BDO Corporate Tax News

Following extensive debate (including two failed no-confidence votes) and multiple amendments, the French parliament adopted the finance bill for 2026 on 2 February 2026. The bill has not yet been published and still must be reviewed by the Constitutional Court.

Key corporate tax measures affecting companies are summarised below.

Extension of the Exceptional Surtax on Large Corporate Profits

The temporary surcharge on companies with significant corporate profits is extended for an additional year. Originally applicable only to the first fiscal year (FY) ending on or after 31 December 2025, the surtax will now also apply to the second FY (typically FY 2026).

Notably, the turnover threshold for 2026 is increased and the surcharge rate will not be reduced by 50% as initially proposed.

The surcharge is calculated on the average corporate income tax due over the two fiscal years. As a result, the effective corporate income tax rate increases to:

• 30.98% for taxpayers with French turnover between EUR 1 billion and EUR 3 billion; and
• 36.30% for taxpayers with turnover exceeding EUR 3 billion.

(The rates include the 3.3% social surtax on corporate income tax.)

For the second year of application, the surcharge applies only to larger companies, i.e., those with French turnover of EUR 1.5 billion or more, assessed solely for FY 2026. The existing “smoothing mechanism” applicable to taxpayers exceeding the threshold by less than EUR 100 million is adjusted accordingly.

Minority Shareholder Interest Deductibility

Interest on loans granted by unrelated minority corporate shareholders (i.e., shareholders that do not control the company) may be deducted up to a market-based rate, an option previously reserved for related party loans. Until now, minority shareholders were capped at the quarterly safe harbour rate published by the tax authorities. This measure will apply to fiscal years ending on or after 31 December 2025. Loans granted by individual shareholders remain excluded.

Long-Term Capital Gains Regime‑Term Capital Gains Regime

Shares eligible for the French parent–subsidiary regime and representing at least 5% of voting rights may qualify for the long-term capital gains tax regime even if they are accounted as portfolio securities, provided the shares are recorded in a dedicated sub‑account. This prevents reassessments based solely on accounting treatment of the shares.

Global Minimum Taxation Rules (Pillar Two)

Building on the introduction of global minimum taxation rules in 2024 and adjustments in 2025, the 2026 finance bill further refines the rules to incorporate the OECD’s June 2024 administrative guidance and address sector specific issues.

Key updates include:

Refined definitions and sector-specific adjustments

• Clarifications regarding interposed entities, hybrid and reverse hybrid entities and the aggregated tax regime for controlled foreign companies (CFCs).
• Tailored rules for mutual banking groups and entities preparing combined (rather than consolidated) accounts.
• Alignment of securitisation vehicles with the regime for investment entities.

Covered taxes and deferred taxes

• Revisions apply to entities under particular regimes (permanent establishments, transparent entities, CFCs, hybrid entities, reverse hybrids and dividend distributing entities).

The bill also:

• Clarifies reallocation mechanisms;
• Introduces a five-year election allowing the reporting constituent entity to exclude certain deferred tax expenses from the adjusted covered taxes; and
• Excludes certain reallocated covered taxes and deferred tax charges from the adjusted covered tax amount for national top-up tax purposes.

Deferred tax liabilities (OECD June 2024 guidance)

• The bill incorporates:
  • Category-based tracking;
  • Rules for clearing pre‑existing deferred tax liabilities upon entry into the Pillar Two regime; and
  • Exclusions for specific items (notably lease-related deferred tax liabilities).

These measures apply to fiscal years beginning on or after 31 December 2023.

Domestic top-up tax

• The bill introduces exemptions for:
  • Stand‑alone investment entities;
  • Insurance investment entities;
  • Securitisation vehicles; and
  • Listed investment entities (even if not stand‑alone).

The general allocation rule is revised to ensure proper attribution of the top-up tax to French constituent entities when the group is undertaxed. New filing obligations apply to joint ventures and their subsidiaries to ensure proper identification of entities within multinational or domestic groups subject to the top-up tax.

In line with EU DAC 9 directive, the tax authorities may require the filing of a corrected information return where the initial declaration contains material errors.

E-invoicing

The finance bill confirms a two-phase rollout of mandatory e-invoicing:

• From 1 September 2026:
  • All VAT-registered companies must be able to accept e-invoices.
  • Large and medium-sized companies must issue e-invoices for in-scope B2B transactions.
• From 1 September 2027:
  • All other businesses must issue e-invoices.

Penalties will apply for noncompliance, with sanctions strengthened under the bill. For instance, failure to issue an e-invoice will be subject to a EUR 50 fine (instead of EUR 15), and failure to comply with the obligations to provide transaction and payment data will be subject to a EUR 500 fine (instead of EUR 250).

BDO Perspective

From a tax perspective, the finance bill introduces only a few changes. The main measures for businesses are technical adjustments notably aimed at removing certain longstanding tax irritants, while smoothing the renewal of exceptional taxes that continue to place the bulk of the budgetary effort on (large) companies. In this respect, it should be noted that the proposal to accelerate the abolition of the Business Value Added Tax (CVAE), bringing forward the repeal from 2030 to 2028, was not adopted so the 2030 expiration date remains applicable. Additionally, the Young Innovative Company regime, which provides local tax exemptions for seven years, is extended to companies established between 1 January 2026 and 31 December 2028.

Sacha Boksenbaum
BDO in France