A first-year loss is common when a foreign founder launches a business in France: incorporation costs arrive before sales, an initial team may be hired before the first contract, and the French subsidiary may receive funding from a foreign parent while its market is still being built. The loss does not disappear, but it is not a personal tax asset of the founder and it cannot be moved freely between the French company, a foreign parent and an individual shareholder.<\/p>\n
For a company subject to French corporate income tax, called imp\u00f4t sur les soci\u00e9t\u00e9s<\/em> or IS, the usual solution is a carry-forward. The tax loss is deducted from later taxable profits, subject to the statutory annual limitation. A carry-back is different: it is an optional claim against the taxable profit of the immediately preceding financial year and may create a tax receivable only where that earlier year produced the right kind of profit. A newly incorporated company that has never had a profitable French financial year will usually have no prior profit against which to carry back its first loss.<\/p>\n This distinction matters to a non-French founder because the legal person bears the loss. The founder\u2019s residence, nationality, foreign bank account or personal tax return does not turn the company\u2019s deficit into a deduction against personal income. The same caution<\/a> applies to a foreign parent: a loss incurred by the parent or by an overseas branch is not automatically a loss of the French subsidiary. This article explains the first-year company tax position, the filing evidence to preserve, the timing of a carry-back election and the events that can put a carry-forward at risk.<\/p>\n The first question is not whether the company has made a cash loss. It is whether the French tax computation produces a deficit for the relevant financial period. A company can have negative accounting results but a smaller tax loss after adding back non-deductible expenses. Conversely, an accounting profit can become a tax loss after applying tax depreciation, provisions or other adjustments permitted by the Code g\u00e9n\u00e9ral des imp\u00f4ts<\/em> (CGI), the French General Tax Code.<\/p>\n Article 209 of the CGI connects the calculation to the activity taxed in France and provides the basic carry-forward rule. The official text describes the loss as follows: \u00ab ce d\u00e9ficit est consid\u00e9r\u00e9 comme une charge de l’exercice suivant \u00bb. The full provision, including the \u20ac1,000,000 plus 50% limitation and the treatment of the unused balance, is available in Article 209 of the French General Tax Code<\/a>.<\/p>\n For a newly incorporated SAS, meaning soci\u00e9t\u00e9 par actions simplifi\u00e9e<\/em> or simplified joint-stock company, the first accounting period may not align with the calendar year. Article 209 also addresses the first period where no balance sheet is prepared during the first civil year of activity. The tax return must therefore identify the exact opening date, closing date and period covered. A founder who treats an eighteen-month first period as two ordinary twelve-month periods may create an incorrect loss and an incorrect filing deadline.<\/p>\n The carry-forward is not an immediate refund. It is a tax attribute recorded for the French company and used when that same company later generates taxable profit. If the company has a \u20ac120,000 tax loss in its first period and a \u20ac70,000 taxable profit in the next period, the loss can generally reduce that later profit to zero, leaving a balance to track. If the next profit is \u20ac200,000, the whole \u20ac120,000 can generally be used, subject to the conditions of the loss regime and the proof that the loss is genuine. The calculation is made with the tax result, not simply with the cash movement on the company\u2019s bank account.<\/p>\n The general rate used to value a future IS saving is also a tax-law question. Article 219 of the CGI states: \u00ab Le taux normal de l’imp\u00f4t est fix\u00e9 \u00e0 25 % \u00bb. The current text is linked at Article 219 of the French General Tax Code<\/a>. This does not mean that a \u20ac100,000 loss produces a \u20ac25,000 cash payment. It means that, if the company later has sufficient profits taxed at the normal rate, the loss may reduce the tax base and defer or eliminate the corresponding IS for that period. Reduced-rate profits, exempt profits and special regimes require a separate calculation.<\/p>\n A foreign shareholder cannot place that \u20ac100,000 on a personal income-tax return simply because the shareholder funded the company. The French company is a separate legal person. The funding may be a share contribution, a shareholder loan or a documented expense reimbursement, but none of those labels changes the owner of the tax loss. The same separation applies when the founder lives outside France and performs preparatory work from another country: the company\u2019s French tax result must be distinguished from the founder\u2019s own tax position and from the foreign parent\u2019s result.<\/p>\n The filing obligation survives the absence of revenue. Article 53 A of the CGI requires taxpayers to \u00ab souscrire chaque ann\u00e9e […] une d\u00e9claration permettant de d\u00e9terminer et de contr\u00f4ler le r\u00e9sultat imposable \u00bb. That rule is available on Article 53 A of the French General Tax Code<\/a>. A French company with no turnover may still have to file its corporate tax return and supporting schedules. \u201cNo sales\u201d is not the same as \u201cno return\u201d. It is also not a basis for leaving the loss undocumented until a profitable year arrives.<\/p>\n Article 223 of the CGI gives the core deadline: \u00ab la d\u00e9claration du b\u00e9n\u00e9fice ou du d\u00e9ficit est faite dans les trois mois de la cl\u00f4ture de l’exercice \u00bb. When the accounting year closes on 31 December, the statute provides the special deadline linked to the second working day after 1 May. The official text is at Article 223 of the French General Tax Code<\/a>. The foreign founder should make the calendar work from the company\u2019s actual closing date, not from the date on which the Kbis is received. The Kbis is the official extract showing the company\u2019s registration details; it does not replace the tax return.<\/p>\n The first-year payment calendar is often misunderstood. Article 1668 states that newly created companies subject to IS \u00ab sont dispens\u00e9es du versement d’acomptes au cours de leur premier exercice d’activit\u00e9 \u00bb. The provision is available at Article 1668 of the French General Tax Code<\/a>. This exemption from quarterly instalments during the first period does not exempt the company from the final return or from paying IS if the tax computation ultimately produces a profit. In a loss year, it also does not create a refund simply because no instalments were paid.<\/p>\n Proof becomes decisive when the loss is used later. In Conseil d’\u00c9tat, 31 December 2020, no. 428297<\/a>, the court held that \u00ab il appartient, d\u00e8s lors, au contribuable de justifier l’existence d’un d\u00e9ficit reportable et son montant \u00bb. The decision accepts regular and reliable accounts, or sufficiently reliable extra-accounting evidence, but it puts the burden on the taxpayer seeking to use the loss. A foreign founder should read this as a document-retention rule: the file must be built in the loss year, not reconstructed after a tax audit years later.<\/p>\n The evidence should connect each material expense to the planned activity. Preserve the engagement letter with French counsel, the lease or domiciliation agreement, supplier invoices, payroll records, software contracts, market studies, product development records, travel evidence, bank statements and the foreign parent\u2019s funding agreement. If a group company paid an expense, record whether it is a loan, an equity contribution, a recharge or a reimbursement. An unexplained transfer from the foreign parent may create an accounting question even when the underlying expense is real.<\/p>\n Carry-back, known in French as report en arri\u00e8re<\/em>, is not the ordinary treatment of a first loss. Article 220 quinquies of the CGI provides an option under which a loss can be treated as a deductible charge against the profit of the preceding financial year. The current provision opens with: \u00ab sur option, \u00eatre consid\u00e9r\u00e9 comme une charge d\u00e9ductible du b\u00e9n\u00e9fice de l’exercice pr\u00e9c\u00e9dent \u00bb. It is available at Article 220 quinquies of the French General Tax Code<\/a>.<\/p>\n The practical consequence is simple. A company must have an earlier French financial year with taxable profit of the relevant type. If the first year after incorporation is loss-making and there was no preceding profitable year for that same legal person, there is normally no prior IS to reduce and therefore no immediate carry-back receivable. The foreign founder cannot use the parent\u2019s prior profit, a former sole-trader profit or personal income as the missing prior year. If the company\u2019s first reporting period includes a special history or a restructuring, the dates and legal continuity must be checked rather than assumed.<\/p>\n Even where a preceding profit exists, carry-back is limited. The option concerns the preceding exercise and the statutory cap. The fraction of profit that was distributed or exempt, or that was taxed through certain credits or reductions, may be excluded from the calculation. A company should compare three figures before making the election: the current loss, the prior taxable profit after exclusions and the statutory maximum. The smaller eligible amount is the starting point for the claim; the rest remains a carry-forward if the legal conditions are met.<\/p>\n The election is also time-sensitive. The 2026 notice for form 2039-SD explains that the carry-back declaration is filed with the IS balance statement and that depositing form 2039-SD alone does not make the election. The company must elect within the time allowed for filing the results return for the loss year. The official 2026 form and notice are available on impots.gouv.fr: form 2039-SD, carry-back of losses<\/a>. A late form cannot usually revive an election that was never made in the results return.<\/p>\n In Conseil d’\u00c9tat, 12 January 2005, no. 257652<\/a>, the court described the effect of the option as creating \u00ab une cr\u00e9ance sur le Tr\u00e9sor \u00bb. That phrase is important. Carry-back creates a claim against the French Treasury based on the prior IS paid and the amount of loss validly carried back; it does not rewrite the shareholder\u2019s tax history and it is not the same thing as a current-year operating grant.<\/p>\n The resulting receivable can generally be used against later IS and, under the applicable rules, requested for repayment after the statutory period if it remains unused. The company must keep the calculation, the prior-year return, the loss-year return, the 2039-SD and the balance statement together. A foreign finance team should not record the receivable as cash until the French tax administration has accepted the legal and numerical basis. The official guidance on the payment of a carry-back IS credit is available at impots.gouv.fr: payment of the carry-back IS credit<\/a>.<\/p>\n Carry-back also has exclusion events. Article 220 quinquies refers to a total transfer or cessation of the business, a merger or similar operation, and a court judgment opening liquidation or insolvency proceedings. A foreign group planning a restructuring should therefore decide whether to file the election before the operation and should check whether the operation changes the company\u2019s ability to use the receivable. A new French subsidiary should not be told that a parent-company loss can be carried back through the subsidiary merely because the parent financed the launch.<\/p>\n The distinction can be shown with two examples:<\/p>\n The first protection is a clean separation between accounting, tax and corporate records. The annual accounts show the commercial result; the tax computation explains the adjustments that produce the taxable deficit; the corporate file shows who approved the accounts and the allocation of the result. The foreign founder should obtain copies of the signed accounts, the trial balance, the tax reconciliation, the corporate income tax return and the schedules showing the origin and balance of the loss.<\/p>\n The result return should not be treated as an administrative afterthought. Article 223 requires companies subject to IS to file their benefit or loss declaration and to supply the associated corporate information. The declaration should state the correct legal name, SIREN identifier, registered office, closing date, tax regime and amount of the loss. SIREN is the nine-digit identifier of the French legal entity. The Kbis and the RNE, the Registre national des entreprises<\/em> or National Register of Enterprises, help identify the entity, but the tax records must still prove the amount of the deficit.<\/p>\n Keep the original invoices and payment trail. A foreign-language invoice should be retained with a reliable translation where the French tax office, called the SIE (service des imp\u00f4ts des entreprises<\/em>), may need to understand it. A bank transfer labelled \u201cfounder funding\u201d is not enough to prove that a particular legal expense was incurred for the French company. The file should identify the supplier, the service, the business purpose, the contracting party, the payer, the accounting entry and the reason the cost is deductible.<\/p>\n Where the foreign parent pays, preserve the intercompany agreement and the board or shareholder approval. Explain whether the payment is a capital contribution, shareholder loan, recharge or payment on behalf of the French subsidiary. The French company should not deduct a parent\u2019s own cost merely because the cost helped the group. It must show that the French entity incurred or validly received the expense and that the expense is connected with its own taxable activity. If the parent\u2019s payment is later reimbursed, the reimbursement must be consistent with the original accounting and legal documentation.<\/p>\n The proof rules become stricter when the company starts using old losses against new profits. In Conseil d’\u00c9tat, 14 November 2025, no. 493824<\/a>, the court stated that \u00ab les d\u00e9ficits report\u00e9s sur les exercices suivants sont imput\u00e9s sur les r\u00e9sultats b\u00e9n\u00e9ficiaires par ordre chronologique \u00bb. The decision also confirms that the administration may examine the existence and amount of losses from earlier, even prescribed, years when the company uses them or declares them at the close of the audited year. The company should therefore maintain a year-by-year schedule showing the original loss, each amount used, the remaining balance and the profit against which it was used.<\/p>\n The same decision draws an important boundary: if a loss is deemed fully absorbed by profits in prescribed years, the administration\u2019s power to reopen that fully absorbed loss is limited; if only part was used, the remaining balance may still be examined. This is not a safe reason to discard older files. A foreign founder may sell the company, change the board or move the accounting function abroad, but the French entity remains responsible for proving the loss it claims.<\/p>\n If the administration reduces the loss during an audit, the company must preserve the notice, the accounting response, the amended tax calculation and any claim for correction. In Conseil d’\u00c9tat, 5 July 2023, no. 464928<\/a>, the official analysis refers to \u00ab le contribuable pouvant former une r\u00e9clamation contre la r\u00e9duction du montant de son d\u00e9ficit reportable \u00bb. The practical message is that a tax adjustment affecting the loss should be challenged or accepted deliberately, not left unexplained while later returns use a different balance.<\/p>\n At the end of the year, the French company should run a short loss-control review:<\/p>\n A carry-forward is linked to the company and to the continuity of the business that generated it. A change in the shareholder\u2019s nationality does not, by itself, erase the loss. A change in the company\u2019s activity, a legal restructuring, a merger or a group election may have a very different effect. The file should be reviewed before a foreign parent transfers the shares, moves the business, contributes a new activity or merges the French company into another entity.<\/p>\n The long-standing case law is strict where the company no longer operates the same business. In Conseil d’\u00c9tat, 4 June 1975, no. 92483<\/a>, the court required that \u00ab la personne de l’exploitant et l’objet de l’entreprise soient rest\u00e9s, les m\u00eames \u00bb. The decision explains that a company which keeps its legal personality but changes its composition and activity so substantially that it no longer runs the same enterprise may lose the right to use the old deficit.<\/p>\n For a foreign founder, the risk can arise in several ways. A technology company may stop its operating business and become only a holding company. A dormant subsidiary may acquire a completely different trade and try to shelter the new profits with the old loss. A foreign group may move the personnel, contracts and customers to another company while leaving the French entity with the deficit. These steps require a specific tax analysis; calling the operation a \u201cpivot\u201d does not answer the continuity question.<\/p>\n Entry into a French tax group is also not a free transfer of losses. Article 223 I of the CGI provides, for losses suffered before a company enters a group, that they \u00ab ne sont imputables que sur son b\u00e9n\u00e9fice \u00bb. The official text is available at Article 223 I of the French General Tax Code<\/a>. A foreign parent owning the French company does not automatically create a French tax group. The group must meet the statutory ownership, election and filing conditions, and the pre-entry loss normally remains ring-fenced at the level of the company that incurred it.<\/p>\n Loss transfers in a merger or similar transaction are even more formal. Article 209 of the CGI contains the regime for transferring prior losses under the merger framework, and Article 1649 nonies explains that an approval application for a tax regime must, as a general rule, be filed before the transaction it concerns. The official text says that the request \u00ab doit \u00eatre d\u00e9pos\u00e9e pr\u00e9alablement \u00e0 la r\u00e9alisation de l’op\u00e9ration \u00bb. See Article 1649 nonies of the French General Tax Code<\/a>. A foreign group should not sign a cross-border merger, contribution or transfer of business and ask afterward whether the loss followed the assets.<\/p>\n The Conseil d’\u00c9tat has applied this discipline to deficit transfers. In Conseil d’\u00c9tat, 9 June 2020, no. 436187<\/a>, the court examined the refusal of approval for transferring prior deficits after a transaction placed under the merger regime. The decision concerns the economic justification, the continuity of the business and the conditions for approval. The foreign parent\u2019s commercial reason for the restructuring should therefore be documented at the time of the operation: business plans, contracts, employees, assets, customers and operational continuity are more useful than a later assertion that the transaction was not tax-driven.<\/p>\n There is a related risk when an administration audits a loss that is being used against a profitable year. In Conseil d’\u00c9tat, 5 July 2023, no. 464928<\/a>, the dispute also concerned transactions between a French company and a related foreign company and the effect of corrections on the reportable deficit. The existence of a foreign parent does not make intercompany charges invalid, but the group must be able to explain the service, the price, the benefit received by the French company and the accounting treatment. A charge that is added back in the tax computation can change the loss balance; a charge that is not real or not connected with the French activity can trigger a wider dispute.<\/p>\n Finally, do not confuse a tax loss with a balance-sheet loss. The accounting loss may require a corporate decision about equity, continued trading or recapitalisation. A foreign founder may need to fund the company again, reduce capital, convert a shareholder loan or consider insolvency procedures. Those company-law decisions are separate from the tax question, but the timing can affect the ability to carry forward or carry back the loss. The tax file and the corporate file should be reviewed together before a restructuring is implemented.<\/p>\n For a new French company owned from abroad, the decision sequence should be:<\/p>\n A French company\u2019s first-year tax loss is normally carried forward against the company\u2019s future French taxable profits. It is not a deduction for the foreign founder, the foreign parent or the director. A carry-back can create a receivable only where the same French company has the eligible prior-year profit, the option is made on time and the statutory exclusions and cap are respected.<\/p>\n The practical protection is documentary. File the loss return, preserve the accounts and tax reconciliation, prove the business purpose of the expenses, track the balance year by year and examine any restructuring before it happens. The 2025 Conseil d’\u00c9tat decision no. 493824 confirms the chronological use and audit risk; decisions nos. 428297, 464928 and 92483 show why proof, a challenge strategy and business continuity matter. For a foreign founder, the correct question is not simply \u201cCan my company carry this loss?\u201d It is \u201cWhich French entity incurred it, what evidence proves it, what future profit can absorb it and what transaction might put it at risk?\u201d<\/p>\n For the wider registration and governance framework, see the firm\u2019s French company formation and doing-business-in-France practice page<\/a>. That hub addresses the structure, registration and first compliance steps; this article focuses on the tax-loss consequences after the company begins operating.<\/p>\n A 48-hour telephone consultation with a lawyer from the firm can help you review the first-year loss, the foreign-parent funding trail, the carry-back deadline and the effect of a planned restructuring.<\/p>\n Call +33 6 46 60 58 22<\/a> or use the contact page for the French office<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" What a foreign founder should do when a new French company makes a first-year tax loss: carry-forward, carry-back, filing deadlines, proof and restructuring risks.<\/p>\n","protected":false},"author":251031309,"featured_media":16494,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kj_source_type":"","_kj_official_id":"","_kj_official_url":"","_kj_judilibre_id":"","_kj_jur":"","_kj_lieu":"","_kj_chambre":"","_kj_rg":"","_kj_date":"","activitypub_content_warning":"","activitypub_content_visibility":"","activitypub_max_image_attachments":4,"activitypub_interaction_policy_quote":"anyone","activitypub_status":"federated","footnotes":""},"categories":[80314,80313],"tags":[],"class_list":["post-2106722","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-decryptage","category-doing-business-in-france"],"yoast_head":"\nI. Can a French company carry a first-year tax loss forward or back?<\/h2>\n
A. What happens when a French company has no taxable profit in its first year?<\/h3>\n
B. Is carry-back available to a newly incorporated French company?<\/h3>\n
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II. How should a foreign founder preserve and use the loss?<\/h2>\n
A. What evidence and filings protect the French company\u2019s loss?<\/h3>\n
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B. What happens after a change of activity, group entry or foreign restructuring?<\/h3>\n
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Conclusion<\/h2>\n
Need a quick opinion on your case<\/h2>\n