The French Finance Act for 2026 introduces a new 20% tax on certain assets held by private holding companies. Set out in Article 235 ter C of the French General Tax Code, the measure applies for the first time to financial years ending on or after 31 December 2026.
Although the new tax primarily targets certain assets held for personal enjoyment, such as residential properties made available to family members, non-business vehicles and pleasure boats, its scope is not limited to holding companies whose assets consist exclusively of such property.
A holding company that derives most of its income from dividends paid by its subsidiaries may also fall within the scope of the regime, even where it holds shares in operating businesses.
However, not all holding companies will be liable for the tax. Its application depends on several conditions, including the value of the company's assets, the composition of its income and the nature of its ownership and control. Crucially, the 20% tax is not levied on the holding company's entire asset base, but only on the specific categories of assets identified by law.
Which holding companies are caught by the new 20% tax?
Article 235 ter C of the French Tax Code sets three cumulative conditions, assessed at the end of the financial year.
1. Assets of at least €5 million
The market value of all the assets held by the company must be €5 million or more. The threshold is assessed by reference to all of the company's assets, not only those that may be taxed.
2. Control by an individual or their family
An individual must hold, directly or indirectly, at least 50% of the voting or financial rights in the company, or in practice exercise decision-making power.
In assessing control, the holdings of certain family members are taken into account, namely those of the spouse, civil partner, cohabiting partner, ascendants, descendants and siblings.
3. Mainly passive income
Passive income must account for more than 50% of the company's operating and financial income, as defined in the legislation.
This includes dividends, interest, rents, royalties and certain disposal proceeds.
These conditions may also be met by a company held indirectly through several entities. Within a group, each company must therefore be reviewed separately.
Is a holding company receiving dividends from its subsidiaries caught?
This is one of the points that call for particular care.
Dividends received by a holding company are, in principle, included in passive income under the new regime, including where they come from operating subsidiaries.
The mere fact that a company qualifies as an active holding company (holding animatrice) does not, therefore, exclude it from the new tax.
A family holding company that owns an operating business and receives mainly dividends may therefore meet the passive income condition.
That does not mean it will have to pay the 20% tax.
Shareholdings in subsidiaries, cash and financial investments are not, as such, among the assets subject to the new tax.
A holding company may therefore meet all three conditions without owning any taxable assets.
The key is to look not only at how the holding company is organised, but also at what it owns and how those assets are used. Beyond this tax, whether a holding company makes sense depends on many other factors, which we discuss in “Should You Set Up a Holding Company in France?”.
Which assets are subject to the tax on passive holding companies?
The 20% tax is charged on the market value of certain categories of assets expressly listed in Article 235 ter C of the French Tax Code.
These include:
homes reserved for the use of the person controlling the company or certain members of their family;
vehicles not used for business purposes;
yachts, pleasure boats and aircraft;
jewellery and precious metals, subject to statutory exceptions;
racehorses and competition horses;
wine and spirits;
assets used for hunting or fishing.
Assets are excluded from the tax base in proportion to their use during the year in an industrial, commercial, craft, agricultural or professional activity, under the conditions laid down by law.
Shareholdings, cash, securities and works of art, by contrast, do not appear on the list of taxable assets.
Family home, holiday home: is property owned by a holding company taxable?
Owning property through a holding company does not, on its own, trigger the tax.
The regime targets homes whose use is reserved for the individual controlling the company or certain members of their family.
Subject to the other conditions, this covers homes occupied free of charge or for a rent below the market rate, as well as sham lettings.
A holiday home owned by a family holding company and made available free of charge to the children may therefore fall within the 20% tax base.
Conversely, a home genuinely let at a market rent does not fall within this category of taxable assets.
The legislation also allows, subject to conditions, loans taken out to acquire the home to be deducted. Debts owed to shareholders or to certain related companies, however, are subject to specific restrictions.
Before considering a sale of the property, a distribution or putting a lease in place, the tax consequences of each option should therefore be compared.
Foreign holding companies: can a French tax resident be liable?
Yes. The new tax on passive holding companies is not limited to companies established in France.
Certain foreign companies may fall within scope where they meet the statutory conditions and an individual controlling them is tax resident in France.
In that case, the tax is payable by the French-resident individual, in proportion to their direct and indirect shareholdings, rather than by the foreign company itself.
The legislation does, however, include a safeguard: the tax is not due if the taxpayer shows that the choice of a foreign registered office and the holding of the shares do not have the main purpose of circumventing French tax law.
This deserves particular attention for families holding assets through foreign companies, and for individuals planning to become tax resident in France.
How is the 20% tax on a holding company calculated?
Take a family holding company with €6 million of assets whose income consists mainly of dividends.
Its assets include a house made available free of charge to the family, valued at €1.8 million and financed by a bank loan with €300,000 of principal outstanding, together with a pleasure boat worth €200,000.
In this simplified example, assuming all statutory conditions are met, both assets are fully included in the tax base and the loan is fully deductible, the calculation would be as follows:
value of the house: €1,800,000;
deductible loan: −€300,000;
value of the boat: €200,000;
tax base: €1,700,000;
20% tax: €340,000.
This example shows why a prior review matters: the tax can be substantial even though it applies only to part of the company's assets.
It is not deductible, moreover, for corporate income tax purposes.
When must the tax be reported and paid?
For a company established in France, the tax is reported in a schedule to the corporate tax return and must be paid no later than the due date for the balance of corporate income tax.
For a financial year ending on 31 December 2026, the first payment should therefore fall due on 15 May 2027, subject to the applicable tax calendar.
For foreign companies within scope, the individual domiciled in France reports the tax on their income tax return filed in the year following the year end.
What should be reviewed before 31 December 2026?
The first step is to determine whether each company in the group meets the three conditions set out in Article 235 ter C of the French Tax Code.
The assets that may fall within the tax base should then be identified, together with their value, financing and actual use.
For holding companies owning property or other personal-use assets, this review may lead to several options being considered: letting on market terms, a genuine change of use, a sale or a wider restructuring.
None of these is tax-neutral. They may, in particular, trigger tax on capital gains or distributions, or registration duties.
A restructuring should therefore not be considered solely in the light of the new tax, but by taking account of its overall tax, legal and wealth-planning consequences.
A transaction carried out mainly for tax reasons could also be challenged as an abuse of law.
Beaupère & Guermouche Avocats advises business owners, entrepreneurs and families on reviewing their holding companies and wealth structures, in France and internationally.
Do you own a holding company and wish to know whether the new 20% tax applies? We can assess whether your company falls within its scope, identify any taxable assets and evaluate the potential tax consequences.
Where appropriate, we can also help you review the options available before the financial year end, taking account of their wider tax and wealth-planning implications.
Frequently asked questions on the French holding company tax
Are active holding companies exempt from the 20% tax?
Not automatically. The regime makes no general exemption for active holding companies, and the dividends they receive may count as passive income. Liability also depends on the other statutory conditions and on whether the company owns taxable assets.
Does the tax apply to a French property company (SCI) subject to corporate income tax?
Yes, an SCI subject to corporate income tax may fall within scope if it meets the statutory conditions. An SCI taxed under the income tax regime is not, as such, covered by the rules applying to French companies.
Does the 20% tax apply to every holding company with more than €5 million of assets?
No. The €5 million threshold is only one of the conditions. The company must also meet the control and passive income tests, and then own assets that actually fall within the tax base.
Should property be taken out of a holding company before 31 December 2026?
Not necessarily. Removing a property may have significant tax consequences. The first step is to check whether the property is actually taxable, and then to compare the cost of the available options.
Is cash held by a holding company subject to the 20% tax?
No. Cash and financial investments are not, as such, assets subject to the new 20% tax. They may, however, be relevant when assessing the €5 million asset threshold. The scope test must therefore be distinguished from the calculation of the taxable base.
The rules described are those applicable on 13 October 2026. They are set out for general information and are no substitute for advice on a specific situation.