A business can be subject to two different tax regimes: income tax or corporation tax. If the law attributes to each corporate form a tax regime (IR or IS), it is sometimes possible but in a conditional manner to opt for the other regime.
The tax regime applicable to a company is decisive. It has financial consequences on the activity. Indeed, the methods of determining the taxable result, the tax rates and the payment methods are not the same between IR and IS. Also you will have to know how to calculate sales tax.
The income tax system
We should perhaps not speak of a system in the singular, but of several systems and categories of taxation. There are indeed many subtleties when it comes to taxing a company’s results for IR.
The company subject to IR does not pay tax on its behalf. Profits are taxed in the name of the entrepreneur, or in the name of each partner if it is a partnership.
Companies subject to income tax
It is possible to be subject to income tax either as of right or on option.
The companies subject to full income tax are as follows:
- The micro-enterprise (the auto-entrepreneur regime).
- The classic sole proprietorship.
- The associated EURL unique natural person.
- Civil society.
Some of these companies are authorized, under certain conditions, to opt for corporation tax. This is the case of EURL with a single partner, natural person, as well as of EIRL.
Microenterprises and traditional sole proprietorships remain obligatorily subject to income tax.
Some companies can also, under certain conditions, opt for income tax. There are two different option regimes:
The option for the family SARL regime, reserved for family projects.
The common law option for traditional SA, SARL and SAS.
Tax categories: BIC and BNC
BIC and BNC are two categories of taxation of professional profits. Income tax is in fact divided into categories, which are called “schedules”: property income, salaries and wages, income from movable capital, etc. Each tax category is assigned to a type of income. There are eight in total.
- Industrial and commercial profits (BIC) and non-commercial profits (BNC) are two categories assigned to professional profits. There are also BAs: agricultural benefits.
- The BIC category is aimed at sole proprietorships or partnerships making profits from commercial, craft or industrial activities.
- BICs are part of the taxable income of the tax household. They are taken into account for their total amount, without deduction.
The BNC category is intended for companies exercising a liberal activity other than commercial, industrial and craft. The amount of revenue is determined by calendar year, and not by accounting year as in the case of BIC.