The tax on wealth-holding companies that own“luxury”assets applies to fiscal years ending on or after December 31, 2026.

It targets a limited number of entities but at a high rate (20%) and with significant impacts.

Beyond the actual amount of the tax, issues such as abuse of rights and improper management practices could be raised by the tax authorities if the taxpayer files a return.

►Reminder of the principle:

This tax applies to “luxury” non-business assets held by wealth management holding companies subject to corporate income tax in France, or to a foreign tax equivalent to corporate income tax (e.g., wealth management companies in Luxembourg or Switzerland).

►3 cumulative conditions:

  • Ownership by an individual: ≥ 50% of voting rights or financial rights, or de facto exercise of decision-making power
  • Total asset value : ≥ 5 M € in assets held
  • Primarily passive income:> 50% of total operating and financial income (dividends, interest, rents, royalties, etc.) What about holding companies under Article 150-0 b ter of the French General Tax Code?

►Plate

  • ” Luxury ” assets not used for business purposes:
  • Property used for hunting or fishing. What about the forests?
  • Passenger vehicle not used for business purposes
  • Yachts, non-commercial recreational aircraft
  • Jewelry and precious metals (excluding museums or public places): physical gold!
  • Racehorses or show horses
  • Wines and Spirits
  • Housing units intended exclusively for use by the individual (or immediate family) who controls the company:
    • Whether provided free of charge or leased < at market price –> this is considered an abnormal management act
    • Improper Business Practice + Holding Company Tax = Implicit Tax Adjustment
    • Benefit in kind for the executive?

► Calculation and Rates

  • Basis: market value of the selected assets as of December 31 of the fiscal year
  • Foreign holdings: actual value of the equity interest held in the company × the value of taxable assets
  • Rate: 20%
  • Taxable entity: the company itself when filing corporate income tax returns, or a French individual when filing personal income tax returns if the holding company is foreign ( subject to a 75% cap)
  • Effective Date of the Tax for Fiscal Years Ending on or After December 31, 2026

► Actions to Take and Considerations Before December 31, 2026

  • Audit and revaluation at fair value of the assets of companies with more than 5 million euros in assets, including “luxury” assets
  • Necessary measures to propose in order to avoid falling under the scope of the holding company tax: few individuals will report their own “abnormal management practice” or “abuse of rights”:
      • Review of the Oversight of These Types of Companies
      • Restructuring of the types of revenue collected
      • Employment of the affected workers
      • Removal from the balance sheet with tax implications

The FareWell team is available to audit your wealth management holdings and work with you to find solutions in this area.