Corporate income tax (“CIT”) is, by default, applicable to capital companies, such as limited liability companies (SARL), public limited companies (SA) and simplified joint-stock companies (SAS).
The standard CIT rate applicable to a company’s taxable profit is 25%.
However, a reduced rate of 15% may apply, but only to the portion of taxable profit ranging from €0 to €42,500. To benefit from this reduced rate, companies must meet the following conditions:
- Their share capital must be fully paid up;
- At least 75% of the share capital must be held, directly or indirectly, by individuals;
- Their annual turnover must not exceed €10 million.
In the event of tax consolidation, and pursuant to Article 219 of the French General Tax Code (“FTC”), turnover must be assessed by aggregating the turnover of all entities belonging to the tax consolidated group, and not solely by reference to the turnover of the subsidiary seeking to benefit from the reduced rate.
However, in a decision of the French Conseil d’État dated 13 March 2025, the court broadened the scope of entities to be taken into account when calculating turnover. It held that the relevant turnover for assessing compliance with the turnover threshold is that of the entire economic group, within the meaning of European State aid law, regardless of whether or not those entities belong to a tax consolidated group.
As a result, even where the company concerned is not part of a tax consolidated group, the total turnover of the parent company, including that of the companies it controls, must be taken into account.
Sources:
Article 219 of the French General Tax Code
BOI-IS-LIQ-20-10
French Conseil d’État decision of 13 March 2025, No. 481538
