A lively debate is currently taking place in France after a recent parliamentary report found that over 13,000 millionaire households did not pay a single euro in income tax in 2024.
The debate has sometimes lost sight of the difference between wealth and income, as some millionaires merely hold that status by virtue of their ownership of property or shares, not the income they earned in the year.
Nevertheless, it is also true to say that a legal mechanism allows many rich households to report personal taxable income that is zero or extremely low.
To manage their wealth, many ultra wealthy households create a family or personal holding company, which directly owns their shares and business interests.
When an operating company earns profits and distributes dividends, these dividends go to the holding company, not directly to the individual.
French tax law allows holdings to benefit from the “mère-fille” (parent-subsidiary) regime, under which 95% of dividends received by the holding are exempt from corporate tax. Only 5% are added back to the taxable base.
As long as the money stays in the holding company, it is not considered personal income, allowing the accumulation of millions without triggering income tax or the 31.4% flat tax on capital income.
To maintain their luxury lifestyle, the rich use bank loans borrowed against assets as collateral, without generating taxable income. These loans can be several million euros and are not taxable.
During the passage of the Loi de Finances 2026, there was much debate about a new tax on the wealth, the so‑called “Zucman tax”, proposed by an economist Gabriel Zucman. The proposal was for a minimum tax for the ultra-rich.
However, the proposal failed to gain a parliamentary majority.
Nevertheless, in order to gain the support of the Socialist Party (or at least their abstention on a vote of censure) the government introduced a measure aimed at reducing the tax advantage of holding companies.
The new law targets non-professional assets held by personal or family holdings, amounting to a tax of 20%, which applies to assets considered luxury or personal, such as yachts and pleasure boats, private jets and aircraft racehorses, jewellery and precious metals, properties used personally or made available for free, and wine and alcohol collections.
The measure does not the holding’s business investments or regular corporate financial assets. It’s specifically intended to discourage using a holding company merely as a vehicle for accumulating luxury or passive wealth that doesn’t serve an operational business purpose.
The tax, which is not an income tax, applies to total assets worth at least €5 million, which are controlled directly or indirectly by a person or a family and where at least 50% of income is passive, eg dividends, rents, interest.
The law also maintains the minimum contribution on high incomes, ensuring a 20% minimum tax rate on declared income.
In addition, France’s wealth tax Impôt sur la Fortune Immobilière (IFI) remains in place on personal real estate assets greater than €1.3m net.
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