A business owner who asks us about the choice between corporate income tax (impôt sur les sociétés, IS) and personal income tax (impôt sur le revenu, IR) almost always starts with the same question: which of the two costs less? It is rarely the right one. The question that really commits you is about time: after a certain number of financial years, your choice stops being a choice. Article 239 of the Code général des impôts (CGI), France's tax code, makes the election for IS irrevocable where no withdrawal is notified within five financial years — and a company that has withdrawn can never elect again.
This article will not tell you what you should choose. It will tell you what to have checked before you raise it with your expert-comptable (chartered accountant): which legal forms genuinely have the choice, at what point the door closes, which criteria tip the decision, and what the regime you keep changes in the way your accounts are kept. At doo.FINANCE, we see this subject come round twice in the life of a company: at incorporation, then five years later — when the window closes and nobody had noted the date.
Who actually has the choice between IS and IR?
Not every company has a decision to make. The regime follows first from the legal form; the election is only a door, open to some structures and closed to others.
Subject to IS by law: SA, SAS, SASU, SARL (outside the family case), and sociétés en commandite par actions (partnerships limited by shares). Profit is taxed at company level, and the director is taxed personally only on what they receive — remuneration or dividends.
Subject to the partnership regime (IR) by law: SNC, sociétés civiles, sociétés en commandite simple for the share attributable to the general partners, sociétés en participation, EURL whose sole shareholder is an individual, EARL, SCP. Here the company pays no tax: each partner is taxed on their share of the profit, whether they have received it or not. This is the point that is most often underestimated.
In the IR to IS direction, the door is wide. The administrative doctrine (BOI-IS-CHAMP-40) allows the election for SNC, properly constituted sociétés civiles, sociétés en commandite simple, sociétés en participation, EURL with an individual sole shareholder, EARL and SCP. It expressly excludes groupements forestiers (forestry groupings), sociétés civiles de construction-vente (property development companies), sociétés civiles de moyens (shared-resource practices) and SCPI (property investment trusts).
In the IS to IR direction, only two narrow doors: the SARL de famille (article 239 bis AA of the CGI), with no time limit but reserved to a specific composition of shareholders and to specific activities, and the temporary election open to SA, SAS and SARL incorporated less than five years earlier (article 239 bis AB), valid for five financial years and non-renewable. These two mechanisms share neither the same conditions nor the same horizon: confusing them is the most frequent error we come across.
Is the election reversible? What nobody writes clearly
This is the heart of the matter, and the part that general-interest articles deal with in a single sentence. The rules are not symmetrical: reversibility depends on the direction you are going in.
Electing IS: five financial years to change your mind, then it is final
The election must be notified before the end of the third month of the financial year for which the business wishes to be subject to IS for the first time. It may also be made before that financial year even begins.
A withdrawal window then opens. The BOFiP (Bulletin officiel des finances publiques), the published doctrine of the French tax administration, is precise: withdrawal is possible until the fifth financial year following the one for which the election was made, and must be notified before the end of the month preceding the due date for payment of the first IS instalment of the financial year concerned. The example given by the administration speaks for itself: a company that elected in 2017 could withdraw until the end of February 2022, with effect for the financial year ended 31 December 2022.
After that deadline, the text leaves no room: “in the absence of the exercise of the right of withdrawal within the five-financial-year period referred to above, the election becomes irrevocable”.
Two consequences that tend to be discovered too late:
- Withdrawing is not tax-neutral. Withdrawal carries the consequences of a cessation of business, in particular the immediate taxation of unrealised capital gains. Leaving IS can therefore trigger a bill at the very moment you were looking to reduce the charge.
- Withdrawing closes the door in the other direction. Businesses that have withdrawn “can no longer elect again”. There is no moving back and forth from one financial year to the next.
Electing IR: five financial years, and not one more
The election under article 239 bis AB is more tightly framed. The company must meet all of these conditions:
- carry on as its main activity an industrial, commercial, artisanal, agricultural or professional (libérale) activity — the management of securities or property portfolios is excluded;
- employ fewer than 50 employees;
- have annual turnover or a balance sheet total below €10 million;
- have been incorporated less than five years earlier at the time of the election;
- not be listed on a regulated market;
- have its capital and voting rights held at least 50% by individuals, of which at least 34% by the directors and the members of their foyer fiscal (household for tax purposes).
The election requires the unanimous agreement of the shareholders and is notified within the first three months of the first financial year of application. It is valid for five financial years, with no renewal: at the end of that period, the company automatically reverts to IS. An early exit is possible, but it bars any new election. In other words, this is not a regime: it is a start-up window.
The SARL de famille: the only election with no fixed term
Article 239 bis AA opens a third route, with a narrow scope. The SARL must be formed exclusively between relatives in the direct line, between brothers and sisters, and their spouses or PACS partners (pacte civil de solidarité, France's civil partnership) — cohabiting partners are expressly excluded by the doctrine. The activity must be industrial, commercial, artisanal or agricultural: the professions libérales and civil activities have no access to it. The agreement of all the shareholders is required. In return, the election “takes effect for as long as it has not been revoked”: no renewal, and no automatic end date.
| Mechanism | Direction | Duration | Point of no return |
|---|---|---|---|
| IS election (art. 239) | IR → IS | Unlimited | Irrevocable after 5 financial years; after withdrawal, no further election ever |
| Young-company IR election (art. 239 bis AB) | IS → IR | 5 financial years, non-renewable | Automatic return to IS; no new election |
| SARL de famille (art. 239 bis AA) | IS → IR | For as long as it is not revoked | Revocation is possible, but it closes the mechanism |
The 2026 rates, because they enter the calculation
The standard rate of IS is 25% on all profits made in France. A reduced rate of 15% applies to the tranche of profit up to €42,500 per twelve-month period, with the excess taxed at 25%.
This reduced rate is not automatic. Two cumulative conditions: turnover less than or equal to €10,000,000 during the financial year, and fully paid-up capital held at least 75% by individuals (or by a company itself held at least 75% by individuals).
A point to watch for 2026: following a decision of the Conseil d'État, France's supreme administrative court, on 13 March 2025, the administration clarified that for a company belonging to a group, the turnover to be taken into account is that of the entire group, whether or not it is part of a tax consolidation. Companies that had applied the reduced rate wrongly were required to file corrective returns for 2023 and 2024 before 20 May 2026, with no penalty and no late-payment interest.
On the IR side, there is no rate to quote: the share of profit is added to the household's other income and follows the progressive income tax scale. That is what makes the comparison impossible to settle on the back of an envelope — the outcome depends on your personal situation, not only on that of the company.
The four criteria that genuinely tip the balance
The director's remuneration
Under IS, the director's remuneration is a deductible expense: it reduces the base taxed at 25% or 15%. Under IR, it is not deductible — it is an advance on profit, and the partner is taxed on their share of the result, remuneration included. The higher your remuneration relative to the profit, the more IS becomes mechanically favourable.
Reinvesting profits
A company that retains its result to fund growth has an interest in IS: undistributed profit bears the company's tax, and nothing more. Under IR, the partner is taxed on their share even if they receive nothing — so you can pay personal tax on profit that has stayed in the bank. This is the scenario that surprises the greatest number of owners in an investment phase.
Start-up losses
Under IR, the loss flows up to the partners and can, depending on the nature of the activity and their involvement in running it, be set against their other income. Under IS, it stays in the company and will only offset the company's own future profits. For an activity that is loss-making for two or three years, with partners who have other taxable income, the gap is real — and this is exactly the logic behind the five-year window of article 239 bis AB.
A planned sale
The exit horizon changes the decision. The capital gains regime, the basis of the sale — shares or business assets — and the treatment of accumulated reserves do not follow the same rules under each regime. A plan to sell in three or five years has to be put on the table before the election: under IS, the point of no return falls in the fifth financial year, often at the very moment of the first serious discussions with a buyer.
What the regime actually changes in your Odoo accounting
The tax regime is not just a box on a return: it changes the bookkeeping itself. Three differences show up as soon as the system is configured.
The remuneration accounts. Under IS, the director's remuneration goes through staff costs, with the corresponding charges sociales (social contributions). In a structure under IR, the sums drawn by the operator or the partner are not expenses: they pass through a drawings account, distinct from the compte courant d'associé (the partner's current account). Confusing the two distorts the accounting result and the taxable base. In Odoo, this comes down to a French plan comptable (chart of accounts) correctly broken down when the file is opened, not to a reclassification at year end.
The treatment of the result. Under IS, the company recognises a tax charge and instalments, with a reconciliation to maintain between instalments paid and the balance. Under IR, there is no tax charge at all in the company's accounts: the result is allocated to the partners and the tax plays out on their personal returns. A dashboard showing a “net result” without stating the regime therefore does not mean the same thing in the two cases — a classic trap when you monitor your cash without distinguishing the accounting result from the funds actually available, as we set out in our article on the cash flow warning signs to watch every week.
The return that is filed. A company under IS files an IS liasse fiscale (the annual tax return pack); a structure taxed under IR on BIC (bénéfices industriels et commerciaux, trading profits) files a return of a different nature, with its own supporting schedules. It is not only the forms that change, it is the data you have to draw out of your accounts — and therefore the way your books have to be kept all year for the liasse to be prepared without manual rework. An Odoo file configured for the right regime produces a coherent liasse with no restatement; a generic file forces you to rebuild everything at the close. The same logic applies to the other French regulatory projects under way, starting with Odoo's registration as a Plateforme Agréée — the PA status that France requires of an approved e-invoicing platform, formerly known as PDP — for electronic invoicing.
Frequently asked questions
Settle it with a professional, not a spreadsheet
This article gives you the map, not the route. The choice between IS and IR depends on figures that are specific to you: the level of your remuneration, the composition of your personal income, your need to reinvest, the situation of your fellow shareholders and your exit horizon. No general rule replaces that calculation, and nobody should settle a potentially irreversible choice on the basis of an online comparison — this one included.
What doo.FINANCE does, on the other hand, is put figures on the decision. Our teams model both scenarios over three to five years from your actual accounts, identify the exact date on which your withdrawal window closes, and configure your Odoo accounting for the regime you keep — so that the annual return is prepared from your entries rather than in spite of them. As an Odoo Gold Partner, we work both on bookkeeping and accounting advisory and on ongoing financial management.
If you elected IS three or four years ago without noting the deadline, now is the right time to check it. Let's talk it through: a one-hour review is enough to establish whether the question is still open.
Contact us for a free call →Frequently asked questions
Can you go back to IR after electing IS?
Yes, but within a limited window. Withdrawal is possible until the fifth financial year following the one for which the election was made, and must be notified before the end of the month preceding the due date for payment of the first IS instalment. After that deadline, the election becomes irrevocable. Two caveats: a company that has withdrawn can never elect again, and withdrawal carries the tax consequences of a cessation of business.
Does the IS election have to be renewed every year?
No. It is notified once, before the end of the third month of the financial year concerned, and continues to take effect with no annual formality. That is what makes it dangerous to forget: nothing reminds you, during the fifth financial year, that the withdrawal window is about to close. Note that deadline in your closing calendar from the year of the election onwards.
Can a SAS or a SASU be taxed under personal income tax?
Yes, temporarily and under strict conditions. Article 239 bis AB of the CGI opens this election to SA, SAS and SARL incorporated less than five years earlier, employing fewer than 50 employees, with annual turnover or a balance sheet total below €10 million, not listed, and whose capital is held at least 50% by individuals, of which 34% by the directors. It is valid for five financial years and is not renewable.
Does the reduced rate of 15% apply automatically?
No. It assumes turnover less than or equal to €10 million and fully paid-up capital held at least 75% by individuals. Since the clarifications published in 2026 following a decision of the Conseil d'État of 13 March 2025, a company that is a member of a group assesses this threshold at the level of the entire group, whether or not it is part of a tax consolidation. A number of companies had to regularise the 2023 and 2024 financial years on that basis.
Does changing tax regime mean changing legal form?
No, these are two separate decisions: an SNC remains an SNC after electing IS, and a SARL de famille remains a SARL. The regime is chosen by an election notified to the administration, within the deadlines specific to each mechanism. That said, some elections are reserved to specific forms — the SARL de famille is the clearest example — so the legal form determines which doors are open to you.