Corporate taxes in France and French corporate tax rates
French corporate tax rates depend on the business structure and turnover. This guide explains corporate taxes in France, and which French corporate taxes are applicable.
If you become a freelancer in France or start a French business, you will be liable to pay French income taxes under the personal tax system (Impôts sur le Revenu, IR) or corporate tax in France (Impôts sur les Societiés, IS). Considering French corporate tax rates, some smaller companies may opt for taxation under the personal system rather than the French corporate tax system.
This guide explains which French corporate tax rates apply depending on your business structure and turnover, as well as the conditions for paying corporate tax in France.
French corporate tax rates
Similar to elsewhere, corporate tax in France is separate to the French taxes applicable to income from the business paid as salary (see below). The amount of French corporate tax you pay depends on the turnover of your business and the capital structure
France recently introduced a new bill ('2017 Bill') that reduces the standard France corporate tax rate, marking the first reduction since 1993. The bill states that the French corporate tax rate for large companies will drop from 33.33 percent to 28 percent.
The bill splits French corporate tax rates as follows:
- Companies with a turnover of less than EUR 50 million and with a profit up to EUR 75,000 will be subject to a French corporate tax rate of 28 percent.
- For small to medium companies with a turnover of less than EUR 7.63 million, the French corporate tax rate is 15 percent for the first EUR 38,120 profit and 33.33 percent after this, providing you and other owners put in capital and 75 percent is held by individuals.
French corporate tax rates are expected to undergo reforms until 2020 under the bill, when 28 percent will become the standard French corporate tax rate for all companies; for example, the rate of 28 percent will apply to the first EUR 500,000 of all companies' profits in 2018, and to companies earning less than EUR 1 billion from 2019.
Companies have to file a French tax return within three months of close of accounts or by April 30. French corporate tax is payable quarterly on March 15, June 15, September 15 and December 15. Exemptions apply if you’re a new company or paid less than EUR 3,000 in the previous year, in which case you can pay French corporate tax on a yearly basis.
French corporate tax regimes
There are also different French corporate tax regimes, depending on your type of business in France:
- Commercial, industrial or manual/trades/crafts businesses are taxed under the Bénéfices Industriels et Commerciaux (BIC) system.
- Professional businesses are taxed under the Bénéfices non Commerciaux (BNC) system.
- Agricultural businesses are taxed using the Bénéfices Acricole (BA) system.
There are divisions within the BIC and BNC systems. If your turnover falls below a certain threshold you will be taxed under a simplified French corporate tax system (régime du réel simplifié) instead of the régime du réel normal. The BIC threshold is less than EUR 230,000 per year for those providing services and accommodation; EUR 763,000 per year for re-sellers. The BNC threshold is less than EUR 76,300 per year. With these regimes you need to provide information on income, deduct expenditures and apply French business tax to the company's net profit. You can carry losses over up to a maximum of six years.
French income tax is calculated on your personal earnings whether you're an employee or self-employed in France. You can reduce your taxable income through a centre de gestation (affiliated accounting centre).
You can deduct certain things before calculating tax, which include a 10 percent deduction for work-related expenses, social security contributions, interest on certain business loans, and French pension contributions. Read more on filing a French tax return.
In 2015, the French government announced that the lowest rate of income tax would be abolished and the other thresholds increased by 0.5. French income tax rates in 2016 (to be declared in 2017) are:
- Up to EUR 9,710 EUR – 0 percent tax
- EUR 9,711–26,818 – 14 percent
- EUR 26,819–71,898 – 30 percent
- EUR 71,899–152,260 – 41 percent
- EUR 152,261+ – 45 percent
French tax rates apply to each part of income over the thresholds, not the total income. For example, if you earn EUR 30,000 you pay 0 percent on the first EUR 9,710; 14 percent on the next EUR 17,107 and 30 percent on the final EUR 3,183. In some cases, depending on your business type and size, you can opt to claim all liable tax under the personal taxation system.
French corporate tax for sole traders in France
If you are a sole trader (enterprise individuelle or EI) then you and your business are one legal entity and you will be automatically taxed under the personal income tax system (Impôts sur le Revenu) or under the rules of the régime micro-entrepris or régime du reel.
If you take on the status of EIRL (Entrepreneur of Individual Limited Liability), where you and your assets are separate, you pay tax through your French income tax return in the category for your business – industrial and commercial profits (BIC) for traders and artisans, or Non Commercial Benefits (BNC) for independent professionals – or you can opt to pay French corporate tax.
French corporate tax for limited companies
If you are setting up an EURL (limited company under sole ownership), you may choose to be taxed under the personal income tax system under the régime du reel or through French corporate taxation.
French corporate tax for joint-ownership companies
If your company is a SARL (limited company in joint ownership) you can choose to be taxed under the personal income tax system for the first five years of business if the business is small, or is a certain type of family business – otherwise you will be taxed through French corporate taxation.
Business tax for micro-enterprises in France
Businesses with even smaller turnovers can be taxed under an even simpler French corporate tax system called régime micro-entreprise, where you state your turnover and are allocated a fixed allowance and taxed on fixed ‘profit’. This system typically applies to 'micro-entrepreneurs' (formerly 'auto-entrepreneurs) and is split into Micro-BIC and Micro-BNC. Micro-BIC applies to re-sellers of goods with a turnover of less than EUR 82,800 and manual/trades/crafts with less than EUR 33,100. Micro BNC applies to professionals with annual turnovers of less than EUR 33,100. There’s a similar simplified procedure for paying French social security charges.
You have to file a return by May/June each year, and typically pay by September/October. New businesses are exempt from declaring tax for the first year but when you make the declaration on the second year you must include all your accounts and figures since the business began.
Find more information on the L' Agence France Entrepreneur's (AFE) website (in French).
French VAT (TVA)
As of January 1, 2017, France raised the VAT turnover threshold from EUR 32,600 per year to EUR 33,200 for serviced-based businesses, and from EUR 81,500 per year to EUR 82,800 for commercial activities, bars, restaurants and accommodation, at which point you must register to pay French VAT or TVA (Taxe sur la Valeur Ajoutée) and you are obliged to charge it. If your turnover is less and you don’t have to charge French VAT/TVA then your invoices must state that TVA is not applicable – 'TVA non-applicable, art 293B due CGI'. French VAT is set at 20 percent.
Micro-enterprises cannot charge or claim VAT in France.
If VAT is applicable, you will be allocated a French VAT number (numéro de TVA intracommunautaire) made up of 13 characters: FR (for France), a two digit data processing code and your SIREN number. You must write your French VAT number on all your invoices.
The TVA declaration is made by April 30, or within three months of close of accounts if your accounting year is not the calendar year. You can make French VAT declarations and pay online.
Cross-border VAT in France
If you are thinking of buying or selling goods or providing services to customers in other countries – in and outside of the EU – there are special rules regarding cross-border VAT. For example, you don’t charge French VAT when you’re selling goods or providing services to customers outside the EU, although you can deduct the VAT you have paid on related expenses.
When you’re selling goods to businesses in other EU countries, you also do not charge VAT. However, when you’re selling goods to consumers in another country within the EU you have to register with the relevant VAT authorities in that country and charge VAT at their rate, except in cases when the total value of annual sales falls below the limit set by the country.
If you’re providing services to businesses within the EU you don’t normally charge VAT, however, for services to consumers within the EU you charge the French VAT rate. Exemptions apply to telecommunications, broadcasting and electronic services, which are always taxed in the country where the customer belongs.
CET French corporate tax rates
The Contribution Economique Territoriale (CET) is a French corporate tax that helps to pay for the Chambers of Commerce and other services. It’s made up of two elements:
- The Cotisation Foncière des Entreprises (CFE), based the rateable value of the business property;
- The Cotisation sur la Valeur Ajoutée des Entreprises (CVAE) – the CVAE French tax is based on the ‘value added’ each year by the business.
How much you pay depends on turnover. For example, in 2016, if your turnover was less than EUR 10,000 you will be taxed EUR 212–510; a turnover between EUR 10,000 and EUR 32,600 will incur up to EUR 1,009; a turnover of between EUR 32,600 and EUR 100,000 you could pay up to EUR 2,119; up to EUR 6,559 for a turnover more than EUR 500,000.
New businesses get 100 percent tax relief in the first year of trading and 50 percent in the second. The CET French corporate tax is payable in December of each year, or can be arranged in two instalments.
French social security contributions
Everyone in France must pay social charges in order to access the French welfare system. When you are running a business you usually have to pay French social security contributions in advance. For new companies, since there is no previous income record on which to base contributions, the amount will be based on your estimated profit for the first two years and then recalculated after you have submitted your first tax declaration. You have to pay the charges at specific times and there are penalties for missing the deadlines.
How much you pay is complex, depending on your company structure, whether you have chosen to pay tax through personal or French corporate taxation, and your type of business. As a guide, if you are paying tax under the régime du reel you can expect to pay just under 50 percent of your profits to social charges, although these are considered a tax deductible business cost. If you are paying yourself dividends, you pay less social security charges – this is one factor that may influence your choice of company regime (see above).
For social charges for micro-entreprise, see our guide to freelancers and self-employment in France.
French corporate tax advice
An accountant (expert comptable) can advise on French corporate taxation, social security charges, tax law and any available French tax refunds for example. You can find an accountant through the French accountants’ professional body ‘l’Ordre des Expert-Comptables or the local Chamber of Commerce, or consider using an affiliated accounting centre.
The information given here provides a general overview only; it ia always advised to get professional advice from a French accountant or financial expert when starting a business in France.
French tax authority and information
- www.impots.gouv.fr is the official website for the French tax authority.
APCE – Accueil Professionnels et Entreprises – the national organisation for start-ups in France.
- Centre de Formalités des Entreprises or CFE, the organisation responsible for handling business registration throughout France. There are different offices for each type of business.
- Direccte (Directions régionales des entreprises, de la concurrence, de la consommation, du travail et de l'emploi).
- INPI – the Institut National de la Propriété Industrielle, which deals with trademarks, patents, designs and company names.
- A guide to self-employment and freelancing in France.
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