luxembourg SPV earns advisory fees of €5 million and pays covered taxes of €500,000, producing a GloBE ETR of 10%, below the 15% minimum. Under the IIR, the French parent would include top-up tax equal to 5% (the difference between 15% and 10%) applied to the SPV’s excess profit, after deducting any substance-based income exclusion (payroll and tangible asset carve-outs). If the SPV has minimal payroll and tangible assets in Luxembourg, the top-up tax liability could approach €250,000, collected by the French tax authorities.

This example underscores why fund managers must map their group structures and run ETR calculations promptly. Consult the international tax guide for broader context on cross-border tax structuring.

DAC9, DAC7 and DAC6 Developments, France-Specific Reporting Obligations

What you must do: Identify which DAC reporting regime applies to each entity in your fund structure, appoint a data controller, and begin collecting the required data fields immediately.

DAC9, Scope and France Implementation Status

What new reporting or compliance steps must platforms and funds follow under DAC9? DAC9 extends the EU’s automatic exchange of information framework to cover additional categories of income and intermediaries, building on the foundations laid by DAC6 (cross-border arrangements) and DAC8 (crypto-assets). For DAC9 reporting in France, the focus is on enhancing transparency around beneficial ownership information and the activities of financial intermediaries, including those operating within fund structures.

France’s transposition of DAC9 provisions requires intermediaries, including fund management companies that facilitate reportable arrangements, to collect and report specified data to the French tax authorities (Direction générale des finances publiques, DGFiP). The data fields include taxpayer identification numbers, account balances, income types and beneficial ownership details. Reporting is annual, with submission deadlines aligned to the broader EU exchange calendar.

DAC7, Platform Reporting Impacts on Funds

DAC7 France obligations apply to digital platforms that facilitate the sale of goods, provision of services, rental of immovable property, or investment of capital. Investment platforms that enable retail or institutional investors to access French-domiciled funds are within scope. Platform operators must collect and verify seller/provider identification data, including names, tax identification numbers, addresses and transaction values, and report this data to DGFiP annually.

For fund managers, the DAC7 obligation is most directly relevant where the fund or its management company operates or distributes through a platform that qualifies as a “reporting platform operator” under the directive. Even if the fund itself is not the platform operator, fund managers should ensure that their distribution partners are compliant, as data gaps in the chain may trigger regulatory inquiries directed at the fund.

Practical Compliance Steps, Data Collection, Filing and Penalties

Common pitfalls include incomplete taxpayer ID collection (particularly for non-resident investors), failure to update terms and conditions to require TIN disclosure, and misidentification of which entity within a fund structure holds the reporting obligation. Penalties for non-compliance with DAC reporting in France include financial sanctions determined by the DGFiP, the severity of which depends on the nature and duration of the breach.

Cross-Border Tax Relief and Avoiding Double Taxation for Funds and Investors

What you must do: Review your fund’s treaty-relief claims, update withholding tax documentation, and ensure reclaim procedures are initiated within the applicable statute of limitations.

Treaty Relief and Foreign Tax Credit Mechanics

How do I avoid double taxation on cross-border fund distributions? France maintains an extensive network of bilateral tax treaties that provide relief from double taxation through either the credit method or the exemption method, depending on the treaty and the type of income. For funds, the most common mechanism is the foreign tax credit: where a fund or its investors have paid withholding tax in a source country, a credit against French tax liability may be available, subject to treaty conditions and domestic limitations.

Double taxation relief in France requires careful documentation. Funds distributing income to non-resident investors should issue certificates of residence and withholding tax statements in a format acceptable to both the French and the foreign tax authorities. The applicable treaty rate, typically reduced to 10–15% on dividends and 0% on interest for qualifying investors, must be claimed proactively; the default French withholding rate will otherwise apply.

Withholding Tax and PFU Interactions for Cross-Border Distributions

For non-resident investors receiving distributions from a French-domiciled fund, withholding tax is levied at source. The rate depends on the investor’s jurisdiction of residence and the applicable treaty. Where the PFU regime applies to a resident individual investor who also has foreign-source income, the interaction between the flat-rate levy and the foreign tax credit must be modelled to ensure no over-taxation occurs.

Practical Steps for Claiming Relief

• Obtain and maintain certificates of fiscal residence for all non-resident investors.
• Apply the correct treaty withholding rate at source, do not default to the standard domestic rate and reclaim later, as this creates cash-flow drag.
• File reclaim applications within two years of the end of the year in which the withholding tax was deducted (general limitation period for French WHT reclaims).
• Maintain a complete audit trail of income allocation, withholding tax deducted, and treaty provisions relied upon, for each investor and each distribution.

Fund managers seeking bespoke guidance on treaty applications can consult the international tax practice area for specialist support.

Transfer Pricing and Documentation Implications for Funds

What you must do: Determine whether your intra-group transactions trigger French transfer pricing documentation France obligations, and prepare or update your master file and local file accordingly.

French transfer pricing rules apply to transactions between related enterprises, including management fees charged by a fund management company to its funds, intra-group advisory or service charges, and intercompany loans between fund vehicles. Where a French entity is part of a group that meets the documentation thresholds, generally, consolidated revenue exceeding €150 million or gross assets exceeding €400 million, a master file and local file must be maintained and made available to the French tax authorities on request.

For fund groups, the most common transfer pricing risk areas are:

• Management fees. Fees charged by the société de gestion to the funds it manages must reflect arm’s-length pricing, benchmarked against comparable third-party management agreements.
• Advisory and sub-advisory fees. Where advisory services are provided by a foreign affiliate, the pricing must be documented with functional and risk analyses.
• Intercompany loans. Loans between fund vehicles and management entities should carry interest rates consistent with the borrower’s credit profile and prevailing market conditions.
• Cost-sharing arrangements. Shared services (compliance, IT, legal) should be allocated using a methodology that can withstand scrutiny, typically cost-plus or transactional net margin methods.

The Pillar Two framework amplifies transfer pricing exposure: mispriced transactions that artificially reduce a constituent entity’s GloBE ETR below 15% may trigger both top-up tax and transfer pricing adjustments simultaneously. Coordination between the Pillar Two compliance team and the transfer pricing function is essential.

Compliance Checklist and Timeline for Fund Managers

What you must do: Use the timeline below to assign responsibilities and track progress against each deadline. Escalate any gaps to your board or audit committee within the relevant action window.

Practical Templates and Worked Examples

What you must do: Download the templates below, adapt them to your fund’s specific structure, and integrate them into your compliance workflow.

To support fund managers in implementing the 2026 tax changes France has enacted, the following templates are available:

• Download: Pillar Two Calculation Checklist. A step-by-step workbook covering scope assessment, entity mapping, ETR computation, substance-based income exclusion, and top-up tax allocation, aligned with the OECD’s GloBE model rules and computational guidance.
• Download: DAC9 Data Mapping Template. A spreadsheet listing all required data fields for DAC7 and DAC9 reporting (entity identifiers, TINs, income categories, transaction values, beneficial ownership details), with column-by-column guidance on source systems and validation rules.
• Download: Investor Communication Note. A model investor letter template summarising the impact of the Finance Act 2026, the social charges increase, the PFU status, and the compliance steps the fund is taking, suitable for distribution to institutional and retail investors.

These templates are designed as starting points. Given the complexity of fund structures and the interaction between French domestic law, EU directives and OECD frameworks, bespoke adaptation with the support of a qualified France-based tax specialist is strongly recommended.

Looking Ahead, Navigating France’s Evolving Tax Landscape

The tax changes France introduced in 2026 reflect a broader European trend toward higher fiscal transparency, minimum effective taxation and tighter reporting for intermediaries and platforms. For fund managers, these reforms are not isolated events, they are components of an accelerating regulatory trajectory that will likely see further tightening of beneficial ownership disclosure, potential enactment of a French QDMTT, and continued expansion of the DAC framework in future legislative cycles.

The practical implication is clear: compliance with the 2026 measures must be treated not as a one-off exercise but as the foundation for an ongoing, scalable tax governance framework. Fund managers who invest now in robust data architecture, Pillar Two calculation infrastructure and transfer pricing documentation will be better positioned to absorb future changes with minimal disruption.

Early indications suggest that the French tax authorities intend to scrutinise DAC filings and Pillar Two returns closely during their first full reporting cycle. Proactive engagement with qualified tax counsel, rather than reactive correction after an inquiry, remains the most cost-effective risk-mitigation strategy.

This article is intended as general guidance on the tax changes France enacted for 2026 and does not constitute legal or tax advice. Fund managers should seek bespoke advice tailored to their specific structures, investor base and jurisdictional exposure.

Sources

1. Legifrance, Loi de finances pour 2026 (Finance Act 2026)
2. Service-public.gouv.fr, Investment income and social charges guidance
3. Impots.gouv.fr, PFU and investment income taxation
4. OECD, Pillar Two / GloBE model rules and implementation guidance
5. European Commission / DG TAXUD, DAC7 and DAC9 directive texts
6. AMF (Autorité des Marchés Financiers), Fund regulatory guidance
7. KPMG Avocats, Tax measures in Finance Act 2026 adopted
8. PwC Tax Summaries, France
9. Chambers Practice Guides, Investment Funds 2026 (France)
10. Le Monde, French PM announces taxes on large companies (January 2026)