How to Switch from Personal Income Tax to Corporate Tax for Your Business

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Some businesses that are automatically taxed under the personal income tax (IR) regime can choose to switch to corporate income tax (IS). This guide outlines which entities are eligible, the steps to make the change, and the impact this decision has on taxable profits.

Which Businesses Can Choose Corporate Taxation?

By default, certain legal structures are subject to personal income tax but have the option to elect corporate tax instead. These include:

  • Limited liability sole proprietorships (EIRL)

  • Single-member limited liability companies (EURL)

  • Agricultural limited liability farms (EARL)

  • General partnerships (SNC)

  • Professional partnerships (SCP)

  • Joint ventures

  • Limited partnerships (SCS)

Individual entrepreneurs wishing to be taxed under the corporate tax regime must first convert their business to an EURL or EARL. This conversion is permanent and must be requested via a letter to the local corporate tax office (SIE) before the end of the first quarter of the fiscal year concerned.

Note: Since May 15, 2022, creating new businesses under the EIRL status is no longer possible. A unified individual entrepreneur status now applies, protecting the owner’s personal assets from business liabilities.

How to Opt for Corporate Tax (IS)

The process differs depending on your business form:

  • For sole proprietorships: The business owner can make the decision unilaterally.

  • For companies: The election must follow the procedure outlined in the company’s statutes or, if not specified, be approved unanimously by all partners.

You can opt for corporate taxation:

  • At the time of formation by checking the appropriate box on the registration form submitted to the business formalities center (CFE).

  • After formation by sending a written request to your local SIE, no later than the end of the first quarter of the financial year you want the change to apply.

Your request must include:

  • The business name and registered office address

  • The names and addresses of the business owner or all partners

  • The capital distribution among partners (for companies)

Can the Corporate Tax Option Be Reversed?

Yes. Since 2019, a business may revoke its decision to opt for corporate tax, but only within five fiscal years following the initial switch. After this period, the choice becomes permanent.

How Does This Affect Taxable Profits?

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

  • The standard corporate tax rate has been 25% since January 1, 2022.

  • A reduced rate of 15% applies to profits up to €42,500 if:

    • Annual revenue is €10 million or less (excluding VAT), and

    • At least 75% of the company’s capital is owned by individuals (or qualifying entities).

Note: If your business generates over €7.63 million in revenue and owes more than €763,000 in corporate tax, it is subject to a 3.3% social contribution on the amount of tax owed.