France proposes Side-by-Side safe harbours in a government Finance Bill amendment

By Lee Hadnum — Chartered Accountant, former Senior Tax Analyst at Bloomberg Tax and specialist in international tax planning.

On 10 October 2026, the French Government tabled amendment I-3734 to the 2027 Finance Bill, proposing substantial changes to France’s Pillar Two safe harbours and related implementation rules. The amendment would insert an additional article after Article 15 of Bill No. 3210. At the time of review, the Assembly’s record marks it “En traitement” and expressly makes the text subject to processing by its services and admissibility. It is a government proposal, not an adopted amendment or enacted relief.

The principal measures are an elective Side-by-Side Safe Harbour, a separate UPE Safe Harbour, a one-year extension of the Transitional CbCR Safe Harbour and an authority to complete further implementation by ordinance. The changes matter both for foreign-parented groups with French entities and for groups using France’s existing simplified calculations. Several proposed application dates precede the expected enactment of the budget law.

Side-by-Side relief for IIR and UTPR

Paragraph I(9) would add CGI Article 223 VZ decies. On an election by the reporting constituent entity, top-up tax payable under Articles 223 WG and 223 WJ—the IIR and UTPR collection provisions—would not be due where the group’s UPE is located in a jurisdiction with a qualified Side-by-Side regime. The election would apply to fiscal years beginning on or after 1 January 2026.

Qualification would require an Inclusive Framework review of the jurisdiction’s domestic and foreign-income tax regimes, together with crediting of foreign QDMTT on the same terms as other covered taxes. A ministerial order would identify the qualifying jurisdictions. The proposal therefore does not permit a French entity simply to self-certify that its parent jurisdiction’s tax system is equivalent. Nor does the text waive the French domestic minimum top-up tax: its operative relief refers to the IIR and UTPR, and the explanatory statement expressly preserves the domestic charge.

A distinct UPE Safe Harbour

Paragraph I(8) would add paragraphs II and III to CGI Article 223 VZ nonies. This relief would reduce the UTPR calculation to zero for low-taxed constituent entities located in the UPE jurisdiction, including the UPE itself, where that jurisdiction has a qualified UPE regime. It would also be elective and apply to fiscal years beginning on or after 1 January 2026.

The geographical scope is narrower than Side-by-Side relief. Qualification refers to an Inclusive Framework review of the domestic-regime criteria in proposed Article 223 VZ decies I(A)(1); the foreign-regime criteria needed for Side-by-Side qualification are not incorporated into this separate UPE test. The two elections should consequently be assessed separately.

One additional year of Transitional CbCR Safe Harbour

Paragraphs I(5)(a) and I(7) address the simplified ETR threshold and the safe harbour’s duration. Against the existing Articles 223 VZ bis and 223 VZ octies, the proposal would extend the final start date from 31 December 2026 to 31 December 2027 and the final end date from 30 June 2028 to 30 June 2029. The Government describes the measure as a one-year extension; the 17% simplified ETR threshold is intended to cover the additional year.

Groups should treat these as prospective planning changes pending the legislative process. A proposed extension does not itself establish eligibility, remove the existing elections and exclusions, or suspend current French filing and payment obligations.