It’s important for businesses to understand what direct and indirect taxes they need to pay in France. Here, we review the three main types of taxes on businesses—taxes on profits, territorial economic contribution (contribution économique territoriale, or CET), and value-added tax (VAT).

What’s in this article?

• Taxes on profits
  
• Territorial economic contribution (CET)
  
• Value-added tax (VAT)
  

Taxes on profits

Depending on a business’s legal structure, its profits are taxed yearly either through a corporate tax (impôt sur les sociétés, or IS) or through income tax (impôt sur le revenu, or IR).

By default, companies with share capital are subject to IS. These include:

• Simplified joint-stock companies (sociétés par actions simplifiées, or SAS)
  
• Single-shareholder simplified joint-stock companies (sociétés par actions simplifiées unipersonnelles, or SASU)
  
• Limited liability companies (sociétés à responsabilité limitée, or SARL)
  
• Public limited companies (sociétés anonymes, or SA)
  
• Limited partnerships with shares (sociétés en commandite par actions, or SCA)
  

Conversely, partnerships with no share capital are automatically subject to IR, including:

• Sole proprietorships (entreprises individuelles, or EI)
  
• Microbusinesses
  
• Single-shareholder limited liability companies (entreprises unipersonnelles à responsabilité limitée, or EURL)
  
• General partnerships (sociétés en nom collectif, or SNC)
  
• Limited partnerships (sociétés en commandite simple, or SCS)
  
• Professional civil company (sociétés civiles professionnelles, or SCP)
  

In some cases, it is possible for businesses to change from one taxation system to the other.

Taxation method based on a business’s legal structure

Corporate tax (IS)

Under the IS, profits earned in France are taxed yearly in the name of the business. A flat rate is applied to the business’s net profit minus business expenses and the director’s compensation. The standard rate is 25%, but some businesses are subject to a reduced rate of 15% on the first €42,500 of profit if they meet the following eligibility requirements:

• The annual business turnover is under €10 million.
  
• The share capital is 100% paid up, and at least 75% of it is owned by individuals.
  

The business’s director is subject to IR on compensation and dividends. Furthermore, profits earned abroad by French businesses are not subject to IS.

Income tax (IR)

Under IR, profits earned in France are taxed yearly in the name of the business owner or partners. In other words, there is no taxation at the business level.

The full income of the business owner as an individual—including their personal compensation—is taxable. Partners in a partnership are subject to tax for their own share of the profit. In both cases, profits are taxed based on the income tax scale.

Territorial economic contribution (CET)

CET is a yearly tax any individual or legal entity carrying out nonsalaried professional activities must pay to local authorities. It doesn’t apply to employees. It consists of:

• Business property tax (contribution foncière des entreprises, or CFE)
  
• Contribution on the added value of companies (contribution sur la valeur ajoutée des entreprises, or CVAE)
  

Business property tax (CFE)

CFE is a tax related to a business’s premises—the establishment’s main place of business. It’s calculated based on the rental value of the property used in year N–2, meaning two years before the tax year. Businesses without a location are still subject to a minimum contribution based on their sales.

Businesses in their first year and companies with a yearly income of less than €5,000 are not subject to CFE.

Contribution on the added value of companies (CVAE)

The CVAE is based on the business’s yearly added value. This local tax applies only if a business’s pre-tax income is over €500,000. It’s set to be abolished in 2027.

Value-added tax (VAT)

VAT is a consumption tax. Businesses selling goods or services subject to VAT collect the tax on behalf of the government by charging it to customers at the time of sale. In other words, businesses act as a VAT intermediary.

When businesses purchase goods or services from suppliers, they act as customers and, therefore, have to pay VAT on those purchases. Businesses can typically deduct business expense-related VAT when filing their VAT returns.

Stripe Tax makes managing your tax returns easier by automating business tax calculations and speeding up the process of filling out and submitting VAT returns. Stripe also provides you with detailed reports on your yearly transactions and income—no coding required.