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France has unveiled sweeping new corporate tax measures in its Finance Act for 2025, approved by Parliament on February 6 and pending formal enactment. The legislation signals President Emmanuel Macron’s intent to tighten fiscal policy by targeting the largest and most profitable companies, aligning with international standards while pushing forward with domestic reform.
Exceptional surtax targets high profits
At the centre of the new measures is an exceptional corporate income tax surtax, aimed at large multinationals and highly profitable French companies. The government has justified the move as a way to ensure that corporations benefiting most from post-pandemic growth and inflationary gains contribute a fairer share to public finances.
While specific thresholds and rates have yet to be fully detailed, the surtax is expected to apply to firms exceeding substantial profit margins, echoing similar initiatives in Germany and the UK to balance public budgets without impeding smaller businesses.
CVAE phase-out continues
In line with prior commitments, the Finance Act introduces a recalibrated phasing out of the CVAE (cotisation sur la valeur ajoutée des entreprises), a local production tax. This adjustment slows the pace of the original phase-out plan, a move welcomed by regional governments but viewed warily by industry groups.
The CVAE’s gradual elimination had been promised to reduce the tax burden on businesses. However, the slower timeline reflects concerns about maintaining local government revenues in the short term.
Tax on share buybacks and new dividend withholding conditions
A new tax on share buybacks has been introduced, aligning France with global momentum to discourage practices perceived to prioritise shareholder returns over investment. The tax aims to nudge companies toward reinvestment in productive capacity, particularly amid concerns over stagnating wage growth and capital inequality.
In another significant development, the law inserts a beneficial ownership condition into the French tax code for withholding tax on dividends. This measure is designed to close loopholes that have allowed treaty shopping or tax avoidance via complex ownership structures, enhancing the integrity of cross-border taxation.
Pillar Two implementation and financial transaction tax hike
France is also pressing ahead with its implementation of OECD Pillar Two rules, updating domestic legislation in line with the guidance released in December 2023. These rules aim to enforce a global minimum tax rate of 15% on large multinational enterprises, as part of the broader OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
To bolster market-based tax revenues, the Finance Act includes a 0.1 percentage point increase in the financial transaction tax, raising the rate from 0.3% to 0.4%. This applies to purchases of equity securities in French-listed companies with market capitalisations exceeding €1 billion.
Outlook: balancing reform with competitiveness
The Finance Act 2025 is emblematic of France’s balancing act: modernising its corporate tax framework while seeking to remain competitive in an increasingly integrated global economy. The government hopes the combination of targeted surtaxes and international tax alignment will not deter investment, particularly from foreign firms eyeing the EU’s second-largest economy.
Yet business leaders and tax professionals have raised concerns over predictability and administrative burden, especially with several provisions awaiting secondary legislation for implementation.
While the overall fiscal impact is expected to be modest, the Finance Act marks a strategic pivot toward a more redistributive and globally coordinated tax policy.
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