Budget 2026: Key Tax Cuts and Investment Incentive Changes Shake Up France's Fiscal Landscape
France's 2026 budget removes key investment incentives, eliminates 23 tax niches to save €5 billion, and introduces changes to pension taxation amid efforts to reduce the deficit.
- • The 2026 Finance Bill excludes the anticipated private landlord status, impacting rental investors.
- • The government proposes eliminating 23 tax niches, expected to raise €5 billion in savings.
- • The contentious removal of the 10% pension tax deduction is justified by its budgetary cost and redistributive concerns.
- • The budget combines tax increases and spending cuts to target a deficit below 5% and includes freezing pensions and social benefits.
- • New income tax entrants are targeted for increased taxation to fund public investments in infrastructure, ecology, and defense.
Key details
The 2026 French Finance Bill (PLF), presented by the new Prime Minister on October 14, 2025, introduces significant changes to taxation and investment incentives, with notable impacts on investors and public finances. Among the key developments is the removal of the proposed "private landlord status," which had been expected to encourage rental investment but has now been excluded from the bill, a setback for property investors seeking fiscal support.
In a sweeping fiscal reform, the government plans to eliminate 23 tax niches deemed ineffective or obsolete, expected to generate approximately €5 billion in savings. These niches currently contribute to an annual tax exemption total of €85.1 billion, representing a considerable loss to state revenue. One highly contentious measure is the proposed abolition of the 10% tax deduction on pension income, a move criticized for its anti-redistributive effect but justified by the government due to its significant cost to public finances.
Finance Minister Sébastien Lecornu highlighted that the government’s broader budget strategy involves balancing increased taxation with robust spending controls, aiming for a deficit reduction to below 5% in 2026. This includes freezing pensions and social benefits, replacing the 10% pension deduction with a flat €2,000 allowance, and freezing income tax brackets and the CSG to raise around €2.2 billion. Overall, a fiscal effort of €30 billion is planned, combining €17 billion in spending cuts and €14 billion in new revenues. Defense, interior, and justice remain exceptions with budget increases.
Lecornu also warned that suspending the pension reform will cost €400 million in 2026 and €1.8 billion in 2027, underscoring the challenge of maintaining fiscal discipline. The introduction of 200,000 new taxpayers due to the income tax freeze targets wealthier individuals for increased contributions, aiming to fund investments in infrastructure, ecology, and defense.
These fiscal measures combine to present a cautious government approach to addressing France's budgetary challenges while attempting to phase out inefficient tax subsidies and maintain public investment. However, the elimination of rental investment incentives and the controversial pension tax changes may prompt further political debate and investor concern.
Overall, the 2026 budget reflects the government's ambition to tighten fiscal policy while promoting more targeted tax fairness and investment allocation within a strained economic context.