Deconstructing the corporate income tax (CIT) calculation process is essential for any company operating in the tax landscape. Understanding how to calculate corporate income tax becomes a strategic lever for optimizing your tax obligations. In this article, discover the mechanisms involved in calculating IS. It highlights the subtleties of tax rates, possible exemptions, and the various steps involved. All this, to accurately determine the amount of this tax contribution. Discover the nuances of corporate income tax calculation to ensure optimal financial management of your company.
What categories of company fall within the scope of corporate income tax (IS)?
Firstly, IS applies intrinsically to entities with the legal status of a corporation. This, namely the société anonyme (SA), the société par actions simplifiée (SAS), the société anonyme à responsabilité limitée (SARL), the société en commandite par actions, SELs, and SELARLs.
However, other forms of business, beyond limited companies, can voluntarily choose to adopt the IS tax regime. This includes sole proprietorships (EI or EIRL), non-trading companies carrying on an industrial or commercial activity, EURLs and SNCs. You can waive this option for a period of 5 years.
.
Please note: L’impôt sur les sociétés is called the same as “impôt sur les bénéfices”. It thus establishes a perfect equivalence between these two names. IS represents, for companies, what income tax represents for individuals.
Secondly, corporation tax is calculated on the basis of the profits generated by the company over the course of the financial year. It is paid annually. We’ll be taking a closer look at the detailed IS calculation process shortly. Remember: companies with no profits are not subject to corporation tax.
.
As far as foreign companies are concerned, if one of them establishes a stable establishment on French territory, the profits it generates are subject to corporate income tax.
What is the amount of corporate income tax, including taxable profits, tax rates, and method of calculation?
The corporate income tax is based on the profits generated by the company during the financial year, limited to profits generated on French territory. As a result, the profits of foreign establishments within a group are not subject to corporate income tax.
The corporate income tax is based on the profits generated by the company during the financial year, limited to profits generated on French territory.
The “base d’imposition” or tax base, consists of profits. The second component of the corporate income tax calculation is the tax rate, which varies according to several categories:
The “tax base”, or tax base, consists of profits.
- The standard rate, initially 31% in 2019, gradually decreases to 25% in 2022. It applies to companies with sales (excluding VAT) exceeding 7.63 million euros, whose capital is not fully paid up and is more than 1/4 owned by legal entities.
- The reduced rate of 15% concerns small SMEs, applying only to the first 38,120 euros of profits. Beyond that, the fraction of profits is subject to the standard rate. To qualify for the reduced rate, the company must have sales of less than 7.63 million euros (excl. VAT), fully paid-up capital, and at least ¾ of the capital must be held by individuals
- .
- The reduced rate of 28% applies to the profit bracket between €38,120 and €500,000.
To illustrate, let’s consider sales of €2 million and profits of €180,000, eligible for the reduced rate:
- 38120×15%=5718 euros
- (180000−38120)×31%=43983
- 5718+43983=49701 euros
Non-profit associations and organizations benefit from specific rates, with special conditions for capital gains on real estate sales.
Declaring and paying IS : How ?
You can pay IS in 4 instalments by the following deadlines:
- Instalment 1: before March 15.
- Discount 2: by June 15.
- Discount 3: by September 15.
- Discount 4: by December 15.
The amount of the installments is based on the IS paid the previous year, with each installment corresponding to 1/4 of this sum. You must pay the balance of the tax by the 15th of the fourth month after the close of the fiscal year.
Exceptions
Companies whose corporation tax paid in the previous year was less than €3,000 and new companies pay the tax in one lump sum.
What about the additional contribution to corporate income tax?
This tax concerns companies distributing dividends to their shareholders or associates. Set at 3% of the amounts paid in dividends, this contribution is not deductible from taxable profit.
SMEs, characterized by fewer than 250 employees and sales of less than €50 million, benefit from total exemption from this additional contribution. Dividends paid in the form of shares are also exempt.
If you feel you are paying too much IS, seek advice from a specialist tax lawyer. For an in-depth exploration of professional taxes, hire an expert on freelance platforms such as BeFreelancr, Fiverr, ComeUp, Malt or others.