CDHR: The Tax on High Incomes Is Here to Stay
Originally designed as a temporary measure, the differential tax on high incomes (CDHR) is being made permanent under the 2026 Finance Bill. This confirmation marks a lasting change in the approach to taxing high incomes.
A Targeted Tax on the Effective Rate
Created by the 2025 Finance Act, the CDHR has a simple goal: to ensure a minimum effective income tax rate of 20 percent. It applies to taxpayers whose income exceeds 250,000 euros for a single person or 500,000 euros for a married couple filing jointly.
The program is primarily aimed at individuals whose income is largely subject to the flat tax. Dividends, interest, capital gains on securities, and proceeds from the surrender of certain life insurance policies may, in fact, be subject to a flat rate that is significantly lower than the progressive tax scale.
A Well-Established Mechanism
The 2026 Finance Bill does not alter the structure of the CDHR, but it does reinforce its rationale. The collection method remains unchanged: affected taxpayers will be required to pay, beginning in December, an advance payment equal to 95% of the estimated tax liability, provided their effective tax rate is less than 20%. This is one of the most restrictive aspects of the system. It requires a very precise forecast of one’s tax situation well in advance of the final tax assessment.
A New Fiscal Normal
By making the CDHR permanent, the government is endorsing a clear trade-off. Rather than directly challenging the flat tax, it has chosen to mitigate its effects through a targeted adjustment mechanism. For high-income earners, this contribution is no longer an exception; it has become a structural component of wealth management strategy.
