Corporate Tax or Personal Income Tax: Which Applies to Your Business Structure?
All business profits are subject to taxation. However, depending on your company’s legal structure, profits may be taxed under either the personal income tax (PIT) or the corporate income tax (CIT) system. So how do you know which one applies? And can you choose or change it? Here’s what you need to know.
How is your tax regime determined: PIT or CIT?
Your business’s tax regime is mainly determined by its legal form. Some structures are automatically subject to personal income tax, while others fall under corporate income tax. In many cases, there is an option to switch between the two, subject to certain conditions.
Tax Regime by Legal Structure
| Legal Structure | Subject to Personal Income Tax (PIT) | Subject to Corporate Income Tax (CIT) |
|---|---|---|
| Sole proprietorship | Yes | Optional, under conditions |
| Micro-entrepreneur | Yes | No |
| General partnership (SNC) | Yes | Optional, under conditions |
| Professional civil company (SCP) | Yes | Optional, under conditions |
| Single-member limited liability company (EURL) | Yes | Optional, under conditions |
| Private limited company (SARL) | Optional, under conditions | Yes |
| Public limited company (SA) | Optional, under conditions | Yes |
| Simplified joint-stock company (SAS) | Optional, under conditions | Yes |
| Sole shareholder SAS (SASU) | Optional, under conditions | Yes |
| Civil real estate company (SCI) | Yes | Optional, under conditions |
| Regulated liberal profession company (SEL), except sole-member SELARL | No | Yes |
Declaring Profits Under Personal Income Tax (PIT)
If your business falls under the personal income tax system, profits must be included in your personal income tax return (forms 2042 and 2042-C-PRO). The specific category depends on the nature of your activity:
Industrial, commercial, or craft activities: report under industrial and commercial profits (BIC)
Liberal professions: report under non-commercial profits (BNC)
Agricultural activities: report under agricultural profits (BA)
Your final tax rate is determined based on your total household income and family situation.
💡 Tip: Some businesses that are subject to personal income tax by default may opt to switch to corporate tax if it offers a financial advantage.
Declaring Profits Under Corporate Income Tax (CIT)
For companies taxed under the corporate income tax regime, only the net profit—after deducting salaries paid to executives—is taxed.
This net profit must be reported using form 2065-SD, along with the appropriate financial statement bundle (liasse fiscale) depending on whether you follow the simplified or normal real tax regime.
The company director must report any salary and dividends received in their personal income tax return.
💡 Note: Businesses subject to corporate tax may, in some cases and under specific conditions, elect to switch to personal income tax.
