Taxation of dividends in 2026: 31.4% PFU or the progressive scale?

Taxation of dividends in France in 2026 defaults to the 31.4% flat tax (PFU): 12.8% income tax plus 18.6% social levies, CSG having risen to 10.6%. On €100 gross, €68.60 reaches the shareholder. Electing the progressive scale, with its 40% allowance, only wins below roughly a 24% marginal rate, which in practice leaves the 0% and 11% brackets.

Updated 27 July 2026 (CSG on investment income and savings products raised to 10.6% by the 2026 social security financing act, Article L136-8 of the Social Security Code). France's flat tax (prélèvement forfaitaire unique, or PFU) of 31.4% remains the default regime applicable to dividends paid to individuals tax-resident in France. Yet four situations upend this headline rate and require a careful reading of the mechanism: the global election for the progressive scale with the 40% allowance under Article 158-3-2° of the French Tax Code (CGI), the status of majority manager of a SARL which triggers self-employed social contributions (TNS) above 10% of capital, the quality of corporate beneficiary opening the parent-subsidiary regime under Articles 145 and 216 CGI, and finally the status of non-resident subject to withholding tax under Article 119 bis CGI. At Cabinet Hayot Expertise in Paris, we see too many directors reason on "30%" when the effective burden runs from 1.25% (a dividend routed up to a holding company under the parent-subsidiary regime) to 31.4% (the PFU on a resident individual), and up to 75% for a beneficiary established in a non-cooperative State or territory. The specific case of the majority manager of a SARL, where the dividend shifts into the base of social contributions, is covered in our dedicated article on SARL dividends.

Composition of the PFU: 12.8% income tax and 18.6% social levies#

The PFU applies a 31.4% overall rate to the gross dividend received: the 12.8% tax rate is set by Article 200 A, 1, A, 1° CGI, the advance withheld at source falls under Article 117 quater CGI, and the social portion under Article L136-7 of the Social Security Code. This rate breaks down into two layers: 12.8% income tax and 18.6% social levies. The social levies themselves combine CSG (10.6% since 1 January 2026, Article L136-8 of the Social Security Code), CRDS (0.5%) and the solidarity levy (7.5%). On €100 of gross dividend paid to a resident individual shareholder, the net in hand is €68.60.

The 12.8% withholding advance#

The distributing company withholds an income tax advance of 12.8%, payable to the tax authority via form 2777 within the first fifteen days of the month following payment. The 18.6% social levies are also withheld at source simultaneously. This advance is creditable against the income tax ultimately due for the following year: it functions as a refundable tax credit. If the shareholder subsequently elects the scale and the calculation results in lower taxation, the surplus is refunded by the tax authority. This tax advance should not be confused with the interim dividend of Article L232-12 of the Commercial Code, which is a way of distributing during the financial year rather than a levy: see our article on interim dividends.

Advance exemption based on household reference income#

Article 117 quater CGI opens an exemption from the 12.8% advance for low-income households: the household's reference income (RFR) of year N-2 must be below €50,000 for a single filer or €75,000 for a married couple filing jointly. The exemption request must be submitted to the distributing company before 30 November of year N-1, on the basis of the tax notice produced. Failing this, the advance is withheld and reconciled the following year. For a director who modulates compensation across years, this exemption can represent a significant cash benefit.

The PFU applies to the gross dividend: the 40% allowance exists only under the progressive scale election.

40% allowance under Article 158-3-2° CGI#

By a global election made in box 2OP of the 2042 income tax return, the shareholder may waive the PFU and submit all investment income to the progressive income tax scale. The main benefit: the 40% allowance provided by Article 158-3-2° CGI applies to the gross dividend before scale calculation. However, this allowance is open only if dividends originate from companies subject to corporate tax or an equivalent tax, headquartered in France, in an EU Member State, or in a State or territory bound to France by a double-tax treaty containing an administrative assistance clause, and that have duly resolved on the distribution. Dividends paid in breach of bylaws or outside an assembly decision are not eligible. To this allowance is added the partial deductibility of CSG, at 6.8% under Article 154 quinquies CGI, on income for the following year.

Global and irrevocable nature of the election#

The scale election, made in box 2OP, has two crucial features: it is global (it applies to all investment income and capital gains of the tax household for the year concerned, with no possibility to mix PFU on some items and scale on others, the treatment of interest and of gains on securities being detailed in our article on the 2026 flat tax), and it is irrevocable for the year declared. By contrast, the election binds only the year concerned: a household may elect the scale in N and revert to the PFU in N+1, depending on the evolution of its income and marginal tax bracket. This annuality justifies arbitration each year in light of income projections.

Tipping thresholds by marginal tax bracket#

On €100 of gross dividend, the comparative calculation guides the decision. At PFU, the net is €68.60. At the scale with a marginal tax rate (TMI) of 11%, the calculation gives: €100 - [0.11 × (€100 - €40)] - €18.6 = €74.80 net (the deductible CSG further improves the result the following year), i.e. a gain of about €6. At 30% TMI, the net falls to €63.40 (100 - 18 - 18.6): the PFU, at €68.60, remains markedly more favourable. At 41% or 45%, the scale is markedly unfavourable. The tipping threshold sits at roughly a 24% marginal rate: the election only wins for households whose marginal bracket is capped at 11% (or 0%), and the 6.8-point deductible CSG does not close the gap beyond that. For the full arbitration between dividends and compensation, see our analysis on executive compensation optimisation.

To dig into envelope arbitrations between compensation, dividends and routing income up to a holding company, see our brief on holding companies and tax optimisation.

Reading: per €100 of gross dividend, every regime computed on the same distribution.

These arbitrations assume the dividend remains investment income. It changes nature for the majority manager of a SARL: the fraction of dividends exceeding 10% of certain capital held by the manager is reintegrated into the base of self-employed social contributions (Article L131-6, III of the Social Security Code). That regime, which applies neither to SAS nor SASU, is developed in our article on SARL dividends.

Parent-subsidiary regime under Article 145 CGI#

When the dividend is paid to a company subject to corporate tax and holding at least 5% of the capital of the distributing subsidiary, the parent-subsidiary regime under Articles 145 and 216 CGI allows 95% of the dividend received to be exempted from corporate tax. Only a 5% share of expenses and charges remains taxable at the standard 25% corporate tax rate. The effective levy is therefore 5% × 25% = 1.25% of the gross dividend. The mechanism avoids economic double taxation in chain between subsidiary and holding, and remains one of the most powerful patrimonial levers in French law.

5% expense quota (1% under tax consolidation)#

Under the tax consolidation regime (Articles 223 A and 223 A bis CGI), the share of expenses and charges falls to 1% for participation income received by a group company from another group company, where the holding has been owned for more than one financial year. Note the legal basis: that 1% rate is set by the second paragraph of Article 216, I CGI, Article 223 A merely defining the group regime. The effective levy then falls to 1% × 25% = 0.25%. This regime however requires the prior constitution of a consolidated group, holding of at least 95% of the subsidiary, and formal election for five renewable financial years. Tax consolidation is a legal-structure topic in its own right, dealt with in depth in our dedicated article on holding companies and tax optimisation.

Holding conditions and conservation commitment#

The parent-subsidiary regime requires two cumulative conditions: holding of at least 5% of the subsidiary's capital (in full ownership or in bare ownership) and a commitment to retain the securities for two years. Early breach of the commitment triggers retroactive forfeit of the regime, with tax claw-back and late-payment interest. Securities held for less than two years at the date of the first payment must be subject to a formal commitment. The legal form of the subsidiary is indifferent: SAS, SARL, eligible foreign EU/EEA company, or even corporate-taxed SCI under conditions.

Article 119 bis CGI and bilateral tax treaties#

Article 119 bis, 2 CGI creates a withholding tax on dividends paid by a French company to a beneficiary tax-resident outside France, the rate of which is set by Article 187 CGI: 12.8% where the beneficial owner is an individual, and the rate of the second paragraph of Article 219, I, namely 25%, where the beneficiary is a company (15% for certain non-profit bodies established in the EU or EEA). Applying 12.8% to a foreign company understates the tax by half. Conversely, a parent company established in the EU or EEA holding at least 10% of the capital may be exempt from any withholding under Article 119 ter CGI, subject to holding and beneficial-owner conditions. This rate was reduced from 30% to 12.8% in 2018 to align with the income tax portion of the PFU applied to residents. The withholding is operated and remitted by the French company at the time of distribution. Bilateral tax treaties signed by France (more than 120 currently in force) most often reduce this rate, but each sets its own according to the quality of the beneficiary and the participation threshold: the 5% and 15% rates of the OECD model are frequent, they serve only as an order of magnitude and must be checked treaty by treaty in the list published by the BOFiP (BOI-ANNX-000306). Application of the treaty rate is conditional on the production of a certificate of tax residence of the beneficiary before payment.

Non-cooperative states and territories (NCST) at 75%#

Article 187 CGI provides for an increased withholding tax of 75% on dividends paid to a beneficiary located in a non-cooperative state or territory within the meaning of Article 238-0 A CGI. The NCST list is reviewed annually by ministerial order and typically includes jurisdictions without tax information exchange (certain Caribbean and Pacific islands, etc.). The mechanism is deterrent in nature: it neutralises any interest in structuring a distribution to an opaque shareholder. Verifying the NCST list at the payment date is an unavoidable compliance step.

Reimbursement and foreign tax credit#

The non-resident beneficiary may claim from the French tax authority the reimbursement of the fraction of withholding tax exceeding the applicable treaty rate, on production of the residence certificate and required supporting documents. Symmetrically, a French resident receiving dividends from a foreign company generally benefits from a tax credit equal to the foreign withholding, creditable against French tax up to the treaty rate. Double taxation is thus neutralised. Foreign dividends must be declared in France at their gross amount (before foreign withholding), with mention of the tax credit on the 2047 return.

The 75% increase falls away if the payer proves that the distributions neither have the purpose nor the effect, for tax fraud purposes, of locating the income in a non-cooperative State (Article 187 CGI).

What you report on your 2042 return#

The beneficiary receives from the distributing company a unique tax statement (IFU, form 2561) summarising the gross amount, the advance withheld, the social levies withheld and the taxable net income; the calendar and terms of that obligation, which falls on the company, are detailed in our article on distributing dividends: rules, timing, taxation and evidence. The beneficiary reports these amounts in the 2042 return, boxes 2DC (share income, eligible for the 40% allowance where the scale is elected), 2BH (income already subject to social levies with deductible CSG: this is the line that triggers the automatic 6.8% deductible CSG computation) and 2CK (the 12.8% advance already paid, creditable against the tax due). Box 2CG covers the opposite case, income already subject to social levies without deductible CSG. The global election for the scale is ticked in box 2OP. Failing election, PFU taxation applies automatically.

On the company side: paying the advance#

It is the company paying the dividend that declares and remits the 12.8% advance and the 18.6% social levies. For intra-group distributions under the parent-subsidiary regime, no withholding is operated, but the filing obligation remains. The detail of that formality (form, calendar, penalties for late filing) is set out in our article on distributing dividends: rules, timing, taxation and evidence.

Articulation with French wealth tax (IFI) and foreign accounts#

Shares and corporate units held by an individual are not included in the base of the French real estate wealth tax (IFI), reserved for real estate assets since 2018. By contrast, units in corporate-taxed or income-taxed SCIs, SCPIs and OPCIs with a real estate focus enter the IFI base in proportion to their real estate component. Shareholders holding securities accounts abroad must also file each year a 3916 return per account opened. For a full picture of the reporting calendar, consult our memo on 2026 corporate tax filings.

The arbitration: PFU or scale depending on your situation#

In the files we handle in Paris, four profiles emerge. A single director in the 45% TMI bracket with €80,000 annual dividends has every interest in staying on the PFU: net in hand €54,880 under the PFU (€80,000 × 68.6%) versus about €45,970 at the scale, deductible CSG included. A household at 11% TMI with low salary income and €20,000 of dividends gains €1,200 to €1,500 by electing the scale. A household at 30% TMI is not in an arbitration zone: the PFU clearly wins, at €68.60 net per €100 gross versus €65.44 at the scale once the 6.8-point deductible CSG is taken into account. What still deserves a calculation is the rest of the household: the decision depends on deductible CSG carried over to the following year, on the family quotient and on the overall income composition. Annual comparative calculation through your forecast return remains the only reliable method.

The underestimated risk: deciding the 2OP election after the fact#

A SAS distributes €40,000 of dividends to its president, whose household sits in the 30% marginal bracket.

Electing the scale would cost €1,264 here, and it would also capture every other item of investment income and every securities gain of the household. Illustrative example, to be recomputed on the household's actual situation.