Corporation tax (IS) is based on two main rates: a standard rate and a reduced rate reserved for SMEs.
To qualify for the 15% reduced rate, the company must meet several conditions:
Above €42,500 of profit, the excess is taxed at the standard rate of 25%. This two-tier system significantly reduces the tax burden for small profitable companies.
Let’s take an SME eligible for the reduced rate, with a taxable profit of €60,000.
The calculation is done by brackets:
The effective average rate here is €10,750 / €60,000 ≈ 17.9%, well below the standard rate thanks to the reduced bracket.
For comparison, if this same company were not eligible for the reduced rate, it would pay €60,000 × 25% = €15,000. The benefit of the reduced rate therefore represents a saving of €4,250 for this financial year. Hence the importance of checking eligibility (paid-up capital, ownership, turnover) every year.
Corporation tax is not calculated directly on the accounting result, but on the taxable result, obtained after extra-accounting adjustments.
Taxable result = Accounting result + Reintegrations − Deductions
These adjustments are made on the tax return (notably form 2058-A). Once corporation tax is calculated, it is paid in instalments (typically four quarterly instalments), with the balance settled after year-end.
Accounting software like Orizen produces the clean accounting result that serves as the starting point for this calculation, with the accountant then making the tax adjustments to prepare the tax return.
Discover the Orizen answer: Orizen accounting software, modular and built for French SMEs.
Essai gratuit 14 jours What the Orizen accounting software module costsThe standard corporation tax rate is 25%. Eligible SMEs benefit from a reduced rate of 15% on the portion of profit up to €42,500, subject to conditions: turnover below a legal ceiling, fully paid-up capital and at least 75% owned by natural persons. Above €42,500, the excess is taxed at 25%.
With corporation tax, the company itself pays tax on its profits, and the director is only taxed on their salary and dividends. With income tax (IR), profits are taxed directly in the hands of the partners, whether or not they are withdrawn. The choice between the two systems depends on the legal form, profit level and remuneration strategy.
Corporation tax is generally paid in quarterly instalments based on the previous year’s profit, followed by settlement of the balance after year-end, once the final taxable result is established. If instalments exceed the tax due, the company receives a refund or credit. Deadlines must be closely monitored to avoid penalties.