France’s 2025 Budget : Stricter taxes for high-income earners

The 2025 Finance Bill has sparked intense debate and reveals tensions surrounding taxation applied to the highest incomes in France. At the heart of the controversy is an amendment aimed at exempting certain categories of income from the new “ differential contribution on high incomes” (CDHR), introduced to limit tax evasion practices among the wealthiest taxpayers. This amendment, designed to maintain an attractive tax framework for investors in innovation, was rejected by the National Assembly, marking a defeat for the government and a victory for the opposition advocating for an expansion of this contribution.

The Rejection of the Exemption for Industrial and Intellectual Income

Amendment No. I-3643, proposed by the government as part of the finance bill, aimed to exclude certain categories of income from the differential contribution on high incomes (CDHR). These incomes notably included those derived from the “sale, concession, or sub-concession of industrial property assets,” which already benefit from a specific tax regime with a reduced rate of 10 %. In defending this amendment, the government has clarified that this exemption was intended to “preserve the tax attractiveness of income linked to innovation.” It thus hopes to encourage investments in industrial and intellectual property, which are strategic sectors for France’s competitiveness.

Furthermore, the amendment also aimed at income received by individual inventors or their successors for the transfer or concession of licenses for protected software or patentable inventions. The government argued that these incomes, already governed by advantageous tax rules, should be supported to encourage innovation and research. However, despite the arguments presented, this attempt to lessen the tax burden for these affluent taxpayers was ultimately rejected by the National Assembly on October 22, 2024, prompting mixed reactions.

Toward a More Extensive and Sustainable Contribution for High Incomes

The rejection of Amendment No. I-3643 occurs in a context of tightening taxation for high incomes, with the Assembly adopting two other amendments. Indeed, the first, supported by left-wing groups, aims to perpetuate the differential contribution on high incomes, initially intended as exceptional, extending it to more affluent households. This strategic choice would strengthen the state’s tax revenues while also reducing disparities in tax treatment among the wealthiest taxpayers.

Moreover, an amendment defended by centrist MP Charles de Courson aims to limit the possibility of resorting to tax loopholes and tax credits, often used to significantly reduce the amount of the differential contribution. This additional measure aims to cap the tax advantages available to wealthy households, thereby increasing their net contribution. As the government considers using Article 49-3 to have the finance bill adopted, the rejection of Amendment No. I-3643 and the adoption of these other measures signal a turn towards stronger taxation for the wealthiest.

The outcome of this parliamentary debate outlines an increasingly strict tax trajectory for high incomes in France, aiming to limit the use of optimization mechanisms. While the government faces a setback in its attempt to protect certain innovation-related incomes, the new measures could reshape the tax landscape and encourage investors to rethink their strategies. It remains to be seen whether this direction, which is bound to have economic repercussions, will allow France to reconcile competitiveness and tax justice, with a view to reducing its deficit.