France Releases 2026 Finance Bill with Amendments for June 2024 OECD Administrative Guidance

On October 14, 2025, France released the 2026 Finance Bill. This includes amendments to include the June 2024 OECD Administrative Guidance, as well as DAC 9 implementation.

The key Pillar 2 changes in the 2026 Finance Bill are:

Amended definition of UPE

For financial years ending on or after December 31, 2025, the definition of a UPE is amended by Article 26(4) to include specific entities in the mutual banking sector and insurance sectors.

In particular, it includes:

– a central body referred to in the Monetary and Financial Code (Crédit Agricole S.A., the central body of savings banks and popular banks, and the National Confederation of Mutual Credit.

– a departmental or interdepartmental fund of a mutual credit union when it is required to prepare consolidated financial statements in accordance with a qualified financial accounting  standard.

Amended definition of Consolidated Financial Statements

For financial years ending on or after December 31, 2025, the definition of consolidated financial statements is amended by Article 26(7) to include combined accounts established by an entity in Article L. 345-2 of the Insurance  Code, of 8° of Article L. 423-1-2 of the Construction and Housing Code or Article L. 524-6-2 of the Rural and Maritime Fishing Code.

Deferred Tax Recapture Amendments

The June OECD Administrative Guidance includes further guidance addressing the application of the recapture rule to aggregated DTL amounts. The Finance Bill includes these amendments for financial years beginning on or after December 31, 2023, and specifically includes:

-Aggregate DTL Category basis (Article 1.2.1)

-Exclusion of certain types of GL accounts and separate tracking (Article 1.2.1)

-Exclusion of GL accounts that generate standalone DTAs (Article 1.2.1)

-Exclusion of swinging accounts and separate tracking (Article 1.2.1)

-FIFO/LIFO Basis (Article 1.2.1)

-Aggregation of Short-term DTLs (Article 1.2.1)

The Finance Bill includes an election for a FIFO basis to determining the amount of a reversal where the category of deferred tax liabilities includes only deferred tax liabilities relating to a single  account in the general ledger of the constituent entity.

Whether the FIFO or LIFO basis applies will have an impact on the calculation of the amount of any reversal.

The amount of the reversal is referred to in the OECD guidance as the ‘Unjustified Balance’ in the current Fiscal Year (ie the fifth subsequent Fiscal Year after the year in which the DTL accrual occurred and was claimed in the Adjusted Covered Taxes) when compared with the previous year.

The Unjustified Balance is the excess (if any) of the Outstanding Balance of the DTL over the Maximum Justifiable amount for that category. The Maximum Justifiable Amount is determined differently depending on whether the FIFO or LIFO basis applies.

Under the FIFO basis, the Maximum Justifiable amount is the sum of the net increases in the outstanding DTL balance for each Fiscal Year in the five-year testing period in which there was a net increase in the outstanding DTL balance. This ensures that a net decrease in the DTL balance with a Fiscal Year is treated as reducing  the net increase in DTL balance in the earliest Fiscal Year in chronological order.

Under the LIFO basis, the Maximum Justifiable amount is the greater of zero or the net amount of the DTL accruals and reversals that occurred during the five year testing period.

Investment entities for QDMTT purposes

Articles 26(50)-(52) of the finance bill includes proposed changes to the treatment of investment entities for QDMTT purposes from financial years beginning on or after December 31, 2023.

Currently the law states that for QDMTT purposes an in-scope group must designate another constituent entity in the group (located in France) and that is not an investment entity or insurance investment entity to be liable for the QDMTT for any investment entities and insurance investment entities.

If no entity is designated then the entity liable for the QDMTT is the constituent entity that is a member of the group located in France and which has the highest GloBE income for the financial year in question.

If no constituent entity of the group, other than an investment entity or an insurance investment entity, is located in France, the investment entity or insurance investment entity remains liable.  

The Finance Bill amends this to provide that investment entities and insurance investment entities  are exempt from the QDMTT if no constituent entity of the group, other than an investment  entity  or an insurance investment entity, is located in France.

Amended QDMTT Allocation

The current law provides that the QDMTT allocated to a constituent entity for a financial year is equal to the product of the group’s QDMTT by the ratio between the QDMTT calculated individually by that entity and the total QDMTT calculated individually by each of the entities.

For financial years ending on or after December 31, 2025, Article 26(54) of the Finance Bill provides that if no QDMTT is allocated to an entity of the group or subgroup the QDMTT is allocated to a constituent entity based on the GloBE income of that constituent entity and the total GloBE income of the constituent entities located in that territory.

DAC 9

The Finance Bill implements the EU DAC 9 amendments. This simplifies reporting in-scope groups by enabling central filing of a top-up tax information return (TTIR) and introduces a standard form for filing the TTIR across the EU, in line with the GIR.