Financial services tax digest : Q2 2026

New CIT surcharge for large companies operating in France: computing the corporate income tax exceptional surcharge in the event of a modification of the French tax consolidated group perimeter between two subsequent fiscal years. 

The corporate income tax (CIT) exceptional surcharge for large companies operating in France, including financial institution, introduced by the French Finance Bill for 2025 has been extended by the French Finance Bill for 2026. 

The originally “one-off surcharge” provided for by the Finance Bill for 2025 was computed based on the average of the CIT amount due for the first fiscal year ending on or after December 31, 2025 and of the CIT amount due for the previous fiscal year (ie, FY 2025 and FY 2024 for companies with a calendar fiscal year). 

The same computation mechanism applies to the renewed and now extended exceptional surcharge provided for by the Finance Bill for 2026, with an average of the CIT due over two subsequent fiscal years, including therefore FY 2025 and FY 2026. 

Within a CIT consolidated group, the average is determined using the amount of CIT calculated based on the tax group result before offsetting any tax reductions, tax credits or tax receivables. 

French law does not provide for any specific adjustment in the event of a modification of the CIT consolidated group perimeter between the two subsequent fiscal years for which the exceptional surcharge is computed (ie, entities joining or leaving the tax consolidation).  

The French tax authorities in their recent guidelines, BOIISAUT60, do not provide for any additional clarification in the event of a modification of the CIT consolidated group perimeter. The guidelines merely refer to the French CIT as provided for by Article 219 of the French Tax Code. 

It seems that under a strict analysis of the French law, for each fiscal year, the CIT due by the CIT consolidated group, as it existed during each of the relevant fiscal year, should be retained, regardless of any modification, even significative ones, to the perimeter of the relevant CIT consolidated group.  

Thus, based on the French tax law available to date, the exceptional surcharge for 2026 should be determined based on the average of the two amounts of CIT for 2025 and 2026, without any specific adjustment intended to align or standardize the two perimeters between the two subsequent fiscal years for which the exceptional surcharge is computed. 

However, one may refrain from excessive temptations to adjust the scope of the CIT group solely to reduce the basis of the exceptional surcharge as, even in a tax consolidation situation, fraus omnia corrumpit or ‘fraud corrupts everything’.  

In addition, financial entities operating in France through various legal entities and having implemented a French tax consolidation locally may want to analyse any significant changes to the French tax group perimeter. 

Jérôme Labrousse, Partner, Head of Banking Tax, Forvis Mazars Group  

Legislation update: initiatives enacted 

In our newsletter no. 04/2025, we informed you about two legislative initiatives with implications for the financial services industry. Both have now successfully passed the legislative process and are enacted: 

Re-extension of record retention periods for banks, insurance companies and investment firms 

After generally being lowered to 8 years, the retention period for accounting records has been formally confirmed to remain at 10 years for banks, insurance and investment firms as part of the Act to Modernise and Digitalise the Combat against Illegal Employment (SchwarzArbMoDiG²). The act entered into force on 30 December 2025. The accounting records retention period for these types of FS industry entities therefore now deviates from other companies, which remain at 8 years, so that in mixed enterprise groups, including both types of entities, it must be carefully assessed which record retention period is to be obeyed for which entity. 

Major changes for investment funds adopted: Location Promotion Act 

The Location Promotion Act (StoFöG) was adopted by the Bundestag on 19 January 2026, approved by the Bundesrat on 30 January 2026 and entered into force on 10 February 2026³. The law provides a row of regulatory and tax framework changes to promote private and fund investments in venture capital, infrastructure and renewable energy. For investment and special investment funds, it extends, ia the permissible investment categories under investment tax law (InvStG), removing prior key obstacles with respect to the tax status according to InvStG. Furthermore, taxation of investments in commercial partnerships by funds is revised, including new filing obligations, investment rules for special investment funds are facilitated and the “roll-over allowance” according to Para. 6b Sec. 10 Income Tax Act for tax-neutral re-investments in corporate shares being held as business assets is increased from 500,000 EUR to 2 million EUR. Potentially affected entities should promptly assess in detail the impact of these new regulations. 

Caroline Degenhardt, Senior Manager, Forvis Mazars, Germany  

Department of Finance unveils “strawman proposal” for overhaul of interest tax rules 

The Irish Department of Finance has taken its first formal step toward modernising Ireland’s interest taxation regime, releasing a phase one feedback statement that includes a wide‑ranging strawman proposal. The move follows a public consultation held between September 2024 and January 2025 and signals the beginning of a multi‑phase reform process aimed at simplifying what is as an increasingly tangled system shaped by anti-tax avoidance directives, anti‑hybrid rules, enhanced transfer pricing and the Pillar 2 environment. 

Profit motive test at centre of new framework 

At the heart of the proposal is a new “profit motive” test that would replace the long‑standing “wholly and exclusively” rule. Under the draft model, interest would be deductible only where borrowing supports activities or investments undertaken with the purpose of generating profits or gains. Crucially, the test would apply on an annual basis, requiring taxpayers to reassess the purpose of each loan every year. 

Industry groups have raised concerns that the test is too subjective and may not reflect commercial realities, especially for long‑term or strategic investments. 

Interest as a charge to remain, but only by election 

The Department is proposing to retain “interest as a charge” provisions, allowing taxpayers to elect into the existing regime for qualifying loans. However, interest as a charge and its associated recovery‑of‑capital provisions have become increasingly complex and do not sit comfortably alongside today’s anti‑avoidance landscape. 

Shift to accruals basis for passive Income 

The strawman also proposes moving passive interest income from a receipts basis to an accruals basis, aligning it with the treatment of trading income. A five‑year transition period is expected to ease the cash‑flow impact on affected taxpayers. 

Expanding definition of interest 

Amounts that are economically equivalent to interest would be formally treated as such for the purposes of deductibility and the interest limitation rule (ILR). While this aligns Ireland with EU practice, care will be required to avoid unintended withholding‑tax implications. 

New international guardrails 

Proposed ILR changes include removing the current “cliff edge” triggered when excess borrowing costs exceed €3 million and adding a new group‑level de minimis of €6 million. The Department also plans to extend transfer pricing documentation requirements to medium‑sized enterprises. 

Stakeholders argue that the new €6 million threshold could make Ireland more restrictive than peer jurisdictions and that additional transfer pricing documentation would significantly increase compliance costs for small and medium-sized enterprises (SMEs). 

Business impact expected across borrowing, treasury and finance structures 

The proposed rules would require companies to document the purpose of borrowings annually, adding new pressure to corporate treasury operations. Finance company structures — especially those relying on interest as a charge, Section 110 or complex on‑lending arrangements, may face uncertainty as they evaluate which regime to adopt. 

Medium‑sized companies in particular could see a sharp rise in compliance obligations if full transfer pricing documentation becomes mandatory. 

Stakeholders seek greater certainty and a modern finance‑Company Regime 

Respondents to the consultation have urged the Department to drop the “profit motive” test in favour of a broader “commercial motive” standard, arguing that it would better reflect real‑world financing practice. Many also highlighted the need for a modern, purpose‑built finance‑company regime to replace reliance on outdated provisions. 

Key priorities emerging from industry feedback include retaining certainty for trading entities, improving symmetry in loss relief, protecting Ireland’s competitiveness within the ILR and avoiding disproportionate burdens on SMEs. 

Joe Walsh, Director, Financial Services Tax, Forvis Mazars, Ireland 

Italian Revenue Agency tightens its approach to carried interest 

In Italy, the classification of carried interest is critical because it may trigger either a 26% flat tax as financial income or progressive employment income taxation up to 43% Article 60 of Law Decree No. 50/2017⁴ provides ex ante certainty where its statutory requirements are met. Under Circular 25/E of 2017⁵, however, failure to meet one or more of those requirements does not automatically trigger employment income treatment, since a substantive case-by-case analysis may nonetheless still support the characterisation of the proceeds as financial income. 

Ruling No. 252/2025⁶ is significant because it appears to narrow that substantive approach, which is centred, inter alia, on verifying whether managers have made a real investment and are genuinely exposed to the risk of loss. In the case at hand, the Revenue Agency first denied access to the Article 60 safe harbour on the grounds that the enhanced return was linked only to the minority fund’s return, rather than to all investors recovering capital and minimum yield so that the instruments were not subject to the required five-year holding period. It then went on to deny financial income treatment, also under the substantive case-by-case analysis developed in Circular 25/E of 2017, which effectively represents the last available route to avoid employment income treatment where Article 60 does not apply. 

More importantly, the ruling adopts a markedly formalistic reading of financing and set-off mechanics, attaching decisive weight to the fact that part of the subscription price was financed by the employer and that both subscription and repayment operated through legal set-off rather than actual cash movements. This appears difficult to reconcile with the substance-based approach endorsed in Circular 25/E of 2017 and may require a reassessment of structures implemented under the earlier administrative framework. 

Raffaele Villa, Partner, Forvis Mazars, Italy 

Offshore private equity structures, reattribution of management and performance fees  

In a recent decision¹, the Swiss Federal Supreme Court confirmed that management and performance fees formally paid to offshore fund managers are reattributed to a Swiss investment advisor, as the Court found that the foreign management companies did not have enough real economic substance to perform their duties. 

Although the fund prospectus stated that portfolio management took place in Singapore, the Bahamas and the United Arab Emirates, the key investment management activities were actually carried out from Switzerland. As a result, the Swiss tax authorities reassigned the management and performance fees to the Swiss entity for tax purposes and imposed tax evasion penalties. 

The Court applied the established criteria for tax avoidance, namely an unusual structure, the absence of non-tax business reasons and the achievement of a tax advantage. They concluded that the offshore entities performed, at most, administrative tasks and lacked operational capacity commensurate with the remuneration received.  

Impact on the banking sector 

The decision addresses an extreme case in which offshore entities lacking substance received significant management and performance fees for activities largely carried out from Switzerland. In practice, most investment managers have sufficient substance to perform their duties. However, in cases where Swiss banks have setup their own investment fund structures abroad, it is strongly recommended to review the agreed remuneration based on a functional analysis and to document it accordingly. 

It remains to be seen whether this is an isolated case or whether the tax authorities will increasingly examine the substance of foreign fund structures with Swiss investment advisors in the future. 

[1] Decision 9C_521/2025 of 17 December 2025

André Kuhn, Partner, Forvis Mazars, Switzerland 

Yann Waeber, Senior Manager, Forvis Mazars, Switzerland 

Marius Décaillet, Consultant, Forvis Mazars, Switzerland 

Tax savings for AI investments  

Financial services organizations are making significant investments in artificial intelligence (AI) to improve operational efficiency and accelerate innovation. These investments have become essential to keeping pace with evolving customer expectations, increasing regulatory complexity and growing external threats. AI also creates opportunities to enhance the client experience, generate insights through advanced analytics and modelling as well as enable faster, more efficient software development processes. Given the scale and importance of these investments, many organisations are now evaluating whether related activities may be eligible for tax incentives. 

For activities performed in the U.S., the federal Credit for Increasing Research Activities (R&D tax credit), along with similar credits available at the state level, may provide an opportunity to partially subsidise AI investments through tax savings. Potential credit opportunities can arise when AI initiatives are focused on expanding the capabilities of existing systems, driving efficiency through automation or developing new functionality. 

The first step in pursuing these opportunities is developing a clear understanding of the objectives and underlying activities associated with an organisation’s AI investments and how those activities align with the R&D tax credit framework. In addition, properly categorizing related costs is critical to determining whether they align with credit‑eligible cost types and how they translate into potential tax savings. Finally, capturing and leveraging documentation generated through existing business operations is an important step in supporting the substantiation of a potential credit claim. 

Forvis Mazars has a dedicated team of R&D tax credit professionals supported by customised technology, enabling clients to pursue these opportunities through a comprehensive approach designed to maximise the value of available incentives while minimising disruption to ongoing business operations. 

Leigh Hayes, Partner, Forvis Mazars US