This article was first published on Tax@Hand, and is reproduced on this blog with the authorization of its authors.
On 6 February 2025, France’s 2025 finance bill was adopted by Parliament. It is now expected to be published in France’s official journal in the next few weeks, following a review by the French Constitutional Council, and then enacted at that time.
This article summarizes the law’s key tax provisions.
Corporate income tax
New exceptional temporary surtax on corporate income tax
The finance bill includes an exceptional surtax on corporate income tax liabilities for very large companies, i.e., companies whose annual turnover, in France, is at least EUR 1 billion for the fiscal year (FY) for which the surtax is due or for the previous FY.
For tax consolidated groups, the turnover threshold would be assessed at the tax consolidated group level and be equal to the sum of the revenue of each group member.
The surtax would increase corporate income tax due for the first FY ending on or after 31 December 2025.
More specifically, it would be based on the average of the corporate income tax due for the FY to which the contribution is due and for the previous FY, based on taxable income subject to the standard tax rate of 25%, as well as the reduced 10% rate applicable to patent box income. Such income tax due would be taken into account before offsetting tax credits and tax receivables of any kind.
Depending on the company’s turnover, two surtax rates would apply:
- 20.6% surtax: For companies with a turnover below EUR 3 billion for the FY for which the surtax is due and for the previous FY. The effective tax rate (ETR) would then rise to 30.98% as the standard rate.
- 41.2% surtax: For companies with turnover equal to or greater than EUR 3 billion for the FY for which the surtax is due or for the previous FY. The ETR would then rise to 36.13% as the standard rate.
The bill also includes a scheme to mitigate the impact of the surtax for companies whose turnover exceeds the relevant thresholds by only EUR 100 million.
The surtax would give rise to an installment equal to 98% of the estimated surtax, to be paid on the date scheduled for the payment of the last corporate income tax installment for the same FY.
New exceptional temporary tax for large shipping companies
Subject to certain conditions, shipping companies can elect to be subject to tonnage tax instead of corporate income tax.
A new temporary tax would be imposed on the operating income of shipping companies that elect the tonnage tax and whose turnover is at least equal to EUR 1 billion for the first FY ending on or after 31 December 2025. Its rate would be 12%.
The tax would give rise to the payment of an installment equal to 98% of the estimated amount of the temporary tax, to be paid at the same time as the last corporate income tax installment for the same FY.
Adjustments to Pillar Two rules
As a reminder, the 2024 finance law transposed into French law Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation (15%) for multinational enterprise groups and large-scale domestic groups within the EU (“Pillar Two directive”).
The 2025 finance bill includes technical adjustments aimed at taking into account most of the administrative guidance on Pillar Two recently published by the OECD.
The finance bill would also update the rules relating to the French qualified domestic minimum top-up tax (QDMTT) to ensure that it is qualified.
New tax on capital decrease following the repurchase of its own shares by a large company
The 2025 finance bill provides for a new “share buyback” tax applicable to companies headquartered in France with a turnover exceeding EUR 1 billion over the previous FY.
The measure would be implemented in two phases:
- Introduction of an exceptional tax on “net” share capital decrease resulting from a cancellation of shares (in case of a company repurchasing its own shares) carried out between 1 March 2024 and 28 February 2025. The new tax would be equal to 8% of the share capital decrease and associated premiums.
- Introduction of a tax on share capital decrease resulting from a cancellation of shares previously bought back on the market, carried out as from 1 March 2025. The new tax would be equal to 8% of the share capital decrease and associated premiums.
Exceptions could apply in case the capital decrease compensates a capital increase linked to a free allocation of shares to employees.
Restructuring transactions
The 2025 finance bill would allow the corporate income tax neutral regime applicable to mergers to also apply to partial demergers.
Further delay in the phasing out of the added value contribution (CVAE) and introduction of an exceptional additional contribution to the CVAE for 2025
As a reminder, the 2024 finance law provided for the gradual phasing out of the CVAE (French business tax assessed on the added value realized by a company), with a complete elimination in 2027.
The 2025 finance bill would delay the phasing-out period by an additional three years. Thus, the CVAE would be abolished in 2030 instead of 2027.
For 2025, the maximum CVAE rate would be 0.19%, supplemented by an additional exceptional contribution, resulting in a maximum rate of 0.28%.
Details of the phase-out delay
In 2025, the CVAE applies at a single rate of 0.19% to the added value produced by a company (rate provided by the 2024 finance Law). However, a digressive allowance is available depending on the company’s turnover, affecting the CVAE’s ETRs.
The finance bill proposes to modify these ETRs, as illustrated in the table below:
| Turnover (excluding taxes) | 2025 ETR | 2026 and 2027 ETR | 2028 ETR | 2029 ETR |
| < EUR 500,000 | 0 % | 0 % | 0 % | 0 % |
| EUR 500,000 ≤ turnover ≤ EUR 3 million | 0,063% × ((turnover-EUR 500,000) / EUR 2,500,000) | 0,094% × ((turnover – EUR 500,000) / EUR 2,500,000) | 0,063% × ((turnover – EUR 500,000) / EUR 2,500,000) | 0,031% × ((turnover – EUR 500,000) / EUR 2,500,000) |
| EUR 3 million < turnover ≤ EUR 10 million | 0,063 % + 0,113 % × ((turnover – EUR 3,000,000) / EUR 7,000,000) | 0,094 % + 0,169 % × ((turnover – EUR 3,000,000) / EUR 7,000,000) | 0,063 % + 0,113 % × ((turnover – EUR 3,000,000) / EUR 7,000,000) | 0,031 % + 0,056 % × ((turnover – EUR 3,000,000) / EUR 7,000,000)€ |
| EUR 10 million < turnover ≤ EUR 50 million | 0,175 % + 0,013 % × ((turnover – EUR 10,000,000) / EUR 40,000,000) | 0,263 % + 0,019 % × ((turnover – EUR 10,000,000) / EUR 40,000,000) | 0,175 % + 0,013 % × ((turnover – EUR 10,000,000) / EUR 40,000,000) | 0,087% + 0,006 % × ((turnover – EUR 10,000,000) / EUR 40,000,000) |
| > EUR 50 million | 0,19 % | 0,28 % | 0,19 % | 0,09 % |
The CVAE’s ETR would increase for 2026 and 2027 and would then be gradually reduced for 2028 and 2029, with maximum CVAE ETRs of 0.19% and 0.09%, respectively. As from 1 January 2030, the CVAE would be abolished.
The delay in the elimination of the tax could give rise to adjustments to the deferred tax booked, as the case may be.
Introduction of an exceptional additional contribution to the CVAE for 2025
The bill would introduce an additional contribution to the CVAE applicable only to FYs ending as from the day after the finance law is enacted. The rate would be set at 47.4% and would be based on the CVAE due for the year 2025. The CVAE ETR would then rise to a maximum of 0.28% of the added value for 2025.
This exceptional contribution would give rise to an installment equal to 100% of the additional contribution to be paid no later than 15 September 2025.
The territorial economic contribution (CET) cap (further discussed below) would not apply to the additional contribution.
Adjustments to the CET cap mechanism
The CET is composed of two different taxes: the immovable property contribution (CFE) and the CVAE. In 2025 the CET is capped at 1.438% of the added value generated by an enterprise (cap mechanism).
This cap would then evolve between 2026 and 2029 to follow both the upward and downward changes in CVAE rates. It would be increased from 1.438% to 1.531% for 2026 and 2027. It would then be lowered to 1.438% for 2028, 1.344% for 2029, and 1.25% as from 2030.
Individual income tax
New temporary exceptional contribution on the highest income
The finance bill provides for an exceptional contribution applicable to households whose income subject to tax exceeds EUR 250,000 for a single individual or EUR 500,000 for a couple.
The new contribution would apply if the household’s average tax rate is lower than 20% of their income subject to tax, raising the household’s tax rate to meet this threshold.
It would only apply to the taxation of income for 2025.
The exceptional contribution would give rise to the payment of an installment equal to 95% of the amount of contribution estimated by the taxpayer, between 1 and 15 December 2025.
New measure relating to non-professional furnished rentals (“Airbnb rentals” measure)
The 2025 finance bill provides that depreciation deducted during the rental period should be taken into account when calculating the capital gain upon the sale of the property.
The measure would apply to sales occurring as from the day after the 2025 finance law is enacted.
Clarification of the tax regime applicable to “management package” gains
The finance bill regulates the tax regime applicable to “management package” gains by defining a threshold below which the gain realized will be considered a capital gain, and above which it will be considered remuneration (and therefore taxed as a salary as long as it is linked to the employee’s status).
Miscellaneous provisions
Amendments to the R&D tax credit
The bill would:
- Exclude several expense categories from the R&D tax credit basis, including expenses related to patents and plant variety certificates (filing and maintenance fees, defense fees, depreciation allowances) and technological watch expenses;
- Provide for a reduction of the flat rate for considering staff expenses in determining operating expenses under the R&D tax credit from 43% to 40%; and
- Remove the double counting for expenses related to young PhD graduates.
The provisions would apply to expenses incurred as from the day after the 2025 finance law is enacted.
Increase of the financial transactions tax rate
The financial transactions tax applies to the acquisition of listed shares of French companies where there is a transfer of legal title of the shares (as defined under the Monetary and Financial Code), the shares are listed on a regulated market, and the shares are issued by a company headquartered in France whose market capitalization exceeds EUR 1 billion on 1 December of the previous year.
The financial transactions tax is levied at a rate of 0.3% on the acquisition price. The bill would increase this rate to 0.4 % for acquisitions made as from the first day of the second month following the enactment of the law.
