Features of the French tax system at the end of 2024 – a brief analysis

France has what is perhaps one of the most complex and multi-tiered tax systems, covering both legal entities and sole proprietors. Let us consider the main taxes that apply to these categories of taxpayers.

Taxes for legal entities

1) Corporate income tax (Impôt sur les Sociétés, IS):
Its standard rate is 25% on a company’s profit. A reduced rate of 15% is possible and applies to the first €38,120 of profit for small and medium-sized enterprises with an annual turnover of less than €7.63 million.
Some companies can choose between taxation under the personal income tax system (Impôt sur le Revenu, IR) or corporate tax (IS), depending on their legal form and capital structure.

2) Value added tax (Taxe sur la Valeur Ajoutée, TVA): its rates are also diversified. The standard rate is 20%, while the reduced rates of 10%, 5.5% and 2.1% apply to certain goods and services.

3) There is also a tax known as the territorial economic contribution (Contribution Économique Territoriale, CET). It consists of two components: a tax on the value of commercial real estate (Cotisation Foncière des Entreprises, CFE) and a contribution on the added value of businesses (Cotisation sur la Valeur Ajoutée des Entreprises, CVAE). The rates depend on the location and turnover of the company; the maximum CVAE rate is 1.5% for companies with a turnover of more than €50 million.

4) A so-called vehicle tax (Taxe sur les Véhicules de Sociétés, TVS) is also applied. It is levied on companies that use cars for commercial or business purposes. The rates depend on the type of vehicle, its age and its level of CO₂ emissions.

Taxes for sole proprietors are also rather complicated.

1) Personal income tax (Impôt sur le Revenu, IR) with a progressive scale from 0% to 45%, depending on annual income. The income of sole proprietors is taxed under the same scale as the income of individuals. There are various tax regimes for sole proprietors, such as the “micro-entrepreneur” regime with a simplified system of accounting and taxation.

2) Social contributions: sole proprietors are required to pay social and health insurance contributions, the amount of which depends on the type of activity and the level of income.

3) Value added tax (TVA). Sole proprietors must register as VAT payers if their annual turnover exceeds certain thresholds; for example, for the trade in goods it is €91,900, and for the provision of services it is €36,800.

As in almost any country in the world, there is a property tax (Taxe Foncière). It is levied on property owners regardless of their resident status. The setting of rates is up to the local authorities and depends on the cadastral value of the property.
There is also, for the time being, a residence tax (Taxe d’Habitation); it is levied on persons living in a property as of January 1 of the reporting year. This tax is being gradually abolished for most households; the full transition is planned to be completed in the coming years.
The luxury tax, or Impôt sur la Fortune Immobilière (IFI), is levied on individuals whose real estate holdings in France are valued at more than €1.3 million. A progressive scale applies, from 0.5% to 1.5% of the value of the property.
The French tax system is characterized by a high degree of progressivity and a variety of taxes, which requires careful planning and record-keeping when running a business. It is advisable to consult professional tax advisers to ensure compliance with current legal requirements and to optimize the tax burden.

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