Amendment I-3734 to France’s 2027 Finance Bill proposes new Side-by-Side and UPE safe harbours, a one-year extension of transitional country-by-country reporting relief, and changes to top-up tax payment arrangements for multinational groups.
The French government tabled Amendment I-3734 to the 2027 Finance Bill (Projet de loi de finances pour 2027, No. 3210) on 10 October 2026, introducing significant updates to France’s Pillar Two global minimum tax framework.
The proposal transposes global agreement frameworks adopted by the OECD/G20 Inclusive Framework on 5 January 2026, modifying the French General Tax Code (Code général des impôts – CGI) to establish new elective safe harbour mechanisms and extend transitional tax calculation reliefs for multinational enterprise (MNE) groups.
The elective side-by-side safe harbour
A major addition in Amendment I-3734 is the creation of an elective Side-by-Side Safe Harbour, codified under CGI Article 223 VZ decies. Upon election by a reporting constituent entity, top-up tax payable under France’s Income Inclusion Rule (IIR – Article 223 WG) and Undertaxed Profits Rule (UTPR – Article 223 WJ) is reduced to zero where the group’s Ultimate Parent Entity (UPE) is located in a jurisdiction applying a qualified side-by-side regime.
To qualify as a side-by-side regime, the UPE jurisdiction’s domestic legislation must be recognised by an OECD Inclusive Framework peer review meeting two primary criteria:
- Eligible domestic tax regime: A statutory corporate income tax rate of at least 20%, a Qualified Domestic Minimum Top-Up Tax (QDMTT) or equivalent minimum tax, and no significant risk of entities being taxed below the 15% minimum rate.
- Eligible foreign operations regime: Taxation of resident entities on foreign earnings (including Controlled Foreign Company or Permanent Establishment rules), active anti-base erosion measures, and tax credits for foreign QDMTTs granted on terms equivalent to other covered taxes.
Qualifying jurisdictions will be formally listed via a decree from the French Minister of the Budget. Crucially, while this safe harbour eliminates foreign-source top-up taxes under the IIR and UTPR, it does not exempt French constituent entities from France’s local Qualified Domestic Minimum Top-up Tax.
A distinct UPE safe harbour
The amendment introduces an elective UPE Safe Harbour that eliminates UTPR top-up tax for low-taxed constituent entities in the ultimate parent entity’s home jurisdiction, including the UPE itself. Qualification depends on an OECD Inclusive Framework assessment of domestic taxation criteria, without requiring compliance with foreign-income taxation rules. The UPE and Side-by-Side safe harbour elections apply to fiscal years beginning on or after 1 January 2026.
One-year extension of the transitional CbCR safe harbour
To provide business groups with additional operational transition time, the amendment extends the Transitional Country-by-Country Reporting (CbCR) Safe Harbour under CGI Articles 223 VZ bis and 223 VZ octies by one full year:
- The maximum start date for eligible fiscal years is extended from 31 December 2026 to 31 December 2027.
- The overall end date for covered reporting periods is shifted from 30 June 2028 to 30 June 2029.
- The simplified Effective Tax Rate (ETR) threshold of 17% remains applicable during this extended transition period.
Government ordinance authorisations and payment centralisation
The amendment authorises the French Government to issue ordinances within 12 months to incorporate OECD guidance, clarify intra-group top-up tax recharges and correct drafting inconsistencies. It also expands the option for groups to centralise IIR top-up tax payments through a designated entity, including for joint ventures and their subsidiaries.
Timeline and legislative status
The new safe harbour elections apply to fiscal years beginning on or after 1 January 2026, while certain technical corrections apply retroactively from 31 December 2023. As Amendment I-3734 remains under parliamentary consideration, multinational groups operating in France should plan ahead while complying with current rules.
