In short: In 2026, France taxes most investment income for residents under the Prélèvement Forfaitaire Unique (PFU), the 'flat tax', at 31.4% — made of 12.8% income tax and 18.6% social charges (up from 30% after the social-charge rate rose on 1 January 2026). This covers dividends, interest and capital gains on shares, bonds and funds. You can instead elect the progressive income-tax scale for all your investment income, which unlocks the 40% dividend allowance and deductible CSG — worthwhile mainly at lower incomes. Tax-advantaged wrappers change the picture: a PEA is income-tax-free after 5 years (social charges still apply), and regulated savings like the Livret A are fully exempt.
How investment income and capital gains are taxed in France (2026)
If you hold shares, bonds, funds or ETFs as a French tax resident, most of your investment income falls under one headline number in 2026: the 31.4% flat tax. But the details — when it's withheld, when a progressive option saves you money, and how ETFs are treated — make a real difference. Here's the calm version, current as of 2026. This is general education, not tax advice, and the rules can change.
Know your default: dividends, interest and securities gains are taxed at the 31.4% PFU flat tax (12.8% income tax + 18.6% social charges) unless you opt otherwise.
Check the progressive option: if your income is modest, electing the progressive scale can unlock the 40% dividend allowance and deductible CSG — but it's global and irrevocable for the year.
Use a wrapper: a PEA (income-tax-free after 5 years) or assurance-vie can shelter growth from annual tax.
For ETFs, mind the format: accumulating ETFs in a plain account defer tax until you sell; distributing ones are taxed yearly.
What matters
The default: the 31.4% flat tax. For French tax residents, dividends, interest and capital gains on securities — shares, bonds, and funds including SICAV, FCP and ETFs — are by default taxed under the Prélèvement Forfaitaire Unique (PFU), known as the flat tax. In 2026 it totals 31.4%: 12.8% income tax plus 18.6% social charges (prélèvements sociaux). The rate rose from 30% on 1 January 2026 because the social-charge component went from 17.2% to 18.6%.
Dividends. Taxed at 31.4%. When paid, your bank withholds a 12.8% advance (the prélèvement forfaitaire non libératoire) plus social charges; the advance is later credited against your final tax. You can ask your bank to waive the 12.8% advance if your reference income from two years earlier was below EUR 50,000 (single) / EUR 75,000 (couple) — request it before 30 November of the prior year. Social charges still apply.
Interest. Also 31.4%, with the same 12.8% advance. The waiver threshold is lower: EUR 25,000 single / EUR 50,000 couple. The 40% allowance is dividend-specific and does not apply to interest.
Capital gains. Net gains on selling securities are taxed at 31.4%. Losses offset gains in the same year and carry forward 10 years. There's no general holding-period break under the PFU.
The progressive option. You can elect to tax all your investment income on the progressive scale instead of the 12.8%. This unlocks the 40% dividend allowance, partial CSG deductibility, and — only for securities bought before 1 January 2018 — holding-period allowances (50% for 2–8 years, 65% beyond). The choice is global and irrevocable for the year.
Funds and ETFs. France does not tax unrealised fund gains each year. An accumulating ETF in a plain account pays nothing out, so its reinvested income is taxed only as a capital gain when you sell — a real deferral advantage. A distributing ETF is taxed yearly on its distributions. Foreign dividends are taxed on the gross amount, but foreign withholding tax is generally recoverable as a tax credit up to the treaty cap.
ExampleSay you sell ETF units for a EUR 10,000 net gain in 2026 in a plain securities account. Under the default flat tax, you owe 31.4% = EUR 3,140 (EUR 1,280 income tax + EUR 1,860 social charges), leaving EUR 6,860. Now say you instead receive EUR 2,000 of French dividends. Default flat tax: 31.4% = EUR 628. If you elect the progressive scale, the 40% allowance shrinks the taxable dividend to EUR 1,200 before your marginal rate and social charges apply — better only if your marginal income-tax rate is low enough to beat 12.8% on the full amount.
Accumulating ETFs in a compte-titres let income compound untaxed until you sell — useful with a long horizon. See how that compounding adds up with Kontoo's compound-interest calculator before you decide.
In depth
The PEA: France's equity wrapper
The Plan d'Épargne en Actions holds EU/EEA equities and eligible funds and ETFs. Once you've held it for 5 years, gains and dividends become exempt from income tax — though the 18.6% social charges still apply on withdrawal. Withdraw before 5 years and you normally close the plan, with the gain taxed at the 31.4% flat tax; after 5 years, partial withdrawals no longer close it and you can keep contributing. The contribution cap is EUR 150,000 per person (EUR 300,000 per couple), with a separate PEA-PME ceiling. Nothing is taxed while money stays inside the wrapper, so income compounds untaxed — which, over a long horizon, is the PEA's real strength for EU-focused investors.
Assurance-vie and the 8-year mark
Assurance-vie is taxed only when you withdraw (a rachat). Before 8 years, the 12.8% flat-tax income rate applies to the gain portion. After 8 years you get an annual allowance of EUR 4,600 (single) / EUR 9,200 (couple) on withdrawn gains; above that, gains tied to premiums up to EUR 150,000 are taxed at a reduced 7.5% income tax, and 12.8% above EUR 150,000. Social charges apply in every case. Because nothing is taxed until you take money out, the accumulating-versus-distributing question inside an assurance-vie (or PEA, or PER) is largely irrelevant — the wrapper itself defers the tax.
Foreign ETFs, withholding tax and credits
Dividends from foreign securities and ETFs are taxed in France at 31.4% on the gross amount, but the foreign withholding tax you suffered is usually recoverable as a tax credit, capped by the relevant double-tax treaty. With a French broker the credit is often pre-filled (e.g. box 2AB on form 2042); with a foreign broker you compute it yourself on form 2047 and carry it to box 8VL. Treaty caps matter: for an Irish-domiciled ETF, Irish withholding can be 25% but the France–Ireland treaty limits the recoverable credit to 15%. A new box 8PL appeared in 2026 to cap the recoverable credit; as of 2026 its precise mechanics are lightly documented, so treat them as provisional and verify before relying on them.
Checklist
My broker withheld a 12.8% advance plus social charges on dividends — that's normal, not the final bill.
I compared the 31.4% flat tax against the progressive option before filing, since the choice is global and irrevocable.
For long-term ETF holding outside a wrapper, I considered an accumulating fund to defer tax until sale.
If I hold a PEA, I checked whether I've passed the 5-year mark before withdrawing.
Common myths
Myth: The flat tax is still 30%.
Reality: It rose to 31.4% on 1 January 2026 for mainstream securities income, because social charges went from 17.2% to 18.6%. Some carve-outs (life insurance, real estate) keep 17.2% — check per product.
Myth: France taxes my accumulating ETF every year like Germany does.
Reality: It doesn't. There is no French equivalent of the German Vorabpauschale. An accumulating ETF in a plain account is taxed only when you sell.
31.4% in total: 12.8% income tax plus 18.6% social charges. The social-charge part rose from 17.2% to 18.6% on 1 January 2026, lifting the headline rate from 30% to 31.4% for mainstream securities income.
Should I choose the flat tax or the progressive scale?
The 31.4% flat tax is the default and simplest. Electing the progressive scale only helps if your marginal rate is low enough, because it unlocks the 40% dividend allowance and deductible CSG. The election is global for all investment income and irrevocable for that year, so run the numbers first.
Are accumulating ETFs taxed every year in France?
No. France has no German-style deemed annual tax on unrealised fund gains. In a plain securities account, an accumulating ETF pays no dividend, so there's nothing to tax until you sell — then the gain is taxed at 31.4%. Distributing ETFs are taxed yearly on what they pay out.
All lessons · Glossary · Editorial · Kontoo does the math and explains – this is general education, not tax, legal or financial advice.
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