France Tax Regime

France applies its corporate income tax on a territorial basis: a resident company is taxed on French-source income, and income attributable to a foreign permanent establishment (under a treaty) or foreign business activity is excluded from the French base — an unusual feature among large economies. The standard rate is 25%, with a reduced 15% band for small companies, a 3.3% social surcharge on larger companies, and a temporary exceptional contribution on the largest groups. A mère-fille participation exemption, an 88% exemption for long-term gains on participations, a 10% patent box and one of the world's most generous research tax credits (the CIR) sit within a system that is otherwise high-rate and complex.

Individuals are taxed on a progressive income-tax scale to 45% (plus high-income contributions), with a 30% flat tax on most capital income and substantial social levies. France also levies a real-estate wealth tax (IFI) and significant inheritance and gift taxes. A company is resident where it is incorporated or effectively managed; the territorial principle, not residence, drives the corporate base.

1.1 Sources of law and treaties

The General Tax Code (Code général des impôts), amended by the annual Finance Acts (lois de finances), governs the system, administered by the Directorate-General of Public Finances (DGFiP). EU directives, an extensive treaty network and the OECD multilateral instrument apply, and administrative doctrine (BOFiP) guides interpretation.

1.2 Recent developments

The most consequential recent and pending changes are:

A temporary exceptional contribution on companies with French turnover of at least EUR 1 billion, for the first fiscal year ending on or after 31 December 2025, raising the effective corporate rate to roughly 31% (turnover under EUR 3 billion) or 36% (turnover at or above EUR 3 billion).

Implementation of the OECD Pillar Two regime — an income inclusion rule (income years from 31 December 2023), an undertaxed-profits rule (from 31 December 2024) and a 15% domestic minimum top-up tax — for groups with consolidated turnover of at least EUR 750 million.

A green-industry tax credit (C3IV) of 20% (and up to 40% by location) for investment in battery, solar, wind and heat-pump production, for plans approved by 31 December 2025.

Continuing high-income contributions on individuals, including a minimum-taxation measure for very high earners.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Territorial scope and residence

France taxes resident companies only on French-source income: profits of a foreign permanent establishment (where a treaty applies) or of foreign business activity are outside the French base, and correspondingly foreign losses are not deductible. Non-resident companies are taxed on income attributable to a French permanent establishment or French business activity and on French real-estate income. Residence follows incorporation or effective management, but the territorial principle is the defining feature of the corporate charge.

2.2 Rates and surcharges

The standard corporate income tax rate is 25%. A reduced 15% rate applies to the first EUR 42,500 of profit of small companies (turnover up to EUR 10 million, at least 75% individual-owned). A 3.3% social surcharge applies to the corporate tax of larger companies (above a EUR 763,000 allowance). For the first fiscal year ending on or after 31 December 2025, a temporary exceptional contribution applies to companies with French turnover of at least EUR 1 billion, lifting the effective rate to about 31% or 36% depending on size.

2.3 Participation exemption

Two regimes underpin French holding structures. Under the mère-fille (parent-subsidiary) regime, qualifying dividends from a 5%-or-more shareholding held for two years are 95% exempt — only a 5% deemed-expense share is taxed, an effective charge of about 1.25%. Long-term capital gains on the disposal of qualifying participations (broadly 5% or more, held two years) are 88% exempt — a 12% portion is taxable, giving an effective rate of roughly 3%. These exemptions make France a workable holding location despite its headline rate.

2.4 The patent box

Net income from the licensing or disposal (to unrelated parties) of patents, patentable inventions, certain industrial processes and copyrighted software is taxed at a reduced 10% corporate rate under the OECD nexus approach, requiring that the company performed the underlying R&D. A formal annual election and supporting documentation are required, and the exceptional contribution can also apply to patent-box income.

2.5 Income determination and depreciation

Taxable profit derives from the commercial accounts adjusted for tax. Depreciation is generally straight-line, with a declining-balance method and exceptional depreciation available for certain assets. Provisions, the limited deductibility of certain charges (including some related-party interest and management fees) and the treatment of inventory and long-term contracts are key adjustments, and a registration and documentation framework supports the rules.

2.6 Interest limitation

Net financial expense is deductible only up to the higher of 30% of tax-EBITDA or EUR 3 million, with a group escape clause, an additional restriction for thinly capitalised companies, and carryforward of disallowed interest and unused capacity, implementing the EU anti-tax-avoidance directive. Older anti-abuse limitations (such as the Charasse and Carrez rules on acquisition financing) continue to apply.

2.7 Losses

Tax losses carry forward indefinitely, but their annual use is capped at EUR 1 million plus 50% of the taxable profit above that threshold; a one-year carryback (within a EUR 1 million limit) is available by election. Change-of-activity and certain ownership-change rules can forfeit carried-forward losses.

2.8 Tax consolidation

A French group can elect the tax-integration regime (intégration fiscale) where the parent holds at least 95% of its subsidiaries: the group files a single return, intra-group results and certain transactions are neutralised, and profits and losses of members are pooled at the head-company level. The regime accommodates ‘horizontal’ integration of French sisters held through an EU parent, subject to conditions.

2.9 Controlled foreign companies

Under the CFC rule (Article 209 B), profits of a foreign entity controlled by a French company and subject to a privileged tax regime (broadly, foreign tax less than half the French tax) are taxed in France, unless the entity carries on a genuine economic activity (an automatic exemption applies within the EU absent an artificial arrangement). The rule counters the diversion of profits to low-tax jurisdictions.

2.10 Transfer pricing

Cross-border related-party transactions must be priced at arm's length under rules aligned with the OECD Guidelines, with master-file and local-file documentation for larger groups, an annual simplified transfer-pricing return, and country-by-country reporting above the EUR 750 million threshold. The tax authorities audit transfer pricing intensively, and a specific procedure addresses transfers of hard-to-value functions and intangibles.

2.11 The research tax credit and other incentives

The research tax credit (crédit d'impôt recherche, CIR) is France's flagship incentive: 30% of qualifying R&D expenditure up to EUR 100 million (5% above), refundable after a three-year carryforward (and immediately for SMEs), with the receivable transferable to credit institutions. A collaborative-research credit (40%, or 50% for SMEs, up to EUR 6 million) supports work with approved research bodies, a green-industry credit (C3IV) supports clean-technology manufacturing, and a charitable-donation reduction (60% up to EUR 2 million) applies. There is also an innovation credit for SMEs.

2.12 Pillar Two

France has transposed the EU minimum-tax directive: an income inclusion rule (income years from 31 December 2023), an undertaxed-profits rule (from 31 December 2024) and a qualified domestic minimum top-up tax, for groups with consolidated turnover of at least EUR 750 million. A top-up tax arises where a jurisdiction's effective rate is below 15%, with transitional safe harbours; French entities file a GloBE notification with their return and the GloBE information return within the prescribed deadlines.

3.1 Residence and rates

An individual is resident if their home or principal place of stay, main professional activity or centre of economic interests is in France, and residents are taxed on worldwide income under the household (foyer fiscal) quotient system. The income-tax scale is progressive, with bands at 0%, 11%, 30%, 41% and a top rate of 45%, and an exceptional contribution on high incomes (3%/4%) plus a minimum-taxation measure apply to the highest earners. Social levies (CSG/CRDS) apply broadly to income.

Indicative; bands are indexed annually. As-of June 2026.

3.2 The flat tax on capital income

Dividends, interest and capital gains on securities are generally taxed under a 30% single flat levy (prélèvement forfaitaire unique, PFU) — 12.8% income tax plus 17.2% social levies — with an option for the progressive scale where that is more favourable. The flat tax simplified the taxation of investment income and is central to personal investment planning.

3.3 The real-estate wealth tax

France abolished its general net wealth tax but retains a real-estate wealth tax (impôt sur la fortune immobilière, IFI) on individuals whose net taxable real-estate assets exceed EUR 1.3 million, at progressive rates from 0.5% to 1.5%. The principal residence benefits from a 30% allowance, and business real estate is generally excluded; the IFI is a notable feature of personal taxation for property-rich residents.

3.4 Inheritance, gift and social levies

Inheritance and gift tax is levied at progressive rates that rise with the value transferred and fall with the closeness of the family relationship (up to 45% in the direct line and 60% between unrelated persons), with substantial allowances and reliefs (including a 75% business-transfer ‘Dutreil’ exemption). Social levies (CSG, CRDS and related contributions) at 17.2% apply to investment and property income on top of income tax.

Dividends paid to non-residents bear a 25% withholding (aligned to the corporate rate), eliminated for qualifying EU parents under the Parent-Subsidiary Directive and reduced by treaty; a punitive rate applies to payments to non-cooperative jurisdictions. Interest paid to non-residents is generally not subject to withholding, and royalties bear 25% (reduced by the EU Interest-and-Royalties Directive and treaties). Representative outcomes:

5.1 Anti-deferral, pricing and financing

The CFC rule (Section 2.9), transfer-pricing rules (Section 2.10) and interest-limitation rules (Section 2.6) form the core of France's outbound and inbound framework, taxing diverted foreign profits, requiring arm's-length pricing and capping financing deductions. Anti-hybrid rules neutralise deduction/non-inclusion and double-deduction mismatches in line with the EU directives, and a charge applies to payments to non-cooperative states.

5.2 General anti-avoidance, exit tax and disclosure

France's abuse-of-law doctrine (abus de droit) allows the authorities to set aside arrangements that are fictitious or whose main (or principal) purpose is to obtain a tax advantage contrary to the law's intent, with heavy penalties. An exit tax charges unrealised gains on substantial shareholdings when an individual transfers their residence abroad, and mandatory-disclosure (DAC6) rules require reporting of certain cross-border arrangements.

5.3 Foreign tax relief

Double taxation is relieved by the participation exemption for qualifying dividends and gains and, otherwise, by treaty credit (with tax-sparing clauses in some treaties); the territorial corporate base itself removes most foreign business profits from French tax. Treaties allocate taxing rights and provide a mutual-agreement procedure.

6.1 Value-added tax

VAT (taxe sur la valeur ajoutée) is charged at a standard rate of 20%, with reduced rates of 10% (including certain hospitality and transport), 5.5% (food, books, energy-saving works) and 2.1% (medicines and press), and exemptions for financial, insurance, medical and education services. Businesses register, charge and recover VAT, and the EU cross-border, reverse-charge and one-stop-shop rules apply.

6.2 Local business and property taxes

The territorial economic contribution (contribution économique territoriale, CET) comprises the business-premises levy (cotisation foncière des entreprises, CFE) on rental value and, historically, the value-added levy (CVAE), which is being phased out. Property taxes (taxe foncière) apply to owners, and registration duties apply to real-estate and share transfers. Payroll taxes apply to employers not subject to VAT.

6.3 Social security and other

Employer and employee social-security contributions are high by international standards and fund France's extensive social-protection system. Additional levies — including the general social contributions (CSG/CRDS), apprenticeship and training taxes, and various sector and environmental taxes — apply. Combined with the corporate surcharges and the IFI, France's overall tax-to-GDP burden is among the highest in the OECD.

7.1 Filing and payment

Tax is administered by the DGFiP. Companies file the annual corporate-tax return within three months of the year-end (by mid-May for 31 December year-ends), pay four instalments of corporate tax during the year and a balance after the year-end, and file monthly or quarterly VAT returns. Individuals file an annual income-tax return in the spring, with tax collected at source (prélèvement à la source) through the year and reconciled on assessment.

7.2 Audit, rulings and limitation

The general reassessment period is three years (extended in cases of fraud, undisclosed activity or foreign assets). The authorities conduct desk and on-site audits, and a ruling (rescrit) procedure provides binding positions on the tax treatment of transactions, including specific rulings for the CIR and permanent-establishment questions. Late-payment interest and penalties (scaled to good or bad faith, up to 80% for abuse) apply.

7.3 Disputes

A taxpayer first submits a contentious claim (réclamation) to the authorities, then may bring proceedings before the administrative courts (for income and corporate tax and VAT) or the civil courts (for registration duties and the IFI), up to the Conseil d'État or Cour de cassation. The mutual-agreement procedure and EU dispute-resolution mechanisms address cross-border double taxation.

Indicative deadlines. As-of June 2026.

9.1 Entity choice and presence

Investors typically operate through a société anonyme (SA), the more flexible société par actions simplifiée (SAS) or a société à responsabilité limitée (SARL). A subsidiary is a separate French taxpayer, whereas a branch is taxed on the profits of its French permanent establishment at the same rates and then, unless relieved, on a deemed distribution of those profits. Article 115 quinquies of the Code général des impôts provides that profits realised in France by foreign companies are deemed distributed, for each financial year, to associates having neither their tax domicile nor their registered office in France, taken as the total amount of the results, taxable and exempt alike, after deduction of corporate income tax; that deemed distribution falls within the withholding tax of article 119 bis. Two statutory reliefs narrow the charge without abolishing it: paragraph 3 disapplies the presumption for a company whose seat is in a Member State of the European Union or a State party to the European Economic Area agreement, which is subject to corporate income tax there without the possibility of an option and without being exempt from it, and which does not benefit from a specific exemption on the profits mentioned in paragraph 1; and paragraph 2 lets a company claim a fresh assessment to the extent the sums charged exceed the total of its actual distributions. A double tax treaty is a third and independent route — several of France's treaties eliminate the charge outright rather than merely reducing the rate — so the branch form is genuinely free of a second French layer only where the head office qualifies under paragraph 3, is protected by a treaty, or makes distributions large enough for paragraph 2 to absorb the charge. Because France taxes only French-source business profits, the location of the profit-generating operations — not residence — drives exposure, so permanent-establishment analysis is central for inbound groups, and the SAS is favoured for its contractual flexibility and governance freedom.

9.2 Holding and financing structures

A French holding company combines the mère-fille dividend exemption, the 88% participation-gains exemption and tax integration (intégration fiscale) to pool group results, but acquisition structures must navigate the Charasse and Carrez interest-limitation rules and the 30%-of-EBITDA cap, which together constrain debt push-down into a French target. Intra-group financing is tested under transfer pricing, and the taxation of management packages and carried interest should be modelled at the outset of any private-equity structure.

9.3 A worked illustration

A large mainland company with EUR 10 million of taxable profit pays corporate tax at 25% (EUR 2.5 million) plus the 3.3% social surcharge on the tax above the EUR 763,000 allowance and, for a fiscal year ending on or after 31 December 2025 with turnover of at least EUR 1 billion, the exceptional contribution — together lifting the effective rate from about 25.8% toward roughly 31%. The research tax credit (CIR) and the 10% patent box can materially reduce this burden for qualifying research and IP income.

9.4 Compliance and practical points

Beyond corporate tax, employers bear high social charges and the local economic contribution (CFE, with the CVAE being phased out), and the tax authority audits transfer pricing, management fees and permanent-establishment claims intensively. The four-instalment corporate-tax payment pattern, the at-source personal withholding and the abus de droit penalty regime (up to 80%) reward careful documentation and, where useful, an advance ruling (rescrit) — particularly for the CIR and for permanent-establishment questions.