For a foreign founder, choosing a French société par actions simplifiée (SAS, a simplified joint-stock company) usually means accepting French corporate income tax. The French system does, however, contain a narrow and time-limited route to income tax. A qualifying SAS, SASU (a one-shareholder SAS), SARL (a private limited company) or SA (a public limited company) may elect the tax regime of partnerships, so that the result is assessed in the hands of the partners. The founder’s nationality is not the deciding test. The shareholding, voting rights, activity, age of the company, size and management structure are.
The election is not a marketing label and it is not the same as putting a foreign owner on a French company’s Kbis. A Kbis is the official extract showing registration in the French Trade and Companies Register (RCS). The greffe is the court registry that issues or maintains that extract. INPI, the French National Institute of Industrial Property, operates the online one-stop shop for many incorporation filings. None of those registration documents, by themselves, proves that the Service des impôts des entreprises (SIE, the corporate tax office) has received a valid income-tax election.
This guide answers the action question: can a foreign founder choose French income tax (IR, impôt sur le revenu) instead of corporate income tax (IS, impôt sur les sociétés) for a new SAS or SASU? It explains the ownership thresholds, the five-exercise limit, the notification deadline, the treatment of losses and undistributed profits, the consequences of a foreign parent and the evidence to preserve. It is focused on company structuring, not on an individual’s move to France or a property purchase.
I. Can a foreign founder choose income tax for a French SAS instead of corporate tax?
A. What happens by default when a foreign founder incorporates a French SAS or SASU?
A French SAS is normally within the IS system from the start. The current version of Article 206 of the French General Tax Code (CGI, Code général des impôts) states that the listed companies “sont passibles de l’impôt sur les sociétés, quel que soit leur objet”. In plain English, the ordinary rule follows the legal form and the applicable election; it does not wait for the first sale, the first employee or the first profit. A SASU is still a SAS for this purpose, even though it has only one shareholder.
Under IS, the French legal entity computes its taxable result and files in its own name. The shareholder is then considered separately when receiving remuneration or dividends. The tax is therefore built around two different events: the company’s taxable profit and the individual or corporate owner’s income. This distinction matters for a foreign group that wants to leave cash in France, for a founder who expects to draw a salary, and for a parent company that plans to fund or sell the subsidiary.
The ordinary French IS rate is 25 per cent for the relevant exercises. A reduced 15 per cent rate may apply to a qualifying small company on the first tranche of profit, subject to the conditions and ceiling described by the French tax administration. The official impots.gouv.fr guide to corporate income tax states that the normal rate is 25 per cent and presents the 15 per cent band up to 42,500 euros when the relevant conditions are met. A founder should model the rate actually available rather than comparing the headline rates in isolation.
Choosing IR changes the taxpayer, not the existence of a French company. The company still has articles of association, a registered office, a bank account, accounting records, annual accounts and corporate decisions. It may still owe VAT, the French territorial economic contribution, payroll charges and other taxes. The tax election does not replace the incorporation process through INPI, does not remove the RCS registration and does not turn a French subsidiary into a branch of the foreign parent.
The statutory bridge is Article 239 bis AB of the CGI. It allows eligible SAS, SASU, SARL and SA companies to opt for the partnership regime referred to in Article 8. The opening rule is that the company “peuvent opter pour le régime fiscal des sociétés de personnes mentionné à l’article 8”. This is a tax election attached to an eligible company; it does not require the founder to abandon the SAS form.
Once the election applies, the result is allocated to the partners under the partnership regime. Article 8 of the CGI provides that qualifying partners are “personnellement soumis à l’impôt sur le revenu” for the part of the social profit corresponding to their rights. The practical consequence is important: tax can arise on an allocated profit even if the company keeps the cash to pay a supplier, hire staff or finance a second French activity. A distribution decision and a tax-allocation decision are not the same thing.
For an operating business, the individual partner generally reports the allocated result in the category matching the activity. BIC means bénéfices industriels et commerciaux, or industrial and commercial profits. BNC means bénéfices non commerciaux, or non-commercial professional profits. BA means agricultural profits. The appropriate category, accounting regime and forms depend on the activity. An advisory or technology business cannot choose a category merely because it produces a lower personal tax result.
A foreign founder should also separate three questions that are often compressed into the phrase “French company tax”. First, what tax is imposed on the French company or its allocated result? Second, where is the shareholder resident for tax purposes? Third, what does the applicable treaty do with the income and any foreign tax? An IR election answers only the first question. It does not grant a general exemption to a nonresident founder, move the company’s activity abroad or override a double-tax treaty.
The company’s French tax status also remains distinct from social protection. If the founder is the president of a SAS, the rules governing the president’s remuneration and social contributions are not erased by the IR election. URSSAF, the body that collects much of France’s social-security contributions, may remain relevant to payroll or remuneration. A founder who works from another country must additionally examine social-security coordination, an applicable bilateral agreement and the place where work is physically carried out. Income tax and social-security affiliation should be modelled in parallel, not substituted for each other.
The tax choice is also distinct from the foreign founder’s immigration position. A founder who needs a visa or residence permit must address that question under the relevant immigration rules. A founder who remains abroad must not infer from the company’s French Kbis that personal residence has moved to France. Conversely, a French residence, a French home or day-to-day management from France can create personal and company-level questions that the election does not solve. The legal analysis follows actual facts and treaty rules.
B. Which ownership and activity conditions make the IR option available?
Article 239 bis AB contains several cumulative filters. The first is the form: the company must be an unlisted SA, SAS or SARL. The second is the ownership test: at least 50 per cent of the capital and voting rights must be held by one or more individuals. The third is a management test: at least 34 per cent of the capital and voting rights must be held by one or more eligible directors, such as the president, a managing director or a manager, together with members of the relevant tax household. The percentages are not alternative shortcuts. Both capital and voting rights must be checked.
That test can work for a directly owned SASU. For example, a non-French individual who owns 100 per cent of the shares and is the president has, on the face of the ownership figures, more than the 50 per cent and 34 per cent thresholds. The founder’s passport does not disqualify the company. The founder still has to examine residence, treaty allocation, reporting and social consequences, but nationality alone is not an Article 239 bis AB condition.
The result changes when a foreign corporation owns the French subsidiary. If a United States, United Kingdom, Swiss or other foreign company holds 100 per cent of the French SAS, the capital is held by a legal person rather than by an individual. The ordinary 50 per cent individual test is then not met. A structure in which the foreign parent holds 70 per cent and the founder holds 30 per cent also fails that threshold on the stated figures. A group should not describe a corporate shareholder as an individual merely because one person controls the group.
Article 239 bis AB contains technical rules for certain investment vehicles and equivalent structures established in qualifying jurisdictions. Those rules can exclude specified holdings from the percentage calculation where the statutory conditions, including the absence of a dependency relationship, are met. They are not a general exception for every venture-capital fund, nominee, holding company or foreign parent. The cap table should identify each legal owner, its voting rights, its economic rights and any dependency relationship before the election is considered.
The activity test is equally important. The company must conduct as its principal activity an industrial, commercial, craft, agricultural or liberal activity. It cannot be created merely to manage its own movable or immovable assets. A founder who wants to run a consulting, software, design, manufacturing, trading or operating business may be within the activity wording, subject to the facts and any professional regulation. A passive French holding or a company whose principal purpose is managing its own portfolio needs a different analysis.
The company must employ fewer than 50 employees and have annual turnover or total assets below 10 million euros during the relevant exercise. The wording uses “or” for the turnover and total-balance-sheet thresholds, but the employee limit remains separate. The conditions other than the age requirement are continuous throughout the exercises covered by the election. The threshold is not a one-day snapshot taken at incorporation. A later fundraising, acquisition, hiring plan or change of activity can therefore affect the tax status.
The company must be less than five years old at the opening of the first exercise to which the option applies. The age test is not a promise that the company can opt at any time during five years and then keep the regime indefinitely. The five-year age condition determines access to the option; the election itself is valid for five exercises and is not renewable under Article 239 bis AB. A founder should put the incorporation date, the first exercise opening date and the desired tax period in a written calendar before approving the articles.
The statute makes the continuity rule explicit: if one of the relevant conditions is no longer met during an exercise, Article 206 becomes applicable to the company from that same exercise. This is why the cap table and the voting agreement matter after incorporation. An investor’s entry can alter the percentages. A transfer to a corporate parent can change individual ownership. A new line of business can change the principal activity. A headcount or asset increase can create a tax issue even where the company’s commercial plan remains unchanged.
A family SARL follows a separate route. Article 239 bis AA of the CGI allows a SARL conducting an industrial, commercial, craft or agricultural activity and formed only between specified relatives, spouses or civil-partnership partners to opt for the partnership regime. The text refers to companies “formées uniquement entre personnes parentes en ligne directe ou entre frères et soeurs, ainsi que les conjoints et les partenaires liés par un pacte civil de solidarité”. A family SARL is therefore not a universal alternative for a foreign founder with an unrelated co-investor, a corporate parent or a liberal activity.
The family SARL option is not the same as the five-exercise Article 239 bis AB option. The family relationship must remain within the statutory perimeter, and the loss of that condition can end the regime. The family SARL route may be attractive where the family facts and commercial activity genuinely fit it, but it should not be inserted into an international group simply to obtain income-tax treatment. The shareholding, family status, activity and future financing should all be genuine and documented.
The choice of a legal form should therefore be made with the tax route in view. A foreign founder who wants outside institutional investment, a foreign corporate parent, retained earnings and a future sale may prefer the ordinary SAS under IS. A founder who owns the company directly, expects early losses or modest profits and can bear personal taxation on retained results may consider the temporary IR election. Neither conclusion follows from the word “SAS” alone.
II. How should a foreign founder file, compare and protect the French IR election?
A. What documents and deadlines secure the election from the first accounting year?
The election should be treated as a formal tax filing, not as an informal instruction to an incorporation provider. Article 46 terdecies DA of Annex III to the CGI says that notification “s’effectue selon le modèle établi par l’administration”. The notification must state the effective date, the company’s name, the registered office and, if different, the principal establishment, together with the identification number attributed under the Commercial Code. It must also be accompanied by the partner list and signed by the partners required by the text.
The notification must reach the SIE with which the company files its results during the first three months of the first exercise to which the option applies. For a company whose first exercise begins on 1 January, the working target is to have a complete, signed notification filed before 31 March. If the first exercise begins on another date, the three-month period is measured from that opening date. The incorporation date, the date on the Kbis and the first accounting-year opening date should be written on the same internal checklist so that the deadline is not inferred from an email or a bank-opening date.
All partners must agree to the election, subject to the statutory treatment of specified investment vehicles. For a SASU this may be a decision by the sole shareholder, but it should still be recorded in a dated written decision. For a multi-shareholder SAS, the decision should identify the partners, their percentage of capital and voting rights, the president or other eligible director, the effective exercise and the person authorised to correspond with the SIE. A corporate service provider’s generic reference to “tax transparency” is not a substitute for this signed decision.
The evidence file should contain the signed shareholder decision, the notification, proof of transmission or receipt by the SIE, the current Kbis, the articles, the cap table and the voting-rights table. It should also contain a short activity memorandum explaining why the business is operating rather than merely managing assets. If an investment vehicle’s holding is treated under a specific exception, keep the fund documents and dependency analysis. If a foreign founder is nonresident, keep the tax-residence certificate and treaty analysis separately from the company’s French registration papers.
The Kbis is useful evidence of the company’s existence, but it is not evidence of tax acceptance. The RCS registration and the tax notification are different tracks. The official INPI Guichet unique for business formalities can transmit creation information, but the company still needs to identify the SIE responsible for its results declaration and retain the tax filing proof. The greffe cannot be asked to correct a missed SIE deadline by simply changing a Kbis entry. This separation is especially important when an overseas incorporation agent handles the RCS filing but no French accountant monitors the tax mailbox.
The Supreme Administrative Court, the Conseil d’État, addressed the danger of timing in its decision of 5 November 2014, no. 367371. It stated that “une option notifiée à l’administration postérieurement à la date d’ouverture d’un exercice ne peut recevoir effet qu’au titre de l’exercice suivant”. The case concerned a family SARL and the rules then applicable to that option. It should not be read as permission to file late. It is a direct warning that a founder who wants the first exercise covered must build the notification before the exercise opens or within the current statutory window, as applicable to the chosen route.
The same decision also shows why a tax file needs consistent conduct. The court examined whether the company had clearly expressed its intention and whether the company and partners had filed returns corresponding to the partnership regime. That factual discussion does not create a safe late-filing strategy for a new SAS. The robust approach is to file on time, ask the SIE for written confirmation where the circumstances justify it and keep all returns consistent with the election that was actually made.
A later decision, Conseil d’État, 5 February 2024, no. 470324, concerned an EURL, meaning a one-member SARL, and an election for IS rather than IR. The court held that a company whose articles stated that it was subject to IS and which filed its first results under IS could be regarded as having regularly exercised that election. The decision records the requirement that a filing or notification manifest the choice “sans ambiguïté”. That ruling is useful as an evidence lesson, but it does not authorise an SAS to omit the current Article 239 bis AB notification. Different legal forms and different elections must not be conflated.
For a family SARL, the Conseil d’État also considered the effect of stating the option in the incorporation act in its decision of 18 May 2009, no. 310854. The decision refers to the then-applicable rule that the option could take effect immediately “si elle est formulée dans l’acte constatant la création”. The current formal route and administrative model must still be checked for the proposed company and date. The safe lesson is to decide the tax regime in the incorporation package and not to leave the founder’s first tax year to a later assumption.
Annual reporting continues after the election. Article 53 A of the CGI requires eligible taxpayers to file each year a declaration that enables the taxable result to be determined and controlled; the text says they “sont tenus de souscrire chaque année” such a declaration. The company should coordinate its accounts, result schedules and partner reporting. The French tax administration explains that an IR result may need to be reported in the appropriate BIC, BNC or BA category, while a company under IS uses the 2065-SD return and the corresponding tax package.
The reporting file should reconcile the company’s opening balance, capital contributions, shareholder loans, bank charges, professional fees, payroll and invoices. The first year can have a taxable loss even with no sales. A foreign founder should not send the SIE a nil result merely because the company has not billed a customer. The correct result follows the ledger and the applicable accounting rules. A bank statement, a Kbis or an invoice alone is not a substitute for the annual accounts.
B. Should a foreign founder choose IR or IS when profits, losses and cross-border taxes are involved?
The economic comparison starts with cash, not only rates. Under IS, the company is taxed on its taxable profit and can generally retain post-tax cash for growth. Under the IR election, the allocated result is taxed at partner level. A founder may therefore have a personal tax bill even when the SAS has kept every euro in its French bank account. A financial model should show profit, cash retained, salary, social contributions, personal tax, foreign tax and the amount actually available for reinvestment.
IR can be useful during a genuine launch phase. If the company produces a loss and an individual partner actively carries on the business, the loss may be relevant under the domestic rules governing the partner’s income. But a nonresident founder cannot assume that a French business loss will reduce salary or investment income in the founder’s country of residence. The relevant treaty, the nature of the income, the founder’s French filing obligation and the foreign country’s loss rules must be checked. A spreadsheet that subtracts the French loss from worldwide income without those steps is not a legal model.
IR can also be costly when the founder has other income. The allocated operating result is combined with the founder’s personal situation under the applicable French rules or, for a nonresident, allocated to the income that France may tax under domestic law and treaty provisions. A founder who already has a high personal income may face a higher marginal burden than a company paying IS and retaining profits. A founder who has little personal income may see a different result. The comparison must use the actual household, residence and remuneration facts.
IS may be easier to administer for an international group that wants a clear company-level taxpayer, a foreign parent and retained earnings. It also keeps the ordinary route for a future group reorganisation in view. The company must still handle its own transfer-pricing, permanent-establishment, withholding-tax and treaty questions where relevant. Choosing IS does not remove those questions, but it avoids pretending that a corporate parent is an individual partner for the Article 239 bis AB ownership test.
A company that expects outside investment should model the timing of the round. The investor may be a corporation or a fund that changes the capital and voting percentages. A shareholder agreement may allocate votes differently from economic ownership. A preferred instrument may have conversion rights that affect the test later. Before signing a term sheet, the company should ask whether the incoming instrument changes the capital, voting rights, principal activity, employee count or balance-sheet threshold. The election’s continuity rule makes this a tax-planning issue as well as a financing issue.
The five-exercise period requires an exit plan. At the end of that period, the Article 239 bis AB election is not renewable under that route and the company normally returns to the ordinary IS framework. The partners should decide in advance whether the company will distribute cash, retain it, admit a corporate investor, sell shares or change its activity. The tax impact of that next step should be modelled before the fifth set of accounts, not discovered when the accountant prepares the return.
A voluntary early return to IS must also be handled as a tax-regime change. Article 202 ter of the CGI provides for income tax to be established on the period before the change and addresses deferred profits, latent gains and inventory. Its first paragraph begins: “L’impôt sur le revenu est établi dans les conditions prévues aux articles 201 et 202 lorsque les sociétés ou organismes placés sous le régime des sociétés de personnes défini aux articles 8 à 8 ter cessent totalement ou partiellement d’être soumis à ce régime”. The accounting entries, opening balance sheet and filing deadline must be reviewed with the accountant.
Article 202 ter also contains a limited protection where there is no new legal person, the accounting entries are not changed and the tax remains possible under the new regime. That is a technical condition, not a blanket exemption. A company with work in progress, customer receivables, stock, intellectual property or appreciated assets should inventory those items before renouncing the election. The company should preserve the values used in the IR period and the basis that will be carried into the IS period.
The reverse direction must not be confused with the SAS election. Article 239 of the CGI concerns companies and groups that are ordinarily under the partnership regime and want to opt for the regime applicable to companies subject to IS. It says that the option must be notified before the end of the third month of the exercise in which the company first wants to be subject to IS. A default-IR EURL, SNC or eligible civil company may use that route. A SAS that is already within IS uses Article 239 bis AB if it wants the five-exercise income-tax election.
The foreign founder’s personal residence adds another layer. The French government’s current guidance for residents abroad explains that French income tax depends on residence and source rules, while treaties can allocate taxing rights differently. An individual who is not French resident may still have French-source income from a French business, but the exact result depends on the income category and treaty. An individual who becomes French resident may have a broader reporting obligation. The company should obtain the residence facts and treaty before promising the founder a tax result.
For a direct-owner SASU, the file should therefore answer the following questions in writing:
- Is the founder an individual direct shareholder, or is the shareholder a foreign company?
- Who holds the capital and who holds the voting rights on the first day of the elected exercise?
- Does the founder or another eligible director satisfy the 34 per cent management-linked test?
- What is the principal activity, and is the company doing more than managing its own assets?
- Are the employee, turnover and balance-sheet thresholds below the statutory limits throughout the relevant exercises?
- What is the founder’s tax residence, and which country may tax the allocated result under the applicable treaty?
- Will the company have enough cash for personal tax, payroll, VAT, suppliers and growth if profits are taxed before distribution?
- What happens if a corporate investor enters before the five-exercise period ends?
For a foreign-parent structure, the same checklist begins differently. The group should decide whether it really needs a French subsidiary owned by the parent, a directly owned founder company, a branch or another form of presence. A branch is not a separate legal person and cannot simply be treated as a SASU for the Article 239 bis AB test. A French subsidiary may be the better liability and investment vehicle, but its corporate ownership usually makes the temporary IR route unavailable. The structuring decision should be made before the capital is subscribed and the first filing is sent.
The company should also keep a tax calendar separate from the corporate calendar. The tax calendar records the exercise opening, three-month election window, annual result filing, partner declarations, any renunciation window and the fifth exercise. The corporate calendar records annual approval of accounts, changes in directors, share transfers, beneficial-owner information and amendments filed through the relevant channel. The Kbis, the SIREN identifier for the legal entity, the SIRET identifier for an establishment, the tax receipts and the signed decisions should all point to the same legal name and address.
Documentation becomes more important when the founder and directors work from different countries. Keep board or shareholder decisions, management calendars, contracts, bank mandates, invoices and evidence of the actual French activity. Do not create a paper French company with all substantive decisions, customers and work abroad and then assume the Article 239 bis AB election answers the place-of-management issue. Conversely, do not describe a French operating business as a foreign-only business merely because the shareholder lives abroad. The tax file should describe what the company actually does.
The choice should be revisited after a material event: a new shareholder, a conversion of securities, a change in the president, a move of the registered office, a new business line, a large recruitment plan, a sale of assets or a change in the founder’s residence. A written review at each event can identify a failed condition early. Waiting until the annual return may mean that the company has filed several months of invoices, payroll and distributions under the wrong assumption.
Finally, the French tax administration’s official sources should be used for the current forms and rate rules, while the company’s own facts should drive the election. The government’s guide to companies moving from IS to IR confirms the principal conditions and the three-month notification window. The official Service-Public.fr explanation of the IR option provides a plain-language checklist of the same timing and duration rules. The results-filing guidance explains how an IR result is reported and how an IS result uses the company return. Those sources are useful starting points; a cross-border founder still needs a tailored review of residence, treaty, social and group consequences.
Conclusion
A foreign founder can choose income tax for a French SAS or SASU, but only through the specific Article 239 bis AB partnership-regime election. The founder’s nationality is not the obstacle. The decisive questions are whether an individual holds at least 50 per cent of capital and voting rights, whether eligible management-linked individuals hold at least 34 per cent, whether the company conducts an eligible operating activity, whether it remains below the size thresholds and whether it is less than five years old when the first elected exercise opens.
The election must be approved by the partners and notified to the SIE during the first three months of the first exercise covered by it. The Kbis, INPI filing and foreign parent’s ownership do not replace that notification. A foreign corporate parent holding the French company will usually prevent the ordinary individual ownership test. A directly owned SASU may qualify on the figures, but the founder must separately analyse residence, treaty allocation, social contributions, cash needs and any foreign tax.
IR may suit a genuinely founder-owned business with early losses or modest profits, while IS may better fit a group-funded company that retains earnings and expects corporate investment. The answer should come from a five-exercise model and a documented cap-table review, not from a headline tax rate. Before incorporation, prepare the shareholder decision, activity analysis, tax calendar, notification and cross-border memorandum. Before every financing or ownership change, test the conditions again.
For the wider incorporation sequence, this article should be read with the firm’s French company formation guide for international founders. That hub covers the connected decisions around legal form, registration and launch; this page concentrates on the narrower IR election and its cross-border limits.
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