How much Taxes will my French company pay?

French company tax payments

Taxes are always daunting when establishing a business in France. Not only do they have a reputation of being fairly high, but the amount you pay is also not consistent across all company types! As such, one can wonder: “if I want to pay as little taxes as possible, which company type should I choose?”

 

Summary

  1. Income tax or corporate tax?
  2. How taxable profit is calculated

 

Income tax or corporate tax?

Depending on the legal structure chosen, the profits of the company are either subject to income tax,  or to corporate tax (IS).

When subject to income tax

The company is “transparent” when it comes to taxes. All profits are recorded in the overall income statement of the entrepreneur (or associates for their share of the profits) with this classification in the category:

  • They appear in the industrial and commercial profits (BIC) category if the activity is industrial, commercial or craft,
  • They appear in the non-commercial profits (BNC) category if the activity is of a liberal nature.

Basically, in terms of taxes, no difference is made between the profits of the company and the remuneration of the entrepreneur.

 When subject to corporation tax

A clear difference is made between the profits of the company and the remuneration of the directors.

  • The Net income, after deducting the revenue of the directors, is taxed at a fixed rate (see table below).
  • Managers are then taxed personally on their remuneration and on the dividends received. This is subject to Income Tax, with remuneration appearing in the wage and salaries category, and dividends appearing in the property income category.
Income taxCorporate tax

Which company types?

  • Sole proprietorships
  • EURLs
  • Partnerships (SNC, SCP, etc.)

Optionally:

  • Family SARLs (they have to all be ascendants and descendants of the 1st or 2nd degree. This means: Parents, grandparents, siblings, children, spouses, or partners bound by a PACS)
  • SARLs, SASes, SAs as long their activity:
    • Was less than 5 years old when this option was chosen
    • Has less than 50 employees and has less than 10 million € in turnover
    • Isn’t listed
    • Has at least 50% of its voting rights held by “Natural Persons” (individuals), and at least 34% of them held by the director(s) and their taxable households.

Which company types?

  • SARLs
  • SASes
  • SAs

 

Optionally:

  • EURLs
  • Partnerships (SNC, SCP, etc.)
  • EIRLs (under certain conditions)

The base of calculation of the Income Tax:

  • For sole partnerships, either by deducting professional charges (for the micro-company), or by deducting real charges
  • For companies, it is always obtained by deducting real charges
The base of calculation of the Corporate Tax

It is always obtained by deducting real charges.

Tax rate:

  • The progressive scale of the IRPP (taxation of income of natural persons) is applied.
    As such, the rate varies depending on the other revenues and the situation of the household.
  • Micro-entrepreneurs who are subject to the micro-social regime and whose taxable household does not exceed a certain threshold have the option of going for a tax deduction from the income tax.
    Each month or each quarter, the micro-entrepreneur declares his turnover and pays the income tax due for his self-employed activity, which corresponds to:

    • 1% of turnover for a sales activity, goods or housing supplies,
    • 1.7% of turnover for another activity related to industrial and commercial profits (BIC),
    • 2,2% of turnover for a liberal activity

 

(Turnover is considered before taxes)

2018 Tax rate:

  • Normal rate: 33.33%  but will be only 25% by 2022.
  • Global reduced rate: 15% (only on the part of the taxable profits representing less than 38 120€)
  • Reduced rate: 28%  (on the part of the taxable profits that is between 38 120€ and 500 000€)

 

How taxable profit is calculated

There are two ways to determine the taxable profit of a business:

  • it is either done by the tax administration in a “global” way by deducting an amount comparable to the fees of the company to the turnover. This is the Micro-Company scheme, and it can only be applied to Sole proprietorships.
  • or it is done by the entrepreneur in “real” terms, and he determines his own taxable profit. This is the actual benefit scheme (for the BIC) or the controlled return (for the NCB) if it is a liberal profession.

Something to keep in mind: The turnover to be considered for the method of determining the taxable profit is either that of the previous year or of the year before that.

 

Commercial and craft activities

Industrial and Commercial Profit (BIC)

 

Liberal activities

Non-commercial Profits (BNC)

Sole proprietorships with a turnover less than or equal to:

  • 70 000 € before taxes (purchase / sale, supplies and food to take away or consume on site, provision of housing)
  • 70 000 € before taxes (other services)

Micro-Company regime

(Possible to opt for the simplified or normal regime)

  • Sole proprietorships with a turnover less than or equal to:
    70 000 € before taxes

Micro-Company regime

(Possible to opt for the “Controlled declaration” regime)

 

Sole proprietorships with a turnover between:

  • 170 000 € and 789 000€ before taxes (purchase / sale, supplies and food to take away or consume on site, provision of housing)
  • 70 000 € and 238 000€ before taxes (other services)

Simplified regime

(Possible to opt for the normal regime)

 

  • Sole proprietorships with a turnover grater than: 70 000 € before taxes
  • All companies

“Controlled declaration” regime

 

 

Sole proprietorships with a turnover superior to:

  • 789 000€ before taxes (purchase / sale, supplies and food to take away or consume on site, provision of housing)
  • 238 000€ before taxes (other services)

Normal regime

If you want to learn more about company types, you should check out this table. Everything you could want to know is there!