In brief
A holding company is a company whose main assets consist of shareholdings in other companies. It is only worthwhile if it serves a specific purpose, such as reinvesting business profits without first paying them out to the owner, bringing several companies together, preparing a sale or planning succession. It should never be considered in isolation from the owner's personal and family wealth.
One of its main advantages lies in the French parent-subsidiary regime, under which dividends received from subsidiaries are almost entirely exempt from corporate income tax. On €100,000 of dividends, approximately €98,750 can remain available within the holding company, compared with €68,600 if the same amount is paid directly to the individual shareholder, based on the 31.4% flat-rate tax applicable since 1 January 2026. This is, however, primarily a tax deferral. Personal taxation generally arises when the money is subsequently distributed to the shareholder.
The 2026 Finance Act tightened both the contribution-and-sale regime and the Dutreil pact. It also introduced a 20% tax on certain assets held for private use through passive holding companies, although this only applies in specific circumstances. The 2027 Finance Bill, tabled on 1 October 2026, further proposes that gifts or inheritances of holding company shares should bring contribution-and-sale tax deferrals to an end for transfers made from that date.
A business generates regular profits. Its owner does not need to draw all of them personally and would rather invest in another company, acquire business premises or prepare for a sale in a few years' time. Sooner or later, the same suggestion tends to arise: “You should set up a holding company.”
Sometimes that is excellent advice. Sometimes it is unnecessary and, occasionally, expensive.
A holding company should not be designed in isolation. It forms part of a wider picture that includes the owner's salary and dividends, available cash, personal and corporate investments, a future sale or LBO and succession planning for the next generation. Considered together, those decisions can reinforce one another. Taken separately, they can easily conflict.
What is a holding company used for?
A holding company allows an owner to hold shareholdings and move cash between companies without first bringing it into their personal estate.
In practice, it may be used to reinvest the profits of an operating company in other projects, bring several companies under common ownership, prepare for the sale of a business by organising how the proceeds will be reinvested, or pass a business or family wealth on to the next generation while retaining control over key decisions.
These purposes can, of course, overlap.
An important distinction runs through all of them. An active holding company, or holding animatrice, takes an active role in setting group policy and controlling its subsidiaries and may also provide them with services. A passive holding company simply owns shares. The French Conseil d'État set out the relevant criteria in 2018.
The distinction is far from theoretical. It matters in particular for the Dutreil business succession regime and certain exemptions from French real estate wealth tax, or IFI.
Does a holding company reduce tax on dividends?
More precisely, it often allows the personal tax charge to be deferred.
Where a company subject to French corporate income tax owns at least 5% of a subsidiary's share capital, the shares are registered and the company undertakes to retain them for at least two years, it may qualify for the parent-subsidiary regime under Articles 145 and 216 of the French Tax Code.
Dividends received are then exempt from corporate income tax, except for a 5% add-back for costs and expenses. This may be reduced to 1% for dividends paid within a tax-consolidated group by a company that has belonged to the group for more than one financial year.
The difference is easily illustrated. If an operating company distributes €100,000 of dividends:
a payment directly to the individual shareholder bears the 31.4% flat-rate tax, leaving €68,600;
a payment to the holding company results in only a €5,000 add-back being taxed. At the standard 25% corporate income tax rate, the tax is €1,250, leaving €98,750 available for reinvestment.
If the holding company subsequently distributes that money to its shareholder, personal taxation will arise at that stage. The benefit is therefore most significant where the cash remains within the holding company and is reinvested for several years, whether in another business, business premises or financial investments.
There is an important qualification where the shareholder has a genuine credit balance on a shareholder loan account, or compte courant d'associé. Repayment of the principal amount genuinely advanced or left at the disposal of the company does not constitute a taxable dividend. Any interest is subject to its own tax treatment.
Simplified example assuming that the option for progressive income tax rates is not exercised and that the holding company is taxed at the standard 25% corporate income tax rate.
How much profit makes a holding company worthwhile?
There is no statutory threshold. The answer depends on what the holding company is intended to achieve.
A holding company may make sense for an acquisition, the consolidation of several shareholdings or succession planning even where cash flows are relatively modest. Where its principal purpose is reinvestment, the relevant question is less how much profit the business generates than how much can remain within the corporate structure over time.
There are also running costs. A holding company requires its own accounts and tax filings, corporate formalities and, for certain transactions, a contribution auditor (commissaire aux apports). Those costs are justified only where the structure serves a genuine purpose.
The decisive question is therefore straightforward. How much do you need personally, and what do you intend to do with the rest? If all the dividends will ultimately need to reach your personal bank account, the holding company may simply postpone an unavoidable tax charge.
Can you invest in shares or real estate through your holding company?
Yes, although each type of investment follows its own tax rules.
Rental income, interest and dividends from shareholdings below 5% are generally subject to corporate income tax. Qualifying SMEs may benefit from the reduced 15% rate on the first €42,500 of profit, with the standard 25% rate applying thereafter. Gains on qualifying shareholdings held for at least two years are exempt, subject to a 12% portion remaining taxable.
Real estate requires greater caution. Property held through a company subject to corporate income tax can be depreciated, reducing taxable profits during the period of ownership. On disposal, however, the gain is calculated by reference to the property's written-down value, without the holding-period relief available to individuals.
Where shareholders reserve a home owned by the holding company for their personal use, the new tax on certain assets held through passive holding companies must also be considered.
Should you invest personally or through your holding company?
That depends on the purpose of the investment and on when the money will need to reach you personally. The real question is not simply which tax rate is lower, but where you want your wealth to be built.
Investing through the holding company allows cash to be deployed without a prior distribution to the shareholder. This can leave substantially more capital available for investment. The investment will, however, belong to the company, and both its income and gains will be taxed under the rules applicable to that company. If the resulting cash is later distributed to the shareholder, personal taxation will then arise.
The position is different where the shareholder has a genuine credit balance on a shareholder loan account. Repayment of the principal amount of that debt does not constitute a taxable distribution. How the holding company was originally funded can therefore itself be an important part of the wealth-planning analysis.
Investing personally generally means first extracting the money from the corporate structure and bearing the corresponding personal tax. Some investment regimes, however, are available only to individuals. These include the French PEA equity savings plan, the exemption for gains on a main residence, holding-period relief on property gains and French life insurance (assurance-vie), which has its own succession rules.
Several factors therefore need to be considered together:
the type of investment, since a stake in another business, business premises and a securities portfolio are not taxed in the same way;
the investment horizon, as money intended to remain invested for ten years calls for a different approach from money that will be needed in two;
future personal requirements, including housing, lifestyle and retirement;
other companies and structures already owned, together with the financial flows between them;
any contemplated sale or LBO, which may determine what the holding company will receive and reinvest;
succession plans, whose consequences differ depending on whether assets are held personally or through the holding company.
A holding company can therefore be an excellent reinvestment vehicle without being the appropriate home for the family's entire wealth. In many cases, the operating company, the holding company and the owner's personal estate each have a distinct role.
Selling your business: is a holding company still worthwhile in 2026?
Yes, provided the transaction is planned sufficiently early.
The contribution-and-sale mechanism under Article 150-0 B ter of the French Tax Code involves contributing shares in a company to a holding company controlled by the owner before those shares are sold. The gain arising on the contribution is not immediately taxed but placed in tax deferral.
If the holding company sells the contributed shares within three years, maintaining the deferral requires part of the proceeds to be reinvested in qualifying business activities.
Since the 2026 Finance Act, 70% of the sale proceeds must be reinvested, compared with 60% previously. The reinvestment must be completed within three years of the sale and the relevant investments must generally be retained for at least five years. Managing the holding company's own assets, including its own real estate portfolio, does not qualify.
Timing has therefore become even more important. Once a sale has already taken place, it can no longer be preceded by a contribution-and-sale transaction.
A gift made before a sale follows a different logic. Provided the gift is genuine, takes place before the sale has become legally certain and involves an effective transfer of ownership, the recipient's base cost for a subsequent disposal is generally the value used for the gift. The French tax authorities nevertheless scrutinise transactions where the sale had already been agreed or where the donor ultimately recovers the proceeds, directly or indirectly.
How can you pass a holding company on to your children?
A holding company can be an effective succession-planning vehicle, but its existence alone does not make a transfer tax-efficient.
The transfer can, in particular, be organised gradually through a gift of the bare ownership (nue-propriété) of the holding company's shares. The parents then retain the usufruct and, in principle, the right to dividends, while gift tax is calculated only on the value of the bare ownership, which depends on the usufructuary's age.
Splitting ownership in this way allows succession to be prepared without immediately transferring all the rights attached to the shares. Retaining control over decisions, however, requires careful allocation of voting rights between usufructuary and bare owner, particularly in the articles of association.
The Dutreil regime can exempt 75% of the value of qualifying business shares from gift or inheritance tax, subject to its conditions. Since the 2026 Finance Act, the individual holding commitment has been extended from four to six years. Certain so-called luxury assets that are not used exclusively for an operating activity are also excluded from the benefit of the relief.
For a holding company, its status as an active holding company can be particularly important. This requires genuine participation in group policy and control of the subsidiaries. Simply owning shares is not sufficient.
Owners who have used the contribution-and-sale regime must also follow current legislative developments carefully. Under current law, a gift of the holding company's shares generally eliminates the deferred gain. Where the child receiving the shares controls the holding company, however, the deferred gain passes to that child and becomes taxable if the shares are disposed of within six years, or eleven years in certain cases. On death, the deferred gain is extinguished.
Particular care for transfers made since 1 October 2026
The 2027 Finance Bill, tabled on 1 October 2026, proposes a fundamental change to this treatment. If enacted in its current form, a gratuitous transfer of the shares received in exchange for the original contribution, whether by gift or on death, would end the tax deferral. Income tax and social charges relating to the deferred gain would consequently become payable.
The Bill is drafted to apply to transfers made on or after 1 October 2026. A gift made today could therefore fall within the new rules if the provision is ultimately enacted in its present form.
Subject to conditions, the taxpayer could request payment of the income tax over the five years following the year in which the gain becomes taxable. Among other requirements, the taxpayer would need to be up to date with their tax obligations and provide sufficient security. The payment plan would not extend to social charges. The Bill remains subject to parliamentary debate and enactment.
Succession planning should therefore be considered at the same time as the structure itself. The allocation of shares, control and liquidity between generations is generally easier to organise when the holding company is created or reorganised than immediately before a transaction many years later.
What happens to losses when several companies are brought under one holding company?
They may be offset against profits elsewhere in the group, but only prospectively and subject to the tax consolidation rules.
Where the holding company owns at least 95% of its subsidiaries and the other statutory conditions are satisfied, it may elect for French tax consolidation. Corporate income tax is then calculated by reference to the group's overall taxable result, allowing losses in one group company to offset profits in another.
Losses incurred before a company enters the tax group do not become group losses. They remain available only against the profits of the company that incurred them. A genuine change in the nature of a company's business may also result in the loss of carried-forward tax losses under Article 221(5) of the French Tax Code.
This issue frequently arises in practice. An owner may have one profitable company and another dormant company carrying tax losses, and consider placing a profitable activity into the latter in order to use those losses. If the transaction amounts to a genuine change of activity, the losses may instead be forfeited. The structure therefore needs to be analysed before it is implemented.
How does an acquisition holding company work?
The holding company borrows to acquire the target shares and services that debt using dividends received from the acquired company.
Those dividends can generally move up to the holding company with very little corporate income tax under the parent-subsidiary regime. Where the holding company owns at least 95% of the target and the other conditions are met, tax consolidation may also allow the holding company's financing costs to be taken into account when calculating the group's overall taxable result.
There are, however, two important limitations.
Net financial expenses are subject to a statutory cap. In principle, they are deductible only up to the higher of €3 million or 30% of an adjusted tax result calculated under the French Tax Code. This limitation is most relevant to larger transactions.
A further restriction may apply where an owner causes a holding company to acquire shares that the owner already held. The so-called Charasse amendment under Article 223 B of the French Tax Code can result in part of the financing costs being added back to the taxable result of the consolidated group.
The issue also arises from the seller's perspective. An owner involved in an LBO will often sell part of their shares and reinvest alongside the incoming investor. The balance between what is contributed, what is sold, the vehicle through which the owner reinvests and the manner in which the new interest is held can affect both the immediate tax consequences and future succession planning.
Does the new 20% tax apply to your holding company?
In most cases, no.
Introduced by the 2026 Finance Act in Article 235 ter C of the French Tax Code and effective since 21 February 2026, the 20% tax applies only where three cumulative conditions are met.
First, an individual must directly or indirectly hold at least 50% of the voting or financial rights in the company, or in practice exercise decision-making power over it. For this purpose, the individual's rights are aggregated with those of their spouse, civil partner or cohabiting partner, as well as those of their ascendants, descendants and siblings.
Second, the market value of the company's assets must be at least €5 million. Third, passive income must account for more than half of its operating and financial income.
Even where those conditions are satisfied, the tax does not apply to all of the company's assets. It targets certain assets not used for a business activity, including vehicles, boats and aircraft, racehorses and competition horses, jewellery and precious metals, wine and spirits, hunting and fishing assets and homes reserved for the personal use of the relevant individual.
The tax first applies to financial years ending on or after 31 December 2026.
Merely holding the owner's operating company or financial investments does not, by itself, trigger the tax. A holding company that owns a family holiday home, a boat or a wine collection, however, warrants closer review before the financial year closes.
For a more detailed examination of the scope of this new tax and the assets concerned, see our article on France's 20% tax on holding companies in 2026.
When is a holding company unnecessary?
When it serves no genuine purpose.
This may be the case where all dividends are needed to meet personal expenditure, where the owner has a single company with no reinvestment, sale or succession plans, or where the profits are too modest to justify the additional running costs.
More problematic still is a holding company used primarily to fund private expenditure such as a home, a vehicle or the shareholder's lifestyle. In that situation, the structure may create more tax and legal risk than it solves.
What are the main risks of a holding company?
The risks generally arise less from the holding company itself than from the way it is used.
Abuse of law. A holding company lacking genuine substance and interposed for a principally tax-driven purpose may be challenged by the French tax authorities under Articles L. 64 and L. 64 A of the French Tax Procedures Code.
Mixing corporate and personal assets. Using holding company cash for personal expenditure may result in amounts being treated as taxable distributions and can also raise corporate-law issues.
Assuming a holding company is active when it is not. Without genuine and documented involvement in group policy and control, a holding company may be regarded as passive. Access to the Dutreil regime or certain IFI exemptions may then be lost, in whole or in part.
Charging for services that are not genuinely provided. Management fees charged by the holding company to its subsidiaries must correspond to actual services. Otherwise, the tax authorities may challenge their deductibility, including under the French concept of an acte anormal de gestion.
What should you decide before setting up a holding company?
The order in which decisions are made matters almost as much as the decisions themselves.
The first step is to identify the objective, whether reinvestment, consolidation, sale, succession or acquisition, and then determine the place the holding company should occupy within the owner's wider wealth. This means deciding what the holding company should own, what should remain personally held and, where relevant, what should ultimately pass to each generation.
The perimeter of the structure comes next, including the companies, shares and shareholders concerned. The way in which the shares enter the holding company must also be considered, since contributing existing shares and having the holding company acquire them can produce very different tax consequences.
Tax treatment, governance and timing then need to be considered together. The parent-subsidiary regime, tax consolidation, genuine group management, service agreements and the company's constitutional documents address different issues, but they must form a coherent whole.
Above all, the structure needs to exist before the transaction it is intended to serve. Once a sale or transfer has taken place, some of the available options will have disappeared.
Beaupère & Guermouche Avocats advises business owners and their families on the overall structuring of their business and personal wealth. This includes setting up and developing holding companies, deploying corporate cash, deciding which assets should be held personally and which through companies, addressing the owner's personal tax position, preparing for a sale, acquisition or LBO and planning succession to the next generation.
Where appropriate, this work is coordinated with the family's notaire, accountant and the company's other advisers.
Frequently asked questions
What is a holding company in France?
A holding company is a company whose main assets consist of shareholdings in other companies. It may simply own those shares as a passive holding company or take an active role in running the group as a holding animatrice.
Does a holding company avoid tax on dividends?
No. Under the parent-subsidiary regime, dividends received by the holding company are almost entirely exempt from corporate income tax. Personal taxation generally arises when the money is subsequently distributed to the shareholder. Repayment of the principal of a genuine shareholder loan account is different and does not constitute a dividend distribution.
Should I invest my holding company's cash or pay myself dividends?
It depends on what the money will ultimately be used for. If it is intended for long-term reinvestment, leaving it within the holding company preserves greater investment capacity by avoiding an immediate distribution. If it is required to fund personal expenditure or investments available only to individuals, extracting the money may become necessary. A credit balance on a genuine shareholder loan account should also be taken into account, since repayment of its principal does not constitute a taxable dividend.
Should I hold investments personally or through a holding company?
There is no single answer. Personal and corporate ownership are taxed differently and serve different purposes. The choice depends on the nature of the investment, its financing, the intended holding period, the future use of its income and the owner's succession plans.
How should wealth be structured when you own both a business and a holding company?
Each level can serve a different purpose. The operating company carries on the business and bears its commercial risks. The holding company owns and controls shareholdings, reinvests cash and prepares certain corporate transactions. Personal wealth meets the family's needs and can hold investments that are better suited, or restricted, to individual ownership. Succession planning should consider all three levels together rather than treating each structure in isolation.
How much profit do you need before setting up a holding company?
There is no statutory minimum. Whether a holding company is worthwhile depends more on its intended purpose than on any fixed amount. It may be relevant for reinvestment, acquisitions, consolidation of shareholdings, a future sale or succession planning. Where its main purpose is reinvesting cash, the amount of profit that can remain within the corporate group over time becomes particularly important.
What is the difference between an active and a passive holding company?
An active holding company takes a genuine role in setting group policy and controlling its subsidiaries. A passive holding company simply owns shares. The distinction matters in particular for the Dutreil regime and certain IFI exemptions, although passive holding companies may also need to be considered under the specific rules applicable to interposed companies.
Can you receive remuneration from your holding company?
Yes, where the owner holds a corporate office or performs genuine functions for the holding company. The tax and social-security treatment depends in particular on the company's legal form and the nature of those functions. Management fees charged to subsidiaries must correspond to services actually provided.
Can you buy your main residence through a holding company?
It is legally possible but rarely attractive. Relevant issues include the need to account for a benefit in kind or charge an appropriate rent, the loss of the individual main-residence capital gains exemption, the risk of mixing corporate and personal assets and, where its conditions are met, exposure to the new tax on certain assets held through passive holding companies.
Is contribution-and-sale still available in 2026?
Yes. If the holding company sells the contributed shares within three years, however, it must now reinvest 70% of the proceeds within three years and generally retain the qualifying investments for at least five years. The 2027 Finance Bill further proposes that a gift or inheritance of the holding company's shares should bring the tax deferral to an end.
What would the 2027 Finance Bill change for gifts of holding company shares following a contribution-and-sale?
If enacted in its current form, a gift or inheritance of the relevant shares would bring the tax deferral to an end. Income tax and social charges relating to the deferred gain would become payable for transfers made on or after 1 October 2026. Subject to conditions and on request, payment of the income tax could be spread over five years.
Does the new 20% tax apply to all holding companies?
No. It applies only where the cumulative conditions in Article 235 ter C of the French Tax Code are satisfied, including conditions relating to control by an individual and specified family members, assets with a market value of at least €5 million and a predominance of passive income. Even then, the tax applies only to specified categories of assets.
The rules described in this article are general. Whether and how to set up a holding company depends on the business concerned, the shareholder's personal and family circumstances and the transaction contemplated. Measures contained in the 2027 Finance Bill remain subject to parliamentary debate and enactment.