Income tax in France: rates, benefits and payment procedure in 2024

The content of the article

1. Personal income tax
   1. Microenterprise mode
   2. Normal mode (régime réel)
2. Corporate tax rates in France
3. Tax on dividends
4. Employee salary tax
5. Insurance and social contributions
6. Professional tax in France

Making a profit by foreign citizens in France is possible in various ways: renting out real estate, bank deposits at interest and buying securities, setting up a business and hiring a device. All these earning opportunities involve paying income tax to the French administration.

The tax rates and payment regime directly depend on the form of profit. It can be subject to either income tax (Impôt sur le revenu, IR) or corporate tax (Impôt sur les sociétés, IS). Some companies may have a choice between two tax options.

Personal income tax

Personal income tax (Impôt sur le revenu, IR) is levied by default on all employees, as well as a number of micro-companies consisting of one or more persons whose annual turnover does not exceed the established limit.

Companies subject to personal income tax:

• self-employed (auto-entrepreneur);
• Sole proprietor with limited liability (EIRL);
• LLC with a single participant (EURL);
• non-profit society (société civile, SCI);
• partnership (SNC).

At the same time, microenterprises EIRL and EURL have the right to choose corporate tax (IS) as their form of taxation.

There are 2 modes of taxation on personal income: microenterprise mode (micro-enterprise) and regular mode (régime réel).

Microenterprise mode

• It is applicable for the self-employed (auto-entrepreneur), as well as for LLC with a single participant (EURL).
• The annual turnover does not exceed 78 thousand euros for the provision of services and 189 thousand euros for the sale or rental of tourist furnished housing.
• There is no need to keep accounting records.
• Real expenses cannot be deducted from the tax base.
• A standard tax deduction is provided: 71% in sales, 50% in the provision of services.

The rates are 13.8% for sales and 24% for services. The rates already include all mandatory social payments. An entrepreneur can choose to pay the tax in a general manner or once a month as part of a free payment (versement libératoire).

Normal mode (régime réel)

• Sole proprietors with limited liability (EIRL), non-profit societies (SCI) and partnerships (SNC).
• The annual turnover does not exceed 254 thousand euros for the provision of services and 840 thousand euros for sales under simplified mode (under normal mode, the annual turnover may exceed the specified amounts).
• It is necessary to keep accounting records.
• Real expenses can be deducted from the tax base.

After deducting expenses, income is taxed at the following rates:

Additionally, it is necessary to pay social payments.

Corporate tax rates in France

Companies subject to corporate tax (Impôt sur les sociétés, IS):

• JSC (SAS, SA, SCA, SASU);
• LLC (SARL);
• companies that have chosen this mode as an alternative to IR (EURL, EIRL, SCI).

The profit earned by the company in France is taxed. Branches of the company located abroad are subject to a different tax.

The bids are:

1. 15% — with an annual turnover of less than 10 million euros, provided that at least 75% of the amount of capital belongs to individuals. The rate is applied to the amount of profit up to 42,500 euros.
2. 25% — for all other companies, except for companies that receive income from real estate (24%) and securities (10%).

Tax on dividends

After paying corporate tax (IS), the company can put part of the remaining amount on the company’s balance sheet, and distribute part of it in the form of dividends among the equity participants — owners of the company.

Companies entitled to distribute dividends among the participants:

• JSC (SAS, SA, SCA);
• LLC (SARL);
• the partnership (SNC) that chose IS;
• the non-profit Society (SCI) that chose IS;
• LLC with a single participant (EURL) who chose IS.

Dividends are subject to a single fixed tax (PFU) at a rate of 30% (of which 12.8% is income tax and 17.2% is social contributions).

In some cases, it is also possible to pay the tax at a progressive rate.

Employee salary tax

The employee salary tax (impôt sur les salaires) in France must be paid by certain types of companies that are not subject to VAT. These include, in particular: government, banking, financial, and educational institutions. In all other cases, this tax is not required to be paid.

At the same time, the income of each employee is subject to a standard tax on the income of individuals at a progressive rate. It is paid by the employer before the employee’s salary is paid.

Insurance and social contributions

Insurance and social contributions in France are an integral part of payments when making a profit. Contributions provide social protection in case of illness, unemployment, and retirement.

Social contributions are required to be paid in the case of employment (deducted by the employer), as well as in all profit-making regimes, except for the microenterprise regime (contributions are already included in the interest tax rate).

The calculation can be based on part or all of the employee’s remuneration for the work done. Each of the contributions corresponds to the statutory rate.

Professional tax in France

In 2010, the professional tax (la taxe professionnelle) was replaced by the territorial economic contribution CET, which, in turn, consists of two taxes: CFE and CVAE.

1. The CFE, or land contribution to the company, is required to be paid by all individuals and legal entities making a profit, including the self-employed, who do not have specialized premises and work at home. The tax base is the rental value of premises occupied by an entrepreneur or company during the year. In the absence of premises, the tax is charged in the amount of the minimum fixed amount (243 euros). There is a tax benefit for the first year of the company’s activity, as well as for all companies whose annual turnover is below 5,000 euros.
2. CVAE, or contribution to the added value of the company. This tax is planned to be completely abolished in 2027. The tax is required to be paid to all companies whose annual income, excluding taxes, exceeds 500 thousand euros.

CVAE rate in 2024

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