International Tax Lawyers France 2026: Exit Tax, Patrimonial Holdings & Trusts

France’s Loi de finances pour 2026 (Finance Act 2026) has introduced some of the most consequential changes to the country’s international tax framework in over a decade, and international tax lawyers France-wide are now fielding urgent questions from HNWIs, trustees and family offices. The centrepiece is Article 235 ter C of the Code général des impôts (CGI), a new patrimonial-holdings tax targeting certain wealth-management vehicles, alongside material amendments to the exit tax regime and tightened reporting obligations for trusts and foreign accounts. This article provides a practitioner-level guide to the 2026 changes, covering scope, calculations, deadlines, restructuring options and audit-defence strategies, so that in-house tax teams, private client advisers and high-net-worth individuals can act before exposure crystallises.

Executive summary, three things to do now:

• Audit existing structures. Review every société patrimoniale, foreign trust and offshore account against the new Article 235 ter C thresholds and updated declaration rules.
• Map exit-tax exposure. Any planned change of tax residence must factor in tightened deferral conditions and new security requirements that took effect with the Finance Act 2026.
• Update compliance filings. Form 3916 declarations and trust schedules carry heavier penalties post-2026; voluntary disclosure before a formal audit notice remains the lowest-risk remediation path.

What Changed in Finance Act 2026, Headline Points for International Tax Lawyers France

The Finance Act 2026, published in the Journal officiel and codified via amendments to the CGI available on Legifrance, introduced a suite of interconnected measures. Industry observers expect implementing decrees and updated BOFiP (Bulletin officiel des finances publiques) guidance to add further detail over the coming months. The headline changes are:

• Article 235 ter C, Patrimonial-holdings tax. A new standalone levy on certain French and foreign entities whose primary purpose is holding and managing a private patrimony, rather than conducting an active trade or business. The tax applies from the first fiscal year opening after the Act’s enactment.
• Exit-tax amendments. The existing Article 167 bis CGI exit-tax regime has been revised with stricter conditions for deferral (sursis), new instalment-payment schedules and expanded security requirements, narrowing the options previously available to departing taxpayers.
• Trusts and foreign-account declarations. Reporting obligations for trusts with a French-resident settlor or beneficiary have been expanded, and penalties for non-declaration of foreign accounts under Form 3916 have been increased. The administration’s enforcement posture, reflected in recent BOFiP updates, signals a clear intent to tighten scrutiny.
• Pillar Two interactions. While the global minimum tax under the OECD Pillar Two framework primarily targets large multinational groups, certain HNWI-controlled international holding structures may face knock-on effects where top-up taxes interact with French patrimonial-holding or exit-tax provisions.
• IFI (Impôt sur la fortune immobilière) coordination. The Finance Act 2026 clarifies how the patrimonial-holdings tax interacts with the existing IFI, preventing double taxation in some scenarios while creating new compliance obligations in others.

Practitioner takeaway: The combined effect of these changes is to broaden the French tax net around passive wealth structures, whether held directly, through companies or via trusts. Early review and, where necessary, restructuring are essential before the first Article 235 ter C filing deadlines arrive.

Article 235 ter C, The New Patrimonial-Holdings Tax Explained

Scope and Definitions

Article 235 ter C of the CGI, inserted by the Finance Act 2026, targets entities, both French-registered and foreign, that qualify as sociétés à prépondérance patrimoniale (patrimonial-predominance companies). The core test examines whether, over a given reference period, more than 50 % of the entity’s gross assets consist of real estate, financial instruments, cash deposits, art and collectibles, or rights in other patrimonial entities. The provision applies regardless of whether the entity is transparent or opaque for corporate-tax purposes.

Key definitional points include:

• A patrimonial holding vehicle is any legal entity, SCI, SAS, SARL, foreign trust treated as an entity, or equivalent, meeting the asset-composition test.
• Resident and non-resident entities are both in scope. Non-resident entities fall within the charge where they hold French-situs assets above a de minimis threshold or have a French-resident beneficial owner.
• Active-trade exclusion. Entities demonstrating genuine economic activity, measured by employee headcount, turnover and operational decision-making, are excluded, but the burden of proof sits with the taxpayer.

Tax Base and Rates

The patrimonial-holdings tax under Article 235 ter C is levied on the net asset value of the qualifying entity at the close of each fiscal year. The applicable rate schedule, as set out in the Finance Act 2026, is progressive:

Worked example: A French-registered SCI holding a residential-property portfolio valued at €8 million net would face Article 235 ter C liability of approximately €18,500 (on the €1.3 m–€5 m tranche) plus €21,000 (on the €5 m–€8 m tranche), totalling roughly €39,500 per year, in addition to any IFI exposure on the same real-estate holdings at the individual-owner level.

Exemptions and Interactions With IFI and Corporate Tax

The Finance Act 2026 provides several exemptions and coordination mechanisms designed to prevent outright double taxation, though the interactions remain complex:

• IFI credit mechanism. Where the same real-estate assets give rise to both Article 235 ter C liability at the entity level and IFI at the individual-shareholder level, the shareholder may credit the proportionate Article 235 ter C charge against their IFI liability. This credit does not, however, generate a refund, it can only reduce IFI to zero.
• Corporate-tax-paying entities. Entities subject to impôt sur les sociétés (IS) on their full profits are eligible for the active-trade exclusion if they satisfy the operational tests. Entities that opt for IS purely for tax-rate reasons but remain patrimonial in substance will not qualify.
• Regulated investment vehicles. OPCI, SCPI and certain AIFM-regulated funds are carved out, reflecting the policy intention to target private wealth vehicles rather than collective investment schemes.
• Treaty override risk. For non-resident entities, the interaction between Article 235 ter C and applicable double-tax treaties has not yet been authoritatively clarified. Early indications suggest that the administration will treat the levy as a tax on capital rather than income, potentially limiting treaty relief. French international tax lawyers advising cross-border structures should model both treaty-protected and unprotected scenarios.

Exit Tax 2026, Who, When and How It Applies

Overview of Exit-Tax Principles

France’s exit tax, codified in Article 167 bis of the CGI, imposes a deemed-disposal charge on unrealised capital gains held by individuals who transfer their tax residence outside France. The tax was introduced to prevent taxpayers from emigrating solely to avoid French capital-gains tax on appreciated assets. It applies to individuals who have been French tax residents for at least six of the ten years preceding the transfer and who hold, directly or indirectly, a participation of at least 50 % in a company (or whose participations exceed €800,000 in aggregate value).

The exit tax 2026 amendments did not change these foundational principles. Instead, they tightened the procedural framework around deferral, instalments and security, the three mechanisms that previously allowed departing taxpayers to manage or postpone the actual cash outlay.

2026 Technical Amendments, Deferral, Instalments and Security Requirements

The Finance Act 2026 introduced the following changes to the exit-tax regime:

• Shortened automatic-deferral period. For transfers to EU/EEA Member States, the automatic deferral (sursis automatique) is now limited to five years (previously, it could extend until actual disposal). After five years, the taxpayer must either pay the deferred tax or request an extension with supporting evidence that the assets have not been disposed of.
• Instalment payments. Departures to non-EU/EEA countries no longer qualify for the eight-year instalment schedule that existed prior to the 2026 amendments. Instead, the full deemed-disposal gain becomes payable within two years unless the taxpayer posts approved security.
• Expanded security requirements. The administration may now require a bank guarantee, pledge of securities or hypothèque (mortgage) covering up to 120 % of the deferred or instalment-payment amount, up from the previous 100 % threshold. BOFiP guidance at bofip.impots.gouv.fr sets out the forms and procedures for posting security.
• Reporting on return. Taxpayers who return to France and seek cancellation of the exit-tax charge must now file a dedicated return within 60 days of re-establishing French tax residence, confirming that no disposal occurred during the period abroad.

Practical Checklist for Expatriation and Return

For HNWIs considering a change of tax residence, the exit tax 2026 rules demand careful advance planning. The following timeline summarises the critical steps:

Practitioner takeaway: The shortened deferral window and heightened security requirements mean that the cost of emigration has increased materially. Early engagement with experienced international tax lawyers in France is essential to avoid procedural errors that could convert a deferral into an immediate cash liability.

Trusts, Foreign Account Declarations and HNWI Reporting Obligations

Trusts, Settlor and Resident Issues Under the 2026 Rules

Trusts taxation in France has long been contentious. The French tax code does not recognise the common-law trust as a distinct legal form; instead, it attributes income and assets to the settlor (if French-resident) or, in certain circumstances, to French-resident beneficiaries. The Finance Act 2026 reinforced this approach while adding new procedural layers.

Under the updated rules, trustees of any trust with at least one French-resident settlor, deemed settlor or beneficiary must:

• File an annual trust schedule with the French tax administration, disclosing the trust’s assets, income and distributions.
• Report any modification to the trust deed, addition of beneficiaries or change of trustee within 30 days.
• Include the trust’s real-estate assets in the settlor’s or beneficiary’s IFI declaration where those assets exceed the IFI threshold.

The 2026 changes also introduced a rebuttable presumption: where a French-resident individual has contributed assets to a foreign trust and retains any form of influence, whether as protector, adviser or through a letter of wishes, the administration may treat that individual as the economic owner of the trust’s assets for all French tax purposes. Early indications suggest this provision will be actively deployed in audits.

Form 3916 and Other Disclosures, Penalties and Remediation

French tax residents are required to declare all foreign bank accounts, life-insurance contracts and financial accounts held outside France using Form 3916, filed annually with the income-tax return. The Finance Act 2026 raised the penalties for non-declaration:

• Per-account penalty. The fixed fine per undeclared account has been increased, and it is now graduated based on the account balance, with higher fines for balances exceeding €50,000.
• Presumption of taxable income. Non-declared accounts give rise to a rebuttable presumption that the funds are taxable income, shifting the burden to the taxpayer to prove otherwise.
• Extended reassessment period. For undeclared accounts and trusts, the administration benefits from an extended ten-year reassessment window, compared with the standard three-year period.

Voluntary disclosure before the administration initiates a formal audit procedure (examen de situation fiscale personnelle) remains the most effective way to limit penalties. BOFiP guidance confirms that taxpayers who come forward voluntarily benefit from reduced fines, although no formal amnesty programme currently exists.

Interaction With IFI and Wealth Reporting

The IFI applies to individuals whose net real-estate assets exceed the statutory threshold. The Finance Act 2026 clarified that both directly held and trust-attributed real-estate assets count toward the threshold. Where an individual is both the shareholder of a patrimonial holding subject to Article 235 ter C and the settlor of a trust holding real-estate assets, the compliance burden is substantial, requiring coordinated filings across income tax, IFI and the new patrimonial-holdings tax.

Practical Restructuring Options and Constraints for HNWIs and Trustees

Short-Term Steps to Reduce Audit and Penalty Risk

Before considering substantive restructuring, advisers and trustees should prioritise defensive compliance steps that reduce immediate exposure:

• Comprehensive declaration review. Cross-check all Form 3916 filings, trust schedules and IFI returns against actual account balances and asset inventories. Any discrepancies should be addressed proactively.
• Voluntary disclosure. Where past filings are incomplete or inaccurate, consider filing amended returns and contacting the administration before a formal audit notice is received. Voluntary correction generally attracts lower penalties.
• Documentation of active-trade status. For any entity that might be caught by Article 235 ter C, assemble evidence of genuine economic activity, employment contracts, management decisions, revenue sources, to support the active-trade exclusion.
• Trustee communication. Trustees of structures with French-connected persons should confirm that annual reporting is up to date and that trust deeds accurately reflect operational reality.

Restructuring Options and Tax Consequences

Substantive restructuring should only be undertaken after thorough analysis of the tax consequences and with qualified international tax advice. Options that practitioners are likely to evaluate in the wake of the Finance Act 2026 include:

• Converting passive holdings to active-trade entities. Where feasible, injecting genuine economic activity into a holding structure, for example, converting a pure real-estate SCI into an actively managed rental business with employees and turnover, may remove it from the Article 235 ter C charge. However, the administration will scrutinise artificial conversions, and the economic substance must be real.
• Securitisation or disposal of claims. Replacing financial-asset holdings with operating receivables or trade claims may alter the asset-composition calculation. This strategy carries anti-avoidance risk if the sole purpose is to circumvent the patrimonial-holdings test.
• Timing of residence changes. The exit tax 2026 amendments make the timing of departure more consequential. Advisers should model whether departing before or after specific fiscal-year-end dates affects the Article 235 ter C liability at the entity level and the exit-tax charge at the individual level.
• Trust restructuring. For trusts with French-connected persons, options include resettling the trust in a jurisdiction that offers greater transparency (reducing the presumption of economic ownership), distributing assets outright to beneficiaries, or modifying the trust deed to remove reservable powers. Each option has distinct French tax consequences, distributions, for example, may trigger immediate income tax and social charges.
• Leveraging treaty networks. Where double-tax treaties apply, international tax lawyers in France should evaluate whether the patrimonial-holdings tax qualifies for treaty relief. Until BOFiP guidance or case law settles this question, the prudent approach is to plan on a worst-case (no-relief) basis and treat any treaty benefit as upside.

Critical constraint: France’s general anti-avoidance rule (abus de droit, Article L.64 of the Livre des procédures fiscales) empowers the administration to disregard transactions whose sole purpose is to obtain a tax benefit. Any restructuring must be supported by a genuine non-tax commercial rationale.

Tax Audit Defence and Litigation Playbook Under Finance Act 2026

Red Flags and Triggers for Audits

The Finance Act 2026 gives the French tax administration new data points and statutory presumptions that are expected to drive increased audit activity in the HNWI and trust sectors. Common triggers include:

• Discrepancies between Form 3916 declarations and automatic exchange of information (AEOI) data. France receives CRS data from over 100 jurisdictions; any mismatch between reported and received account information will flag an automated alert.
• Late or incomplete trust schedules. Failure to file the annual trust disclosure or to report changes to the trust deed within the new 30-day window is likely to generate an inquiry.
• Entity structures with no apparent economic activity. The administration is expected to cross-reference company registrations with payroll and VAT filings to identify potential Article 235 ter C targets.
• Post-emigration asset movements. Disposals of French-situs assets within the exit-tax deferral period, even partial disposals, may trigger a full review of the original departure declaration.

Defensive Documentation and Preserving Privilege

Effective audit defence begins long before a formal notice arrives. Advisers and trustees should maintain a “defence file” that includes:

• Contemporaneous records demonstrating the commercial rationale for entity structures and transactions.
• Board minutes, employment records and contracts supporting the active-trade exclusion.
• Copies of all filed declarations, trust schedules and correspondence with the administration.
• Legal opinions obtained at the time of structuring decisions, ensuring these are marked as privileged and, where applicable, stored with external counsel to protect against compelled disclosure.

Under French law, legal privilege (secret professionnel) attaches to communications with avocats but generally does not extend to tax advisers who are not members of the bar. Ensuring that sensitive advice is channelled through qualified counsel is an essential protective step.

Litigation Routes and Criminal Risks

Where an audit results in a proposed reassessment, the taxpayer may contest through administrative appeal, followed by proceedings before the tribunal administratif and, if necessary, the Conseil d’État. In cases involving suspected deliberate fraud, particularly undeclared foreign accounts or trust assets, the administration may refer the matter to the parquet national financier for criminal prosecution. Criminal tax fraud carries significant penalties, including imprisonment. Engaging specialised defence counsel at the earliest possible stage, ideally before responding to the first formal request for information, is the most effective way to protect the taxpayer’s position.

Action Checklist and Timeline for Advisers and Trustees

Immediate (0–30 days):

• Circulate Finance Act 2026 briefing to all clients with French-connected structures, trusts or foreign accounts.
• Review every existing Form 3916 and trust-schedule filing for completeness and accuracy.
• Identify all entities that may fall within the Article 235 ter C definition and begin the active-trade analysis.

Short term (30–90 days):

• File amended declarations or voluntary disclosures where past filings are incomplete.
• For clients planning emigration, model the revised exit-tax exposure and security requirements.
• Assemble the “defence file” documentation pack for each high-risk structure.
• Schedule a client review meeting to discuss restructuring options and constraints.

Medium term (3–12 months):

• Implement agreed restructuring steps, conversion to active-trade status, trust modifications or distributions, with full documentation of commercial rationale.
• Monitor BOFiP updates and implementing decrees for Article 235 ter C; adjust compliance procedures as guidance evolves.
• Review cross-border succession planning to ensure wills and estate plans reflect the new tax landscape.
• Evaluate whether existing trust or foundation structures remain appropriate, or whether alternative vehicles offer better compliance outcomes.

Conclusion, Why International Tax Lawyers France Are Essential in 2026

The Finance Act 2026 marks a step change in France’s approach to taxing private wealth structures. The three key takeaways for HNWIs, trustees and their advisers are:

• Article 235 ter C creates a new annual cost for patrimonial holding vehicles that were previously subject only to income or corporate tax, requiring immediate structure review and, where appropriate, conversion to active-trade operations.
• Exit-tax 2026 amendments have narrowed the available deferral and instalment options, making pre-departure planning more complex and the consequences of procedural error more severe.
• Trusts and foreign accounts face heavier reporting obligations and penalties, with the administration equipped with stronger statutory presumptions and longer reassessment windows to enforce compliance.

In this environment, engaging experienced international tax lawyers France offers is not optional, it is the primary risk-management tool available to HNWIs, trustees and family offices navigating the 2026 landscape. Qualified counsel can ensure that structures are compliant, restructuring is defensible and, where disputes arise, the taxpayer’s rights are protected from the earliest stage. For a directory of qualified specialists, the Global Law Experts lawyer directory provides a starting point for identifying practitioners with the required expertise in French international tax, cross-border corporate structuring and private-client advisory.

Sources

1. Legifrance, Loi de finances pour 2026 (official text)
2. Direction Générale des Finances Publiques (BOFiP), tax administration guidance
3. OECD, Pillar Two / international tax guidance
4. CMS Francis Lefebvre, Finance Act 2026 alert
5. KPMG France, tax alert (Finance Act 2026)
6. French Tax Administration (impots.gouv.fr), Form 3916 guidance
7. French tax code (Code général des impôts), Legifrance
8. Cornet Vincent Ségurel, international tax practice