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5.3. Tax Consolidation / Group Treatment

Under an optional tax consolidation regime (articles 223 A to 223 Q CGI), a French parent company can include the income of French (only) affiliates (subject to corporation tax), of which it controls at least 95% of the capital in its taxable income. In that case, the parent company pays the corporation tax for all the companies in the group. Groups in which the parent company owns at least 95% of a French affiliate through one or more companies based in the European Union, Iceland, or Norway may also opt for this tax regime. Effective 1 January 2015, the French tax consolidation regime was modified to allow French companies or permanent establishment’s to form a French consolidated tax group when all are directly or indirectly owned (at least 95%) by a company or a permanent establishment that is subject to a tax in another EU or EEA country that is equivalent to French corporate income tax (‘horizontal tax consolidation’). In addition, all French consolidated companies and the foreign parent and intermediaries (if applicable) must have the same fiscal year opening and closing date. Finally, this tax consolidation regime is also available, under certain conditions to some mutual insurance companies and mutual banking groups.

Certain operations are neutralized during the existence of the group. The affiliated companies cannot transfer their pre-existing losses to the group.


A French SA A holds 98% of the capital of two French SA, B and C. A has a positive result of EUR 200 million. B has a positive result of EUR 100 million and C has a negative result of EUR 50 million. As A is the parent company, it has to pay (200.000.000 + 100.000.000 – 50.000.000) x 33,33% =83.33 million) of corporate tax.

Brexit Impact

With the expiry of the Brexit transitional arrangement on 1 January 2021, the United Kingdom formally ceased to be part of the EU. However, as a provisional measure, it is deemed that the conditions for a UK company's inclusion in a horizontal tax group continue to be met until the end of the fiscal year of the company beginning before 31 December 2020, subject to certain conditions. On 11 March 2021, the French tax authority published guidance (BOI-INT-DG-15-20) regarding the withdrawal of the UK from the EU, which included the guidance on the transitional provisions for horizontal tax group.