Updated guidance from the French tax authority confirms the exceptional surtax on major corporations now applies for a second consecutive fiscal year, with a raised turnover threshold, revised look-back rules, progressive smoothing bands to soften tax cliffs, and clarified treatment of foreign tax credits.
The French tax authority has published updated guidance on the temporary corporate income tax surtax for large companies, reflecting the extension and revised liability threshold introduced under the Finance Law for 2026.
This official tax bulletin outlines the extraordinary corporate tax imposed on major corporations in France for the 2025 and 2026 fiscal years. Eligibility is determined by high annual turnover thresholds, specifically exceeding EUR 1 billion in the first year and EUR 1.5 billion in the second. The tax base is calculated using an average of the corporate income tax due over the current and previous years, with variable rates reaching up to 41.2% for the largest entities.
The key updates are summarised as follows:
Extension to a second consecutive fiscal year
The exceptional surtax on large corporate profits was originally established by Article 48 of the 2025 Finance Law as a temporary measure applicable only to the first fiscal year closing on or after 31 December 2025. However, Article 12 of the 2026 Finance Law officially extended this contribution by one year. As a result, the exceptional tax is now due for the first two consecutive fiscal years closing on or after 31 December 2025.
Modification of turnover thresholds and look-back rules
The turnover thresholds for liability are modified between the two years:
- First fiscal year: Companies are subject to the surtax if their turnover is equal to or greater than EUR 1 billion either in the current fiscal year or in the preceding fiscal year.
- Second fiscal year: The turnover threshold is raised to equal to or greater than EUR 1.5 billion. Crucially, the look-back rule is removed for this second period; eligibility is assessed solely on the turnover of that second fiscal year.
Updated tax rates and progressive smoothing rules
To prevent dramatic marginal tax cliffs where a slight increase in turnover results in a disproportionate tax burden, the standard rates are paired with progressive smoothing bands:
Standard rate of 20.6%
- Applies to companies with a turnover between EUR 1 billion and EUR 3 billion for the first fiscal year.
- Applies to companies with a turnover between EUR 1.5 billion and EUR 3 billion for the second fiscal year.
High rate of 41.2%
Applies to companies with a turnover equal to or higher than EUR 3 billion.
- For the first year, this rate is triggered if either the current or preceding year’s turnover hits the EUR 3 billion mark.
- For the second year, it is based solely on the second year’s turnover exceeding EUR 3 billion (unless eligible for the high-end smoothing rule).
Smoothing bands to eliminate tax cliffs
- First year low-end smoothing (EUR 1B to EUR 1.1B): For companies with turnovers in this band, the 20.6% rate is scaled down proportionally.
- Second year low-end smoothing (EUR 1.5B to EUR 1.6B): For the second fiscal year, smoothing applies between EUR 1.5 billion and EUR 1.6 billion, regardless of the previous year’s turnover.
- High-end smoothing (EUR 3B to EUR 3.1B): For both the first and second fiscal years, smoothing applies to turnovers between EUR 3 billion and EUR 3.1 billion.
Treatment and imputation of foreign tax credits
France’s exceptional surtax rules allow foreign tax credits—where permitted under an applicable French tax treaty—to be offset against the surtax, in addition to standard Corporate Income Tax (IS) and the 3.3% social contribution, with companies free to choose the order in which they apply these credits across the three.
However, such credits can only be used at final liquidation of the tax, not against the mandatory advance payment (versement anticipé, generally 98% of the estimated contribution), and any excess credit beyond what’s needed to cover the surtax is neither refundable nor carried forward to future years.
