Your company is generating consistent profits, and your accountant is suggesting a holding company. A partner is talking about selling in three years. Your children are starting to work in the company.
Each of these situations can justify a holding company. None of them can be justified solely by tax savings. For transactions carried out since January 1, 2020, the tax authorities can disregard an arrangement whose primary purpose is tax-related. The 2026 Finance Act also tightened the rules governing contribution-sale transactions and the Dutreil agreement, and created a tax on certain asset-holding companies.
Our position is simple. A holding company is created for a specific purpose: to acquire, sell, transfer, or manage a group. It is this purpose, documented and dated before the transaction, that protects the structure during an audit. Here's how to approach it, legal framework by legal framework, before signing the articles of incorporation.
What is a holding company and what is its purpose?
Plan
The holding company acts as an intermediary between you and your companies
The projects that justify it
- Buying a company
- Sell and reinvest
- Passing it on within the family
- Managing multiple companies
What she doesn't do
- Abolish personal tax
- Erase a personal deposit
A company like any other, with a particular purpose
A holding company is not a legal structure. It is a company, most often a simplified joint-stock company (SAS) or a limited liability company (SARL), whose main purpose is to hold shares in other companies. These are referred to as parent companies and subsidiaries.
It is almost always subject to corporation tax. This is a prerequisite for accessing the group tax regimes described below. A civil law company can also play this role, but with different tax rules.
The four projects that justify a holding company
- To buy back a company by financing the purchase with a loan, repaid by the dividends of the acquired company.
- Prepare for the sale of your business and reinvest the proceeds in an economic activity.
- Organize the family transfer, retaining control while the children acquire shares.
- Managing multiple companies: centralized treasury, shared services, group decisions.
Outside of these projects, the holding company primarily adds costs: more accounting, agreements to draft, and meetings to hold. It only becomes justified when a real benefit, both legal and tax-related, outweighs these costs.
What a holding company does not do
It does not eliminate personal income tax. The dividends that the holding company pays you remain taxable in your hands. The holding company defers and organizes the taxation. It does not eliminate it.
It also does not protect your assets if you have personally guaranteed the debts of a subsidiary. Your personal liability remains, regardless of the overarching structure.
A holding company that doesn't serve any of these four purposes costs more than it brings in. We tell this to the manager before drafting the articles of incorporation.
Two partners buy out their supplier
Two partners in a small business want to acquire a key supplier. They create a holding company that borrows money and buys the shares. Tax consolidation allows them to deduct the loan interest from the supplier's profits, provided they own at least 95% of its capital.
A manager is preparing for the sale in three years
She is now contributing her shares to a holding company she controls. If the holding company sells more than three years after the contribution, the law does not require any reinvestment to maintain the tax deferral.
Parents pass on their skills without losing their touch
They pool their shares in a holding company that manages the operating company. They then transfer the bare ownership of shares in the holding company to their children. The Dutreil agreement can then be applied, with commitments to retain the shares for a minimum of 8 years in total.
Passive or active holding company: a decisive distinction
The passive holding company simply owns
A passive, or pure, holding company manages a portfolio of securities. It collects dividends and votes at shareholder meetings. It does not participate in the management of its subsidiaries' policies.
The holding company that actually runs the group
The Council of State defined the active holding company in a decision of June 13, 2018, No. 395495. In addition to managing its investments, it actively participates in the conduct of the group's policy and the control of its subsidiaries.
It can also provide them with administrative, legal, accounting, financial, or real estate services on a purely internal basis. The Council of State then considers it to be carrying out a genuine activity, and not simply managing assets.
Why qualification changes everything
The qualification of "active employee" triggers several preferential tax regimes. This is notably the case for the Dutreil agreement for the transfer of holding company shares.
| Criteria | Passive holding | Animating holding company |
|---|---|---|
| Role | Holding and receiving dividends | To direct the group's policy and control the subsidiaries |
| Services to subsidiaries | None or marginal | Possible, internally |
| Dutreil Pact | Not applicable to the holding company's securities | Applicable under certain conditions |
| What the administration will ask for | Not much | Concrete proof of animation |
Effective management is demonstrated through actions, not a single sentence in the bylaws. Committee minutes, strategic decisions, service invoices, and communications with subsidiaries: these are the documents that the administration examines.
What are the tax advantages for a holding company?
Graduated ruler
Your share of the subsidiary's capital determines the tax regime
Parent-subsidiary regime: €100,000 in dividends, €1,250 in tax for the holding company.
Tax consolidation: profits and losses offset, option for 5 financial years.
Regardless of the threshold, the sale of equity securities held for 2 years is taxed on only 12% of the gross capital gain.
The parent-subsidiary dividend regime
Article 145 of the French General Tax Code allows this regime to be applied to companies that hold at least 5% of the capital of their subsidiaries. They must retain the shares for at least two years.
Dividends received are then excluded from taxable income, except for a portion of expenses and charges. Article216 of the French General Tax Code sets this portion at 5%. It drops to 1% in certain cases, particularly within a tax-consolidated group.
In practical terms, out of €100,000 in dividends, only €5,000 is included in the holding company's taxable income. At the standard rate of 25%, the tax is €1,250.
Tax consolidation to offset the results
Once it holds 95% or more of the capital, the holding company can opt for tax consolidation under Article 223 A of the French General Tax Code. It then becomes solely liable for the corporate income tax owed by the group.
The profits of one subsidiary offset the losses of another. In a holding company used for acquisitions, the interest on the loan is deducted from the profits of the acquired company. The option is valid for five fiscal years and is tacitly renewed.
The near-exemption of capital gains on securities
When a holding company sells equity securities held for at least two years, the capital gain is exempt from corporation tax. Only a 12% portion of the gross capital gain is taxed, according to Article 219, I, a quinquies of the French General Tax Code.
This regime does not apply to shares in unlisted real estate-focused companies. A holding company primarily invested in real estate therefore operates differently. Our article details this for the transfer of shares in a real estate-focused company.
The reduced corporate tax rate
The holding company pays corporation tax at a rate of 25%. The 15% rate applies up to €42,500 of profit under three cumulative conditions.
- A turnover excluding taxes of less than 10 million euros.
- Fully paid-up capital.
- Capital held at least 75% by natural persons, or by a company which itself meets this condition.
| Diet | Detention threshold | Duration | Effect | Text |
|---|---|---|---|---|
| Mother-daughter | 5% of the capital | Shelf life 2 years | Dividends taxed at only 5% | Articles 145 and 216 of the French General Tax Code (CGI) |
| Tax integration | 95% of the capital | Option for 5 exercises | Profit and loss offsetting | Article 223 A of the French General Tax Code |
| Capital gains on securities | Equity securities | Detention 2 years | Tax on 12% of the gross capital gain | Article 219, I, a quinquies of the CGI |
| Reduced rate | 75% held by individuals | Each exercise | 15% up to €42,500 profit | Article 219, I, b of the French General Tax Code |
Mother-daughter or integration: how we choose
The parent-subsidiary regime is sufficient when the subsidiary is profitable and the holding company has no debt. It is an optional regime, but without a fixed term or cumbersome formalities.
Integration becomes useful when compensation is needed: for example, when there is acquisition debt to repay, a loss-making subsidiary, or several companies with contrasting results. However, it requires 95% ownership of each integrated subsidiary.
Before making a decision, we look at the planned capital distribution over five years, not the current one. A key executive who we want to associate with 10% in the subsidiary closes the door to integration along the way.
Create a holding company through contributions or the purchase of shares
Decision tree
Contribution or purchase, the first question
Yes
No
The contribution of shares from an existing company
The manager contributes his shares to a new company. In exchange, he receives shares in the holding company. He becomes a shareholder of the holding company, which then becomes a shareholder of the operating company.
The capital gain realized on this contribution is subject to deferred taxation. The holding company must be subject to corporation tax and controlled by the contributor. This is the mechanism outlined in Article 150-0 B ter of the French General Tax Code, detailed below.
Securities valuation and the auditor of contributions
In principle, any contribution in kind must be valued by an auditor. When forming a SARL or SAS, the partners may unanimously exclude it, subject to two cumulative conditions stipulated in Articles L. 223-9 and L. 227-1 of the French Commercial Code.
- No contribution in kind exceeds €30,000.
- The total value of unvalued contributions in kind does not exceed half of the capital.
Shares in an active company are rarely worth less than €30,000. Therefore, an auditor is standard practice in most contribution holding companies. Without an auditor, the shareholders are personally liable to third parties for the valuation.
The debt-financed acquisition holding company
To acquire a company, a holding company is created, which borrows money and buys the target company's shares. Dividends from the target company are then paid into the holding company to repay the loan. This is the LBO model, adapted for SMEs.
This financing assumes a target company capable of distributing profits annually. A decline in the subsidiary's activity directly weakens the holding company. Banks often require collateral, sometimes personal guarantees. This risk must be assessed before signing.
Agreements to be drafted from the outset
- A cash management agreement, to regulate advances between the holding company and its subsidiaries.
- A service agreement, if the holding company invoices its subsidiaries for services.
- Articles of association and a shareholders' agreement adapted to two levels of companies.
An agreement between a holding company and its subsidiary often falls under the regulated agreements procedure. This is the case when a director or a key shareholder is common to both companies. Articles L. 223-19 for SARLs and L. 227-10 for SASs govern this process.
The services billed must correspond to actual services provided, at a market price. Billing without corresponding services may result in an audit for abnormal management practices. Loans outside the group are subject to different rules, outlined in our article on inter-company loans.
Contribution-sale: what changed in 2026
Friesland, disposals since February 21, 2026
If the holding company sells within 3 years, the countdown begins
Sale more than 3 years after the initial investment: no reinvestment required, the deferral is maintained.
The principle of tax deferral
A contribution-sale transaction allows a manager preparing for a sale to contribute their shares to a holding company before the sale. The capital gain on the contribution is deferred. The holding company then sells the shares, without significant capital gains, since the shares were acquired at their fair market value.
The deferral is not an exemption. The capital gains tax on the contribution remains due. It becomes payable in certain cases, particularly if the holding company sells too soon without reinvesting.
The new reinvestment conditions
Article 11 of Law No. 2026-103 of February 19, 2026, concerning the 2026 budget, tightened the regulations. The new rules apply to transfers of contributed securities carried out from February 21, 2026.
| Condition | Before February 21, 2026 | Since February 21, 2026 |
|---|---|---|
| Portion of the price to be reinvested | 60 % | 70 % |
| Reinvestment period | 2 years after the sale | 3 years after the sale |
| Preservation of assets acquired through reuse | 12 months in most cases | 5 years in all cases |
| Eligible activities | Broader scope, including financial activities | Industrial, commercial, craft, agricultural or professional activities, excluding financial activities, management of one's own assets and real estate activities |
Reinvestment is only required if the holding company sells the contributed securities within three years of the contribution. Beyond this period, the sale by the holding company does not terminate the deferral.
Typical situation: the sale was prepared too late
A manager signs a letter of intent with a buyer. He then discovers the contribution-sale and creates his holding company a few weeks before the sale, the price already being known.
The scheme remains legal. However, the holding company will have to reinvest 70% of the purchase price in narrower business activities and retain these investments for five years. Without a credible reinvestment plan, the deferral ends and the tax becomes payable.
The correct sequence is reversed. The reinvestment plan is developed before the initial investment, with the same rigor as an acquisition. For a sale of assets rather than shares, our page on the sale of a business describes a different approach.
Transferring the company through a family holding company
Graduated ruler, transmissions since February 21, 2026
Securities must be held for at least 8 years
Since the 2026 budget law
Before
Exemption of three-quartersof the value of the securities transferred, article 787 B of the general tax code.
Assets not exclusively allocated:Passenger vehicles, yachts, aircraft, jewelry, works of art, wines and spirits, housing: their value fraction is taxed normally.
Why the holding company facilitates the transfer
The family holding company combines the shares of the operating company with those of the family members. Parents can give shares in the holding company to their children while retaining control, for example by keeping the usufruct.
It also facilitates the exit of an heir who does not wish to take over the company. The child taking over can create their own holding company, which borrows money to buy back the shares of their siblings. This is known as a family buyout.
The Dutreil pact after the 2026 finance law
The Dutreil agreement is provided for in Article 787 B of the French General Tax Code. It exempts three-quarters of the value of the transferred securities from gift or inheritance tax. It can apply to the securities of an active holding company.
For transfers made from February 21, 2026 onwards, the individual holding period increases from 4 to 6 years. Combined with the collective 2-year holding period, the securities are therefore locked in for at least 8 years.
Certain assets are no longer eligible for the exemption if they have not been exclusively used for business purposes for at least three years, or since their acquisition. These include passenger vehicles, yachts, aircraft, jewelry, works of art, wines and spirits, and housing and residences. The corresponding portion of their value is taxed normally.
Our article on the Dutreil pact in 2026 details the commitments and errors that cause you to lose the exemption.
The limit to know
The Dutreil agreement requires an eligible activity on the date of transfer. A holding company that loses its management role during the commitment period, for example after the sale of a subsidiary, opens a dispute with the tax authorities.
It also doesn't settle the balance between heirs. The forced heirship rules apply to holding company shares just as they do to the rest of the estate. Our article on forced heirship rules explains the share that each child is entitled to.
Tax on asset holding companies: who is affected?
Course outline, exercises closed as of December 31, 2026
Does your holding company pay the 20% tax?
- Assets with a market value of at least 5 million euros?No: not applicable
- Do an individual and their family own at least 50%, or make the decisions?No: not applicable
- Passive income exceeding half of the income?No: not applicable
- Yes to all three20% taxes on luxury assets on the list
On the plate
Vehicles, yachts, boats and aircraft not assigned to a specific purpose, jewelry and precious metals, horses, wines and spirits, hunting and fishing equipment, accommodations for reserved use.
Off the plate
Cash, equity securities, real estate rented at market price.
What the new tax aims to achieve
Article 7 of the 2026 Finance Law creates Article 235 ter C of the General Tax Code. It establishes an annual tax of 20% on the market value of certain non-business assets held by asset-holding companies.
It is due for financial years ending on or after December 31, 2026. The first declarations will therefore take place in 2027, with the declaration of results.
Three cumulative conditions
- The market value of all the company's assets reaches at least 5 million euros.
- A natural person, together with their family circle, holds at least 50% of the voting rights or financial rights, or exercises decision-making power.
- Passive income, such as dividends, interest, or rent, represents more than half of the income.
Taxable assets and those that are not taxable assets
The list is exhaustive. It covers vehicles, yachts, boats and aircraft not used for business purposes. It also includes jewelry and precious metals, horses, wines and spirits, and hunting and fishing equipment.
It also targets housing units that the partner or their family reserves for their own use, either free of charge or at a below-market rent. Cash, equity securities, and real estate rented at market prices remain excluded from the calculation.
The tax is not deductible from corporation tax. However, real estate assets subject to it are exempt from wealth tax on real estate.
The key action to take before December 31, 2026
Any holding company with assets exceeding €5 million must inventory its assets. A secondary residence made available to a partner without market rent is sufficient to be included in the calculation.
A reorganization remains possible before the end of the financial year. However, it must be based on a reason other than tax-related ones, otherwise it will be rejected as an abuse of rights.
The risks of a poorly constructed holding company
Abuse of rights for primarily tax-related reasons
Article L. 64 A of the French Tax Procedures Code targets transactions whose primary purpose is to evade tax, contrary to the objective of the applicable legislation. It applies to transactions carried out since January 1, 2020.
This text does not prohibit choosing the least restrictive path. It penalizes any arrangement that is misused. The strongest defense remains a well-documented project prior to the operation: objectives, timeline, and the role of each company.
In case of serious doubt, a ruling request allows the administration to be consulted before the operation. If no response is received within 6 months, the administration can no longer invoke abuse of rights regarding the described scheme.
The commingling of assets in case of difficulty
When a subsidiary enters insolvency proceedings, the court may extend the proceedings to the holding company in cases of commingling of assets or sham transactions. Article L. 621-2 of the French Commercial Code provides for this.
Abnormal cash flows are a sign of this: mixed cash flow, payments without corresponding counterparties, and current accounts never formalized. Written agreements and separate accounts remain the primary safeguard.
If a subsidiary is experiencing difficulties, it is best to act before it ceases payments. The safeguard procedure then protects the company without waiting for the holding company to be affected in turn.
Three common mistakes made by leaders
- Create the holding company after signing the letter of intent to sell, without a reinvestment plan.
- To present oneself as an active holding company without any written record of the activity.
- Mixing the holding company's cash flow, the subsidiary's cash flow, and personal expenses.
Three things to do before signing the articles of association
- Write the project in one page: why the holding company, for how long, with which companies.
- Simulate the distribution of capital over five years to choose between parent-subsidiary and integration.
- Prepare the agreements between the holding company and its subsidiaries from the outset.
A solid holding company begins with a written plan
Key takeaways
The holding company remains the most flexible tool for acquiring, selling, transferring, or managing multiple companies. Its tax advantages are real and stable: parent-subsidiary regime, tax consolidation, and near-exemption from capital gains on securities.
What changed in 2026 were the conditions for exit strategies. Contribution-sale transactions and the Dutreil agreement now require more time and greater rigor. A holding company designed for a genuine project can navigate these reforms. A holding company designed for tax advantages often loses its appeal.
How we work
Romain Picard, a partner at the law firm, assists entrepreneurs in structuring their holding companies, from shareholding to family succession. He coordinates his work with the client's tax advisors, notaries, and accountants.
Our corporate law and mergers and acquisitions team handles everything from structuring notes to articles of association, intra-group agreements, and contribution transactions. Tax matters are addressed by our corporate and personal tax department .
Synthesis
A project, a tool, a constraint to be met
Frequently asked questions about the holding company
Is a holding company useful for a single company?
Rarely, if its sole purpose is to reduce taxes. It becomes so when a project is taking shape: a sale in a few years, a transfer to children, a buyout to finance. It then allows for the redistribution of dividends almost tax-free and reinvestment from the holding company. The annual costs of administration, accounting, and agreements must remain lower than the expected gain.
Can a holding company be created above an existing company?
Yes, in fact, this is the most common scenario. The executive contributes their shares to a new company, or the holding company buys them back with a loan. The contribution places the capital gain under a tax deferral scheme, according to Article 150-0 B ter of the French General Tax Code. The holding company must be subject to corporate income tax and controlled by the contributor. An auditor for contributions in kind is often required.
Is the head of a holding company liable for the debts of its subsidiaries?
In principle, no, each company is liable for its own debts. Three exceptions apply in practice. A personal guarantee signed in favor of a subsidiary remains due. A commingling of assets can extend the insolvency proceedings from the subsidiary to the holding company. Finally, mismanagement by a director can lead to liability in the event of insufficient assets.
How much does it cost to create and then manage a holding company?
You need to factor in the incorporation fees, the potential fees of an auditor for contributions in kind, and then each year the accounting, approval of the financial statements, and monitoring of the agreements. The cost depends primarily on the structure. A holding company for acquisitions with borrowing and tax consolidation requires more monitoring than a passive holding company. We provide a quote for our services after an initial discussion about the project.
When can the administration challenge a holding company?
When the scheme's primary purpose is tax evasion and it runs counter to the objective of the applicable legislation, as per Article L. 64 A of the French Tax Procedures Code, the company can also contest its classification as a business facilitator or invoices for services rendered without actual compensation. A written plan prior to the transaction, signed agreements, and evidence of business facilitation constitute the strongest defense.
Family holding company or asset holding company, what's the difference?
A family holding company brings a family together around a business that it manages. It often acts as an active operator and may qualify for the Dutreil agreement. A personal holding company primarily manages investments, cash, or real estate. Since the 2026 Finance Act, this second category may be subject to a 20% tax on certain luxury assets.