First introduced by the 2025 Finance Act and renewed for 2026, the Contribution Differentielle sur les Hauts Revenus (CDHR) — France’s high-income differential contribution — has become one of the most structurally significant tax measures for high-net-worth households. Yet it remains widely misunderstood: many taxpayers confuse it with the longstanding Contribution Exceptionnelle sur les Hauts Revenus (CEHR), introduced in 2012, or are unaware of the advance payment obligation that makes it a concrete operational constraint as early as December.

This article breaks down exactly how the CDHR works, which profiles are most exposed, and what adaptation strategies are available.

What is the CDHR, and why does it exist?

The CDHR addresses a straightforward problem: some very high-income households benefit from tax reduction mechanisms, specific exemptions, or income that is structurally lightly taxed — such as dividends and capital gains taxed at the flat rate (PFU) — resulting in an effective tax rate below 20%. The CDHR closes that gap.

In practice, if your combined income tax (IR) and CEHR result in an effective rate below 20% of your taxable reference income (RFR), the CDHR applies to bring you up to that minimum threshold. It does not replace the IR or CEHR — it is added on top of them.

The calculation: a three-step mechanism

The CDHR compares two figures:

• The theoretical minimum tax: 20% of the adjusted RFR, potentially reduced by a degressive relief for taxpayers just above the threshold.
• Tax actually paid: IR + CEHR + flat-rate increases. Since the 2026 Finance Act, the CEHR on exceptional income taxed at the PFU is only counted at 25% in this calculation — making the CDHR significantly more impactful for taxpayers who have realised large capital gains or received substantial dividends.

If the difference is positive, that is the CDHR owed. If it is zero or negative, no CDHR applies.

The December advance payment: the key operational constraint

What sets the CDHR apart from a simple additional tax line on an assessment notice is its mandatory advance payment. Between 1 and 15 December 2026, affected taxpayers must pay an advance equal to 95% of their estimated CDHR.

This requires having, by early December, a reliable projection of all income for the year — including variable income, distributions from pass-through entities, potential capital gains, and investment returns that are often only finalised late in the year.

Which profiles are most exposed?

The CDHR primarily targets situations where high income is lightly taxed:

• Shareholder-directors of SMEs and mid-caps who are remunerated mainly through dividends, taxed at the 12.8% PFU rate plus social contributions.
• Investors who have realised significant capital gains on share sales or business disposals in 2026.
• Taxpayers benefiting from substantial tax reductions (film investment schemes, forestry groups, Malraux or Historic Monuments regimes) that bring their effective rate below 20%.
• French residents with partially exempt foreign income under bilateral tax treaties, where treaty relief reduces French tax without proportionally affecting the CDHR base.

Conversely, salaried executives whose primary income is already taxed in the top marginal brackets are generally not affected: their effective rate naturally exceeds 20%.

What changed with the 2026 Finance Act

The 2026 Finance Act brings two key adjustments relative to 2025:

First, the reduction of the CEHR credit for PFU-taxed income from 100% to 25%. In 2025, CEHR on dividends and gains taxed at the PFU was fully offset against the CDHR calculation. From 2026, only 25% of that CEHR counts. For a taxpayer who received €500,000 in dividends at the PFU rate, the additional CDHR exposure can run to tens of thousands of euros.

Second, the open-ended extension. In 2025, the CDHR was presented as temporary. The 2026 Finance Act ties it to the return of France’s public deficit below 3% of GDP — a threshold France has only met twice in the past fifteen years (2017 and 2018). In practice, the CDHR is now a permanent feature of the French tax landscape.

Adaptation strategies

The CDHR cannot be eliminated for affected taxpayers — its purpose is precisely to establish a tax floor of 20%. That said, several levers allow you to manage its impact:

1. Begin revenue modelling in September. The December advance payment requires clear visibility over full-year income. Any transaction generating taxable income in 2026 — disposals, distributions, bond redemptions, PEA exits — must be planned in advance with your adviser to assess its CDHR impact.

2. Balance dividends and salary. For shareholder-directors, increasing the salary component raises the effective tax rate above 20%, mechanically neutralising the CDHR — at the cost of higher social contributions. The right balance depends on the household’s overall situation.

3. Defer certain transactions to the following year. If a major disposal or distribution is planned, deferring it to 2027 may be worthwhile if next year’s fiscal position is more favourable (reduced other income, change in family circumstances).

4. Use property investment to raise the effective rate. Certain real estate investments — the new Jeanbrun regime, Malraux, Historic Monuments — generate taxable rental income, but the associated depreciation or charges can fine-tune the effective tax rate without dropping below the CDHR threshold.

5. Review the impact of international tax treaties. For French residents with foreign-source income, the treatment of that income within the CDHR calculation warrants specific analysis. Some treaties result in a higher effective rate than purely domestic income; others may increase exposure.

What this means for your wealth management

The CDHR reinforces the importance of proactive, holistic wealth management. It cannot be treated in isolation — its calculation depends on the entire structure of your income, your investments, and the optimisation decisions made throughout the year.

For Riviera Wealth Management clients whose RFR exceeds the applicable threshold, we systematically integrate a CDHR simulation into our annual reviews and year-end planning sessions. The objective is not to avoid a legitimate tax, but to ensure its management is structured, anticipated, and free of surprises — particularly around the December advance payment.

If you would like to assess your 2026 CDHR exposure and optimise your year-end strategy, our team is available for a personalised review.

The information in this article is provided for informational and educational purposes only. It does not constitute individual tax or legal advice. Any tax decision should be taken following consultation with a qualified professional and with regard to your personal circumstances. Sources: French Finance Act for 2026 (Journal Officiel, 19 February 2026), Article 200 A of the French Tax Code (CGI), BOFIP documentation, impots.gouv.fr.