How Income Taxed Businesses Can Opt for Corporate Taxation

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Some businesses that are by default taxed under the personal income tax system in France have the option to switch to corporate tax (IS). This article outlines which entities are eligible, how to make the switch, and the tax implications of this choice.

Which Businesses Can Choose Corporate Taxation?

Certain legal structures are automatically taxed under the personal income tax (IR) regime but may opt for corporate income tax (IS) if they find it more suitable. Eligible entities include:

  • EIRL (sole proprietorship with limited liability),

  • EURL (single-member private limited company with an individual shareholder),

  • EARL (limited liability agricultural operations),

  • SNC (general partnerships),

  • SCP (professional partnerships),

  • Joint ventures and silent partnerships,

  • Limited partnerships.

Individual entrepreneurs can also switch to corporate tax by requesting to be treated as an EURL (or EARL for agricultural activities). This request must be made in writing to the Corporate Tax Office (SIE) before the end of the first quarter of the financial year in which the switch is to take effect. Once approved, this status becomes permanent.

⚠️ Note: As of May 15, 2022, new EIRLs can no longer be created. A new unified sole proprietorship status now exists, which by default protects the entrepreneur’s personal assets from business creditors.

How to Opt for Corporate Income Tax?

Businesses can choose IS through:

  • A personal decision by the business owner (for sole proprietors),

  • A unanimous agreement between partners or per company bylaws (for partnerships or corporations).

When Can You File the Option?

You can opt for IS:

  • At business creation by selecting the appropriate box on the registration form submitted to your local Business Formalities Center (CFE),

  • After creation, by submitting a written request to your main SIE, no later than the end of the first quarter of the fiscal year when you want the IS to apply.

Your request must include:

  • The business name and registered address,

  • Full names and addresses of the owner (for sole proprietors) or all shareholders (for companies),

  • The capital ownership breakdown among shareholders.

Can the Option Be Revoked?

Yes. Since 2019, businesses have the right to revoke their choice of corporate taxation.

You may cancel your election for corporate tax within five fiscal years following the year in which you first opted in. After this period, the decision becomes final and cannot be undone.

What Are the Tax Implications?

Once under the corporate tax system, your business is taxed as a separate legal entity on its annual net profits earned in France.

  • The standard corporate tax rate is 25% (as of January 1, 2022).

  • A reduced rate of 15% applies to the first €42,500 of profit, provided your business meets both of these criteria:

    • Annual revenue (excluding VAT) does not exceed €10 million,

    • The capital is fully paid up and at least 75% owned by individuals (or by a company meeting the same criteria).

💡 Note: If your company earns more than €7.63 million in revenue and owes over €763,000 in corporate tax, it must also pay a 3.3% social contribution on the amount of corporate tax due.