France has a structured yet complex tax system. For business owners looking to establish themselves in the country, understanding the key rules is essential — not only to ensure compliance and meet legal obligations, but also to anticipate filing requirements. Here are the basics.
Direct Taxation
In France, businesses are taxed on their profits either under personal income tax (IR) or corporate income tax (IS):
Income tax (IR) applies to sole traders, micro-entrepreneurs, single-member LLCs with an individual shareholder (EURL), and partnerships (SNC, civil companies). The rate depends on the household’s overall taxable income. The IR scale can be found here.
Corporate income tax (IS) applies to limited liability companies (SARL, SAS, SA, etc.). It can also be elected by certain businesses otherwise subject to IR. IS is an annual tax on all profits generated in France, applied at a flat rate. The standard rate is 25% for all companies, for financial years opening on or after 1 January 2022.
A reduced rate of 15% applies to SMEs on the first €42,500 of profit, provided they meet the following conditions:
- Annual turnover below €10 million
- Share capital fully paid up and at least 75% held by individuals
Indirect Taxation
French businesses do not only pay tax on profits. They must also manage indirect taxes. Here is what you need to know.
VAT: a key indirect tax
Value Added Tax (VAT) is an indirect tax collected by businesses on behalf of the State. Businesses charge VAT to their clients and remit it to the tax authorities, after deducting the VAT paid on their own purchases.
The standard VAT rate is 20%. Reduced rates of 10% or 5.5% apply to certain goods and services.
Three VAT regimes exist in France:
VAT exemption (franchise en base): businesses below certain turnover thresholds are exempt from charging VAT. Thresholds vary depending on the activity (see here).
Simplified real regime: this regime reduces filing obligations to a single annual return. It applies to businesses with annual turnover (excl. VAT) of between €85,000 and €840,000 for the sale of goods and accommodation services, between €37,500 and €254,000 for service activities, and with annual VAT liability below €15,000.
Standard real regime: under this regime, VAT must be declared monthly. It applies to businesses with annual turnover (excl. VAT) exceeding €840,000 for goods and accommodation, and €254,000 for services.
Local Taxes
Territorial Economic Contribution (CET)
The CET is made up of two components: the business property tax (CFE), due by all companies and sole traders including micro-entrepreneurs, even those working from home; and the value-added business tax (CVAE), due by any business with annual turnover exceeding €500,000 (excl. VAT), with an exemption in the year of incorporation. The CVAE is filed online via the company’s tax account, no later than the second working day after 1 May of the year following the one for which it is due. Note: the CVAE is scheduled to be phased out by 2030.
Other Taxes
Depending on the nature or turnover of the business, additional taxes may apply:
- Company vehicle tax, for businesses owning or using passenger vehicles
- Apprenticeship tax, for businesses subject to IR on industrial and commercial profits (BIC) or to IS
- Professional training contribution (CFP), collected by Urssaf via the monthly payroll declaration (DSN), applicable to all employers
Accounting and Filing Obligations
Every business must maintain regular and compliant accounting records. The specific obligations depend on the company’s size, legal form and tax regime.
As a general rule, commercial companies are subject to the following requirements:
Bookkeeping: companies must maintain accounting records (journal, general ledger, balance sheet, income statement). Those under the simplified tax regime may keep simplified accounts. Micro-enterprises have no obligation to produce annual accounts or maintain formal ledgers — a detailed income journal is sufficient.
Tax filings: businesses must declare their profits and submit VAT returns according to a calendar that varies by type and tax regime.
Social filings: businesses employing staff must submit a monthly payroll declaration (DSN) and pay Urssaf contributions (health, maternity, workplace accidents, unemployment, etc.).
Key Takeaways
There are two ways profits are taxed in France: income tax, based on a progressive scale, and corporate income tax, set at a flat rate of 25% regardless of turnover. The applicable regime depends on the company’s legal structure.
VAT is the main indirect tax in France, collected by businesses on behalf of the State at a standard rate of 20%. Three VAT regimes apply depending on turnover.
Businesses are also subject to local taxes, including the CET and the apprenticeship tax.
