The PFU in 2026: Principles and Scope

Introduced by the 2018 Finance Act, the Prélèvement Forfaitaire Unique (PFU) — commonly known as the “flat tax” — fundamentally reshaped the taxation of savings income in France. Its principle is straightforward: a global rate of 30%, comprising 12.8% income tax and 17.2% social contributions, applies by default to the vast majority of capital income from securities.

The following are subject to this regime: interest on bonds and taxable savings accounts, dividends from equities, capital gains on the disposal of securities (shares, fund units), income distributed by companies subject to corporate tax, and gains realised on certain life insurance policies. The 12.8% withholding tax is deducted directly by the paying institution at each disbursement and subsequently credited against the annual tax return.

In practice, if you receive €10,000 in dividends in 2026, your bank automatically withholds €3,000 (30%), of which €1,280 is income tax and €1,720 is social contributions. This final withholding tax extinguishes the fiscal obligation without any further action required — unless you wish to exercise the income tax option.

Income Tax or Flat Tax: The Simulation That Changes Everything

Taxpayers may waive the PFU and opt for the inclusion of their capital income in the progressive income tax scale. This option, exercised globally on the annual tax return (box 2OP of form 2042), applies to all capital income for the year: it is not possible to retain the PFU for interest while opting for the income tax scale for dividends.

When the income tax option is exercised, category-specific rules come back into play: the 40% allowance on dividends from French companies applies, and 6.8% of CSG becomes deductible from the following year’s income. The comparison is therefore not as straightforward as it may appear.

The chart is clear: the crossover point lies at around a marginal tax rate of 14%. Below this threshold, opting for the income tax scale generates a genuine tax saving. Above it, the PFU is systematically less costly. For the vast majority of clients with significant wealth — whose marginal rate exceeds 30% — the PFU is the rational default choice.

Note, however, that where your reference fiscal income falls below certain thresholds, the paying institution may, upon request, exempt you from the 12.8% withholding at source. This exemption, to be requested before 30 November of the preceding year, avoids an upfront cash payment on income tax.

Tax Wrappers That (Partially) Escape the Flat Tax

Not all savings income is subject to the PFU. Certain wrappers benefit from preferential regimes that make them particularly attractive, independently of the PFU/income tax choice. Mastery of these mechanisms lies at the heart of any well-constructed wealth strategy.

Comparative Table: Which Wrapper for Which Objective in 2026?

Faced with the diversity of available wrappers, an effective tax allocation strategy rests on prioritising objectives: short-term yield, long-term compounding, or estate planning. The table below summarises the decisive characteristics for guiding allocation decisions.

Five Pitfalls to Avoid in 2026

Capital taxation is an area where mistakes can be costly. Several common situations lead to an unintentional increase in the tax burden, sometimes without any possibility of correction after the fact.

1. Ticking box 2OP by reflex without running a simulation

Some taxpayers systematically tick box 2OP (income tax option) believing they will “recover” withholding tax already paid. This logic is flawed for households with a marginal rate of 30% or above: the option worsens the tax bill. A simulation on your provisional tax return is essential before any decision.

2. Overlooking the Exceptional Contribution on High Income (CEHR)

The CEHR (3% from €250,001 to €500,000 and 4% above) applies to the reference fiscal income. However, certain capital income integrated via the income tax option inflates this reference figure and triggers or amplifies the CEHR, widening the gap further with the PFU.

3. Realising gains before the optimal holding period

For securities acquired before 2018, holding-period allowances survive under the income tax option (standard allowance of 50% after 2 years, 65% after 8 years). The historical schedule warrants careful review before any disposal.

4. Forgetting the step-up in cost basis at death on securities accounts

The ordinary securities account offers a frequently overlooked estate planning advantage: upon the death of the holder, unrealised capital gains are “wiped out.” Heirs receive the securities at their market value on the date of death, with no tax on prior gains. This mechanism can justify retaining certain highly appreciated positions rather than disposing of them during one’s lifetime.

5. Under-funding the PEA and PER relative to an overloaded securities account

A frequent high-impact arbitrage consists of maximising contributions to the PEA and PER before holding yield-generating assets in a taxable securities account. The basic rule: any PEA-eligible equity should first be housed in that wrapper before being held directly.