2026 Holding Company Tax: A Much Narrower Scope Than Expected

The 2026 budget introduces a 20% tax on certain assets held through wealth management holding companies. However, unlike the initial version, the adopted text significantly narrows the tax base: only assets classified as “luxury” are targeted, and only those valued at more than 5 million euros. This transforms what could have been a broadly applicable measure into a targeted provision that must be handled with precision during estate audits.
 

From the initial proposal to the adopted text: a significant shift in focus
The original proposal was significantly more ambitious: a 2% tax levied on all assets held in holding companies—cash, financial investments, and real estate. Parliamentary debates fundamentally altered the approach. The final text, codified in Article 235 ter C of the General Tax Code, establishes a 20% tax but on a drastically reduced tax base. The intent is no longer to tax the holding of assets in general: the target is now the holding, through a holding structure, of assets used for personal enjoyment and certain “luxury” items.
 

Three Cumulative Conditions for Tax Liability
The scope of application is based on three cumulative conditions. First, the market value of the company’s assets must be equal to or greater than 5 million euros. 

Second, an individual, together with their immediate family—spouse, civil union partner, common-law partner, ascendants, descendants, and siblings—must hold at least 50 percent of the company’s capital or exercise decision-making authority. Third, more than half of the company’s income must consist of passive income: dividends, interest, and rent.
 

These criteria require a “three-dimensional” approach: the composition of the portfolio (what assets?), governance (who makes the decisions?), and the nature of the cash flows (operating income or passive income?). A holding company that operates a business and derives most of its revenue from operations does not qualify as a pure holding vehicle. Conversely, a structure in which the majority of income comes from dividends or rent may, if the other conditions are met, fall within the scope.
 

A tax base limited to luxury goods
The regulatory text sets forth a specific list of taxable assets: items related to hunting and fishing, passenger vehicles, yachts, boats, and aircraft; jewelry and precious metals (except those on public display); racehorses or show horses; wines and spirits; as well as residential properties that a natural person partner reserves for their own use. Conversely, cash, financial assets, works of art, and antiques are excluded from the tax base. This point is fundamental: the tax does not target the holding of assets “in general,” but rather the holding of specific, identified assets.
 

As for who is liable, the rules depend on the company’s location and tax status. For a French company subject to corporate income tax, the tax is payable by the company itself for the fiscal year ending on or after December 31, 2026. For a foreign company owned by a French tax resident, the individual shareholder becomes liable for the tax in proportion to their ownership interest, capped at 75% of the income.
 

In practice, the measure primarily involves mapping and documentation: identifying potentially affected assets, verifying their use (operational or non-operational), analyzing the revenue structure, and then ensuring that the valuation is set around the 5 million euro threshold. For advisors, the challenge lies not so much in the rule itself as in its implementation: classifying an asset, assessing a reserved right of use, and aligning the framework with other governance and wealth management constraints.
 

This tax is therefore not administered like an “automatic” annual tax: it requires verifying each year whether the cumulative conditions are met. For executives and families, the issue also comes down to transparency: Which assets are held in the holding company, in what capacity, and on what economic grounds? It is this process of clarification—rather than the 20% nominal rate—that will make the difference during audits.