Article 235 ter C: A Silent Threat to Organised Wealth Structures

France’s 2026 Finance Act introduced a measure that flew under the radar but will profoundly affect thousands of patrimonial companies: the non-professional asset tax, codified under Article 235 ter C of the General Tax Code (CGI). Its mechanism is straightforward — and its impact, devastating if left unaddressed.

In concrete terms, any company — holding structure, SAS, SARL, SA, or SCI — that holds more than €5 million in assets classified as « non-professional » or « sumptuary » is subject to a 20% annual tax on the market value of those assets, assessed on the first day of the fiscal year. The tax applies to every financial year closing from 31 December 2026 onwards.

Assets in scope include: investment property held on a holding company’s balance sheet, cash and investment securities, luxury goods (yachts, aircraft, artwork, jewellery, racehorses), and interests in entities themselves holding such assets. Operational assets — machinery, inventory, patents, business premises — remain outside the scope.

The legislature’s intention is clear: to target structures that allowed private assets to be held within a corporate IS framework, benefiting from lower corporate taxation while indefinitely deferring personal tax. The message is unambiguous: these arrangements now carry a recurring, quantifiable cost.

Are You Affected? The Precise Eligibility Criteria

Four cumulative conditions trigger the tax. All four must be met on the first day of the financial year for the company to be liable.

Condition 1 — Legal form. The tax applies to all companies subject to corporate income tax (IS): SAS, SARL, SA, IS-elected SCI, pure or operational holding companies. Civil companies taxed on a pass-through basis (IR) are not directly affected, though they may be indirectly caught within an IS group structure.

Condition 2 — The non-professional asset threshold. Total non-professional assets on the balance sheet must exceed €5 million. This threshold is assessed at market value — not book value. For real estate assets acquired ten or twenty years ago, the gap between book and market value can be substantial and unfavourable.

Condition 3 — Asset classification. The tax authority has published an indicative list: real estate not used in the business (holiday homes, rental flats, land), cash and investment securities, luxury vehicles, boats, aircraft, horses, artwork. Operating subsidiaries and holdings in active trading companies may be excluded under specific conditions.

Condition 4 — Financial year end. The tax is computed at each year-end closing, starting from 31 December 2026. For companies on a calendar-year basis, the first application is 31 December 2026. For those with non-calendar year ends (31 March, 30 June, 30 September), the first assessment may fall in 2027 depending on the structure.

Four Strategies to Exit the Tax’s Scope Before 31 December

The good news: the tax is not inevitable. Several restructuring paths can reduce or eliminate your exposure before the first affected closing. Each carries its own constraints and implementation timelines — which must be assessed promptly.

Dividend Distribution: The Most Accessible Lever

Where non-professional assets consist primarily of cash and investment securities, distributing dividends before year-end is the fastest route. An ordinary general meeting suffices, provided distributable reserves are adequate. Personal tax on the distribution remains manageable: at the flat tax rate of 31.4% (12.8% income tax + 18.6% social levies following the CSG increase in the 2026 Social Security Finance Act), it remains well below a recurring 20% annual levy on the total asset value.

Corporate Demerger: For Complex Patrimonial Structures

Where non-professional assets are intertwined with professional ones — operating subsidiaries, business premises — a partial demerger becomes necessary. This involves transferring non-professional assets to a new entity, ideally a pass-through civil company (SCI à l’IR or patrimonial civil partnership) outside the IS framework and therefore beyond the tax’s reach. The process requires a contribution agreement, an independent valuation, and in certain cases a tax clearance (Art. 210 C CGI). Minimum lead time: four to six months. Begin immediately.

Asset Reclassification: Under Strict Conditions

Certain assets may qualify as professional if their effective operational use can be thoroughly documented. A property used as a formal company residence under a signed allocation agreement, a yacht registered as a client hospitality tool, artwork displayed in client reception spaces. Tax authorities will subject these qualifications to heightened scrutiny: documentation must be watertight and actual usage must be substantiated, not merely formal.

Asset Disposal: The Clean Break

For assets that serve no compelling patrimonial purpose — or where the unrealised gain is modest — disposal before 31 December 2026 is the clearest path. A disposal triggers an immediate capital gains tax at 31.4%, but avoids a recurring 20% annual levy. The comparative calculation is straightforward and often favours disposal for low-gain assets.

The Action Timeline: Seven Months to Secure Your Position

The clock is running. Between a complete patrimonial audit, strategic decision-making, legal implementation, and ensuring enforceability against the first affected financial year, deadlines accumulate. Below is the ideal schedule for a company closing its accounts on 31 December 2026.

Pitfalls to Avoid: What the Law Does Not Forgive

Poorly documented or rushed implementation of these strategies may expose you to risks far more costly than the tax itself. Two pitfalls account for the majority of tax reassessments in patrimonial restructuring.

Abuse of law (Art. L64 LPF). A transaction motivated exclusively by tax savings, with no genuine economic substance, may be recharacterised by the tax authorities. The new holding tax makes this risk particularly acute: if your demerger or distribution is supported only by tax savings calculations, with no economic or patrimonial rationale of its own, you are vulnerable. Substance — real board meetings, genuine intercompany agreements, actual use of assets — is your first line of defence.

Asset valuation. The tax is based on market value, not book value. Under-valuing real estate assets or equity stakes to reduce the taxable base constitutes a separate offence, subject to penalties of 40% to 80% for deliberate non-compliance. An independent, documented valuation is imperative.

It is also worth noting that the 2026 Finance Act simultaneously tightened the Dutreil family business exemption (individual commitment extended to six years, bringing the total lock-up to eight years) and the contribution-and-disposal regime under Article 150-0 B ter (minimum reinvestment raised to 70%, holding period extended to five years). These mechanisms, often used as alternatives to the classic patrimonial holding structure, remain valuable — but operate within a significantly more constraining framework than before.