You have just incorporated your French company, or you are about to do so, and one question keeps coming back: how is my French business actually taxed, and how do I take the profits home without a nasty surprise. You may have chosen a SAS (société par actions simplifiée, the flexible joint-stock company most foreign founders prefer), a SARL (société à responsabilité limitée, the classic limited liability company), or you may still hesitate between a subsidiary (filiale, a French company owned by your foreign parent) and a branch (succursale, a French extension of your foreign company with no legal personality of its own). In each case, the French corporate income tax, called IS (impôt sur les sociétés), applies at a standard rate of 25 percent, with a reduced 15 percent rate on the first profits of small companies, and both subsidiaries and branches pay it on the profits generated in France. Dividends sent abroad then face a 25 percent domestic withholding tax, reduced or eliminated by tax treaties and by the European Union Parent-Subsidiary regime. This guide explains, in plain English, who pays French corporate tax and on what profits, how to calculate, file and pay it on time, how the branch-versus-subsidiary choice changes your liability and your tax bill, and how to repatriate profits at the lowest lawful cost. Every French acronym is explained, every key rule is linked to its official source, and the final section gives you a practical checklist used by foreign founders operating from Paris and across France.
I. How France taxes your French business: French corporate tax (IS) basics every foreign founder must know
A. Which companies pay French corporate tax and on which profits: scope, territoriality and the 25 percent rate
French corporate tax, the IS, is the tax on the profits of companies. The starting point is simple: “Corporate income tax is levied on the total net profits realised by companies during the financial year at the standard rate of 25% (increased by additional surcharges, if applicable)”, and “The standard corporate income tax rate has been 25% since 2022”. That 25 percent rate is set by Article 219 of the CGI (Code général des impôts, the French General Tax Code, the single statute that contains almost all French tax rules). The official text of the Code, including Article 206 of the CGI on the persons liable to corporate tax, lists the companies concerned: whatever their corporate purpose, the general partnerships and limited partnerships for their commercial part, joint ventures, limited liability companies such as the SARL, and joint-stock vehicles such as the SAS. In practice, your SAS or SARL is automatically subject to IS from the day of its registration, unless a specific option for partnership-style taxation was validly chosen at incorporation, which most foreign founders avoid because it makes the foreign shareholder personally taxable in France.
Small companies pay less on their first profits. “A reduced rate of 15% applies to SMEs on the first EUR 42 120 of taxable profit”, under Article 219 bis of the CGI on the reduced 15 percent rate, and the official commentary confirms the three conditions, quoted here in the original French: turnover below 10 million euros (“dont le chiffre d’affaires est inférieur à 10 millions d’euros”), fully paid-up capital (“capital entièrement libéré”) held for at least 75 percent by individuals (“détenu pour 75 % au moins par des personnes physiques”). If your French subsidiary is held by your foreign holding company rather than by individuals, the 15 percent rate generally does not apply, and the full 25 percent rate governs from the first euro of profit. Foreign founders are regularly disappointed by this point, so check your shareholder structure before budgeting your effective tax rate.
The second pillar is territoriality: France taxes the profits made in France, wherever the shareholders live. “Resident companies are subject to tax on their worldwide income. Non-resident companies are subject to tax on their French-source income.” For a French subsidiary, worldwide profits fall in principle within French IS, with foreign-branch profits and treaty relief handled separately. For a foreign company operating in France through a branch or a permanent establishment, only the French-attributable profits are taxed here: “business profits are taxable in France if they are derived from business activities carried on in France”. This is the rule of Article 209 of the CGI, explained at length in the official BOI commentary on territoriality (BOI-IS-BASE-10-10). The BOI (Bulletin officiel des finances publiques-impôts, the tax administration’s official commentary, which tax inspectors must follow) details when a foreign company is considered to carry on business in France: a fixed place of business such as an office, workshop or building site of a certain duration, or a dependent agent habitually concluding contracts in France. If you only sell to French customers from abroad, with no premises and no one signing deals on French soil, you normally have no French taxable presence; the day you open a Paris office with staff, or your salesperson in Lyon routinely closes orders, France will claim its share.
Two distinctions confuse almost every newcomer, so let us fix them now. First, IS versus IR: the IS (impôt sur les sociétés) taxes the company’s own profits at 25 percent, while the IR (impôt sur le revenu, personal income tax) taxes individuals on their salaries and dividends at progressive rates; your SAS pays IS on its profits, then you personally pay IR in your country of residence, and possibly in France, on what you take out. Second, BIC versus IS: the BIC (bénéfices industriels et commerciaux, industrial and commercial profits) is the income-tax category for sole traders, while an IS company computes a similar business result but pays IS instead. The scope of the tax, company by company, is summarised in the official BOI commentary on the scope of corporate tax (BOI-IS-CHAMP-10-20). Keep these three letters, IS, IR and BIC, in mind: your accountant (expert-comptable, the French chartered accountant who prepares your accounts and tax returns) will use them in every email.
Registration is what makes the tax real. Your company exists for tax purposes once it is registered through the INPI single window (guichet unique, the one-stop online filing portal run by the INPI, the Institut national de la propriété industrielle, since 1 January 2023 for all French businesses), entered in the RNE (Registre national des entreprises, the National Companies Register) and, for commercial companies, in the RCS (Registre du commerce et des sociétés, the Trade and Companies Register kept by the greffe, the clerk’s office of the commercial court). The greffe issues your Kbis extract (the official identity card of a French company, proving its SIREN number, legal form, directors and address), and the creation is announced in the BODACC (Bulletin officiel des annonces civiles et commerciales, the official gazette of company registrations). The practical incorporation steps for each vehicle are described by the administration in the official SAS creation guide and the official SARL and EURL creation guide. From registration day, your company has a SIREN number (its unique 9-digit business identifier), a tax home (domicile fiscal) at its siège social (registered office), and a competent SIE (Service des impôts des entreprises, the local corporate tax office that collects your IS and VAT). A company registered in Paris reports to a Paris SIE and the RCS of Paris, held by the greffe du tribunal de commerce de Paris; that local anchoring also determines where your Kbis is issued and where your annual accounts are filed.
B. How to calculate, file and pay IS on time: accounts, tax return, instalments and penalties
Calculating French corporate tax follows four steps, and foreign founders should understand each one even when an accountant does the work. Step one is the accounting profit: French companies must keep books under French GAAP (the Plan comptable général), close a fiscal year (exercice, most often 12 months, frequently 1 January to 31 December for new subsidiaries), and have the accounts approved by the shareholders within six months of year-end. Step two is the tax adjustment: starting from the accounting profit, you add back non-deductible items (for instance fines, part of luxury-car costs, and the IS itself) and subtract tax-only deductions, to reach the résultat fiscal (taxable profit). Step three applies the rate: 15 percent on the first 42,120 euros of profit if the SME conditions are met, 25 percent above and in all other cases. Step four subtracts available tax credits (such as the research tax credit, CIR, crédit d’impôt recherche, for eligible R and D spending) to give the IS due. The return that declares all this is form 2065 (the annual IS return, with its annexes forming the liasse fiscale, the full tax pack filed electronically), sent to your SIE within three months of year-end for a 31 December close, extended in practice to the second working day after 1 May for calendar-year companies filing online.
Paying is separate from filing, and this is where newcomers get caught. French IS is paid in advance, in four instalments called acomptes, spread through the fiscal year and computed from the previous year’s profit, with the balance (solde) paid when the 2065 return is filed. A company in its first year, with no previous profit, pays no instalments and settles the whole IS as a balance at the first return, which founders often experience as a painful lump sum fifteen months after launch. All payments go online to the DGFIP (Direction générale des finances publiques, the French tax authority) through your company’s professional tax account (espace professionnel) on the impots.gouv.fr portal, including its English-language international section. Miss an instalment or pay late and two layers of sanction stack up: late-payment interest (intérêt de retard) accruing month by month, plus a surcharge (majoration) of 5 percent as a rule, applied automatically by the SIE. The amounts are debited or notified without a prior court step, so diary discipline matters more than debating the principle afterwards.
Three reflexes keep a foreign-owned company safe. First, open the espace professionnel on impots.gouv.fr in the first month after the Kbis arrives, and mandate your expert-comptable to file and pay on your behalf; founders who leave this to quarter four routinely discover the account was never created. Second, align the fiscal year with the foreign parent’s year-end when possible, so consolidation and transfer-pricing documentation (the justification that intra-group prices between your French company and its foreign parent are arm’s length) run on one calendar. Third, provision the IS monthly in your cash planning: 25 percent of pre-tax profit is not yours, and the first-year balance effect means year two can demand both the year-one balance and the year-two instalments in the same quarter. Companies that sell partly outside France should also track where each profit is made, because the territoriality analysis in section I.A must be re-run every year as the business changes: a support team in Paris serving foreign clients can create French taxable profit even when all invoices go abroad.
Value-added tax runs on a parallel track and must not be confused with IS. Registration for VAT (TVA, taxe sur la valeur ajoutée), the applicable thresholds, invoicing and returns are a separate regime administered by the same SIE but on different forms and calendars; a company can owe VAT from month one while its first IS falls due a year later. Keep the two diaries apart from day one, and ask your accountant for a one-page annual calendar listing the IS instalment dates, the 2065 deadline, the accounts-approval deadline and the VAT return dates for your regime.
II. Branch vs subsidiary in France: choosing the vehicle that protects your profits
A. Subsidiary (SAS, SARL) versus branch (succursale): liability, registration and taxation compared
Foreign founders entering France face one structural choice: create a subsidiary or register a branch. A subsidiary, usually a SAS or sometimes a SARL, is a French person in law: it has its own legal personality, its own Kbis, its own assets, and the foreign parent’s liability is limited to its capital contribution. A branch, the succursale, is the opposite: it is a French establishment of your existing foreign company, with no legal personality, no share capital and no Kbis of its own; it is registered (immatriculée) for transparency, but every contract, debt and lawsuit ultimately binds the foreign parent directly. If limiting risk matters to the group, the subsidiary wins; if you want the lightest structure for a test phase of one or two people, the branch can be faster and cheaper to open, at the price of unlimited parental exposure.
Registration differs accordingly. The subsidiary is formed through the INPI single window with articles of association (statuts), a registered office, a bank certificate for the deposited capital, appointment of a president (président, the legal representative of a SAS) or manager (gérant, the legal representative of a SARL), and publication in a legal announcements journal (JAL, journal d’annonces légales) before the greffe issues the Kbis. The branch is declared through the same single window but with the foreign parent’s corporate documents, translated and legalised as needed, proof of the French business address, and appointment of a branch representative (représentant légal de la succursale); the greffe records it without issuing a Kbis, and the creation is likewise published in the BODACC. In both cases, hiring, VAT and payroll registrations with the URSSAF (Union de recouvrement des cotisations de sécurité sociale et d’allocations familiales, the agency collecting French social contributions) follow automatically from the single-window filing, and both vehicles receive a SIREN/SIRET number identifying the French establishment.
For corporate tax, the two vehicles converge more than founders expect: “French companies (and French branches of foreign companies) are generally subject to corporate income tax on their net profits… currently imposed at a rate of 25%”. The subsidiary pays IS on its profits as a French resident company. The branch pays IS on the profits attributable to its French activity under the territoriality principle described in section I.A, computed with a separate French accounting and its own 2065-style filing. The practical tax differences sit elsewhere. The subsidiary can join a French tax-consolidation group (intégration fiscale) with sister companies, carry its losses forward against its own future profits, and pay dividends up under the treaty and Parent-Subsidiary regimes of section II.B. The branch cannot distribute dividends to its head office, since it has no shares; it remits profits (and can receive loss support) through branch accounts, and a specific branch tax (retenue à la source sur succursales, historically one-half of the IS rate on deemed distributed profits, subject to treaty relief) may apply depending on the applicable tax treaty, a point to verify treaty by treaty before choosing. Branches must also file the foreign parent’s annual accounts in France for public disclosure, which groups protective of their consolidated figures sometimes dislike; subsidiaries publish only their own French accounts.
Choosing well means matching the vehicle to the business plan. Take the subsidiary, normally a SAS, when France is a lasting market, when you will hire, sign leases, invoice locally and seek French financing, because banks, landlords and major customers all prefer a Kbis-bearing French company, and because liability stays ring-fenced in Paris rather than travelling back to the parent’s balance sheet. Take the branch when you need a presence in weeks with minimal capital, for instance to second two engineers to a French client site for a fixed project, accepting that the parent answers for everything the branch signs. Reconsider the choice at each growth step: many groups start with a branch for year one and convert to a subsidiary before hiring a sales team or signing a commercial lease (bail commercial, the protective French 3-6-9 year business lease), because the lease’s deplafonnement and renewal-compensation rules sit more comfortably in a French company. Whatever the vehicle, the competent explanations of each form and their formation steps remain the official SAS guide and the official SARL and EURL guide, and the scope and territoriality commentaries in BOI-IS-CHAMP-10-20 and BOI-IS-BASE-10-10.
A Paris and Île-de-France note, because most foreign founders land there: registering the siège social in Paris puts the company with the RCS of Paris and a Paris SIE, commercial leases fall under the Paris market’s high rents and strict proof-of-address controls by the greffe, and disputes go to the Tribunal de commerce de Paris and, on appeal, the Cour d’appel de Paris. Budget for domiciliation proof (lease, domiciliation contract with an approved provider) from week one: greffe rejections for weak addresses are the most common delay in Paris incorporations, ahead of capital-deposit issues.
B. Taking profits home: dividends, the 25 percent withholding tax, treaties and the EU Parent-Subsidiary exemption
Once the IS is paid, the remaining profit belongs to the shareholders, and moving it across the border is the second tax event. Under domestic French law, “French domestic rules provide for a 25% withholding tax on dividends distributed to non-French resident shareholders… The applicable legal basis for this withholding tax is set out by article 119 bis (2) and 187 (1) of the French tax code”. Concretely, when your French SAS distributes 100,000 euros of after-tax profit to its US, UK or UAE parent, the French company must withhold 25,000 euros, pay it to the French Treasury, and remit 75,000 euros, unless a reduction applies. The full CGI provisions behind this mechanism are collected in the official General Tax Code on Légifrance, with the persons-liable rules in Article 206 of the CGI and the rate mechanics in Article 219 bis of the CGI for the reduced-rate framework.
Three routes reduce or eliminate that 25 percent. The first is the tax treaty (convention fiscale): France has signed over one hundred bilateral treaties, most of which cut the dividend withholding to 15, 10, 5 or even 0 percent depending on the shareholder’s residence and holding percentage, provided the foreign parent supplies a residence certificate and, where required, the treaty claim form to the French paying company before the distribution. The applicable treaty is checked country by country on Légifrance and in the tables of the DGFIP international portal; never assume the headline treaty rate applies without reading the beneficial-ownership and limitation-on-benefits clauses, which French paying agents now verify strictly. The second route is the EU Parent-Subsidiary Directive: “the EU Parent-Subsidiary directive allows for an exemption of this 25% withholding tax, subject to … a 10% holding in the distributing French entity, combined with an uninterrupted two-year holding period”, for qualifying EU parents receiving dividends from a French subsidiary. The directive in force is Council Directive 2011/96/EU on the common system of taxation applicable to parent companies and subsidiaries. In practice, a German or Dutch holding with 10 percent of your SAS held for two years receives French dividends with zero French withholding, while a non-EU parent relies on its treaty.
The third point is case law every adviser now cites: “In a decision dated October 6, 2023… the French Supreme Court for constitutional matters (Conseil constitutionnel) ruled…”, namely Decision no. 2023-1063 QPC of 6 October 2023, in which the Conseil constitutionnel (the court reviewing the constitutionality of statutes, seized here through a QPC, question prioritaire de constitutionnalité, the procedure letting litigants challenge a statute during a trial) censured the former 75 percent withholding mechanism applied to certain non-cooperative jurisdictions and reset the analysis at the 25 percent domestic baseline. The lesson for founders is operational: withhold at the domestic 25 percent rate by default, then claim the treaty or directive exemption with complete paperwork, rather than paying net and arguing later, because refunds (restitutions) take months and draw audits.
Interest on shareholder loans (comptes courants d’associés, the current-account advances a foreign parent often makes to fund the French subsidiary) and royalties for brand or software follow the same logic with different rates and treaty tables: domestic withholding exists, treaties usually reduce it sharply, and the EU Interest-Royalties Directive can exempt intra-EU payments between associated companies. Keep the financing choice deliberate: dividends require distributable profits after IS and a shareholder vote, while interest is deductible within thin-capitalisation limits but needs a written loan agreement, an arm’s-length rate and proper transfer-pricing support. Salary for a non-resident director is a third extraction route, taxed and social-charged in France when the work is done here, with URSSAF affiliation for the French mandate; compare the three routes each year with your expert-comptable rather than locking one in at incorporation.
Timing completes the picture. Dividends can only be distributed after the accounts are approved and the IS for the year is settled, typically mid-year N+1 for year N profits; an interim dividend (acompte sur dividende) is possible only with an interim balance sheet certified by the statutory auditor (commissaire aux comptes) where one exists. Each distribution needs board minutes, a shareholder decision, the withholding computation, payment to the Treasury within the month, and reporting in the following filings. Founders who promise the parent a fixed monthly upstream from month three learn this the expensive way: plan the first distribution for the second year, fund year one through capital and documented shareholder loans, and calendar the AGM (assemblée générale annuelle, the yearly shareholder meeting approving the accounts) as the starting gun for every upstream euro.
Conclusion
French corporate tax for a foreign-owned business holds no mystery once the five moving parts are in place: a 25 percent IS on French profits, with 15 percent on the first 42,120 euros for qualifying small companies; territorial taxation of French-generated profits for both subsidiaries and branches; advance payment in instalments with an automatic-penalty regime for lateness; registration through the INPI single window producing the Kbis, RCS entry and BODACC notice that make the company a taxpayer; and a 25 percent domestic dividend withholding, cut by treaties and eliminated within the EU Parent-Subsidiary framework. Choose the subsidiary, normally the SAS, for a durable, liability-shielded French presence, and the branch for a fast, light test phase with full parental exposure. Then run the annual routine without exception: close the accounts, compute the résultat fiscal, file form 2065, pay the balance, approve the accounts at the AGM, and only then distribute, withholding correctly and claiming each treaty or directive relief with signed paperwork in hand. Do this, and France taxes your success without ever ambushing it; neglect the calendar or the withholding, and the SIE will teach the same lesson with interest and surcharges. When the structure grows, revisit the vehicle, the financing mix and the treaty position every year, because the right answer at incorporation is rarely still the right answer at fifty employees.
Need a quick opinion on your case
You are setting up or running a French company from abroad and want to secure your tax position before the first filing. Our firm offers a telephone consultation within 48 hours with a lawyer of the firm, to review your vehicle, your calendar and your profit-repatriation plan. Call 06 46 60 58 22 or write via our contact page. For related company-formation questions, see also our company creation practice page.