French tax consolidation (intégration fiscale, Articles 223 A et seq. of the General Tax Code) is a group tax regime that allows a parent company owning at least 95% of each subsidiary to file a single consolidated tax return, offsetting the profits of profitable entities against the losses of loss-making entities within the group. The parent company becomes solely liable for the group's consolidated tax, while subsidiaries are treated as if they had no independent tax liability.

The main advantage is immediate loss utilization: rather than carrying forward losses at the subsidiary level, they are offset against the group's current-year profits, reducing the cash tax burden immediately. This is particularly valuable in growth or restructuring phases where new subsidiaries generate losses while established ones are profitable. French tax consolidation also neutralizes certain intra-group transactions — particularly dividends between consolidated entities — which receive a 99% exemption (compared to 95% under the parent-subsidiary regime).

In a financial due diligence context, the existence of a tax consolidation group significantly affects the target's normalized tax charge: the consolidated tax charge may differ substantially from what a standalone entity would pay, requiring restatement. Similarly, in a business valuation, the tax base of the group must be modeled at the consolidated level, not entity by entity, when a tax consolidation election is in place.

At Hectelion, we identify and model tax consolidation impacts in our due diligences and group valuations.