Construction Company Tax Regime in France 2026: VAT, BIC, Corporate Tax and Sector-Specific Deductions

A construction business charges 20% VAT on new build, 10% on improvement and maintenance work on homes completed more than two years ago (CGI, art. 279-0 bis) and 5.5% on energy renovation work on those homes (CGI, art. 278-0 bis A). Since 16 February 2025 the client's certificate (attestation) has been replaced by a certified statement on the quote or invoice. For subcontracting, VAT is self accounted for by the main contractor (autoliquidation). For profits, micro-BIC applies up to 203,100 euros of sales and corporate tax is 15% up to 42,500 euros, then 25%.

Updated 21 September 2026. In 2026, a French construction company must navigate four co-existing VAT rates, a mandatory reverse-charge mechanism on subcontracting (Article 283, 2 nonies CGI), and a spectrum of profit regimes from micro-BIC (ceiling €203,100 for sales/supply activities) to normal real-cost regime under corporate tax. The reduced IS rate of 15% applies up to €42,500 of taxable profit. The clean-machinery super-deduction adds a further lever; the ZFU-TE territorial exemption (certain Paris 18th-20th arrondissement neighbourhoods), however, has been closed to new set-ups since 1 January 2026 and replaced by the priority urban neighbourhoods regime (Article 44 octies B CGI).

The French construction and building trades sector (BTP — Bâtiment et Travaux Publics) operates under one of the most technically layered tax regimes in French law. Four co-existing VAT rates, a mandatory reverse-charge mechanism on subcontracting, a spectrum of profit tax regimes from micro-BIC to consolidated corporate tax, sector-specific depreciation and super-deduction rules, deductible provisions for decennial warranty liability, and priority urban neighbourhood exemptions (Article 44 octies B CGI, the ZFU-TE having been closed to new set-ups since 1 January 2026): the fiscal choices made at incorporation and at each annual close have a direct impact on job-site cash flow and the owner's net income. In Paris, where construction firms simultaneously work on private residential renovation, public contracts, energy-efficiency retrofits and commercial fit-outs, the decisions compound in ways that standard-regime companies rarely face. At Cabinet Hayot Expertise in Paris, we advise sole-trader artisans, BTP SARLs and SASUs, public-works contractors and family-owned holding structures across all of these questions. This article sets out the complete 2026 framework.

Subcontracting VAT reverse charge (Article 283, 2 nonies FTC)#

The VAT reverse charge on BTP subcontracting is the single most structurally significant — and most frequently mishandled — mechanism in the sector. Introduced in its current generalised form by Finance Act 2014 (Law 2013-1278 of 29 December 2013) and codified in Article 283, 2 nonies of the Code général des impôts (FTC) and administrative doctrine BOI-TVA-DECLA-10-10-20, it allocates VAT liability from the subcontractor to the principal contractor (the preneur). The subcontractor issues an invoice excluding VAT, bearing the mandatory note: "Autoliquidation — TVA due par le preneur (article 283, 2 nonies du CGI)". The principal contractor then declares and pays the VAT directly in its periodic CA3 return.

For the subcontractor: no VAT is collected, so none is remitted. Input VAT on materials, equipment and overhead remains fully deductible. Where deductible VAT consistently exceeds collected VAT (common when subcontracting represents 80–90% of turnover), a VAT credit accumulates and must be claimed via quarterly or monthly refund applications.

For the principal contractor: the mechanism is cash-neutral if all output is taxed at 20%: the same amount appears on the CA3 as both collected and deductible VAT on the sub-contract line. A net cost arises only when the principal has partially exempt activities (for example a social housing developer with a partial pro-rata).

Scope limit: the reverse charge applies strictly to construction works on immovable property. Equipment hire without an operator, standalone materials supply and intellectual services billed separately are not covered. A mixed invoice — part works, part materials only — must split the two lines and apply each rule accordingly.

5.5% VAT rate: energy-efficient renovation works and the client's certified mention (Article 278-0 bis A FTC)#

The 5.5% rate applies under Article 278-0 bis A of the FTC to works improving the energy quality of residential premises completed more than two years before the works. Eligible work includes: thermal insulation of walls, roofs and floors, installation of high-performance double glazing, renewable-energy heating systems (eligible biomass boilers, heat pumps), and heating regulation equipment. This is the most favourable rate in the residential renovation segment and aligns directly with the MaPrimeRénov' subsidy framework.

Mandatory formality: since the 2025 Finance Act (Law no. 2025-127 of 14 February 2025), the cerfa certificates 1300-SD and 1301-SD have been abolished. The client certifies, through a mention on the quote or invoice, that the dwelling was completed more than two years ago, is used for residential purposes and that the reduced-rate conditions are met; the firm keeps a copy of the quote or invoice in its accounting records. Without this mention, the 5.5% rate is disallowed and the administration reassesses at 20%, with back-tax and monthly interest charges. At Cabinet Hayot Expertise in Paris, we integrate a certificate compliance check into the annual review of every renovation-focused client.

2026 note: the exact list of works eligible for the 5.5% rate has been refined by successive Finance Acts. The current scope should be confirmed against administrative doctrine BOI-TVA-LIQ-30-20-90.

10% VAT rate: improvement, conversion, fitting and maintenance of residential premises over two years (Article 279-0 bis FTC)#

Article 279-0 bis FTC sets the intermediate 10% rate for works of improvement, transformation, fitting-out and maintenance of residential or mixed-use premises completed more than two years ago. This covers the vast majority of standard renovation work: painting, tiling, plumbing, electrical, joinery, kitchen and bathroom fitting, external rendering and general refurbishment.

Client's certified mention: the same mechanism applies to the 10% rate: the client certifies on the quote or invoice that the dwelling is more than two years old and that the conditions are met. If that certification is inaccurate, back-tax falls on the client under Article 279-0 bis II FTC, provided the firm keeps a copy of the quote or invoice bearing the mention.

5.5% vs 10% split invoicing: when a single job site mixes 5.5%-eligible insulation works with 10%-eligible general renovation, the invoice must show each rate on a separate line. Invoicing the whole job at 5.5% without granular justification is a controlled audit risk.

20% standard VAT rate: new construction, commercial premises, separately billed fixtures#

New construction, works on commercial or professional premises regardless of age, supply of equipment incorporated as fixtures but separately billed, and works on housing completed less than two years ago are all taxed at the standard 20% rate.

Micro-BIC for artisans: threshold, flat deduction and limitations#

A BTP artisan operating as a sole trader (entreprise individuelle) or single-member company (EURL) may elect the micro-BIC regime if annual turnover excluding VAT remains below the "sales and supplies" ceiling. This ceiling is €203,100 for the 2026-2028 period. The flat deduction for "sales and supply" activities is 71%, meaning only 29% of gross revenue is taxable. For pure service provision without materials supply, the threshold is €83,600 with a 50% flat deduction.

Key limitation: micro-BIC does not allow deduction of actual costs. If real operating costs (materials, tools, rent, insurance, SSI contributions, vehicles) exceed the flat deduction, the actual-cost regime is more favourable. At Cabinet Hayot Expertise in Paris, we observe that the vast majority of BTP artisans exceed the micro threshold by year two, and that micro-BIC is rarely optimal above €80,000 of annual turnover.

Simplified real regime (Article 302 septies A FTC)#

The simplified real regime applies automatically between the micro threshold and €945,000 of sales/supply turnover (€286,000 for services, 2026 thresholds). It allows deduction of all actual costs, a simplified balance sheet and streamlined filing. For VAT, the simplified regime allows two semi-annual instalments (55% in July, 40% in December) with a true-up on the annual CA12 return — a cash-flow-friendly structure for firms with extended collection cycles on long-duration jobs.

Normal real regime (Article 302 septies A bis FTC)#

The normal real regime is mandatory above the simplified real thresholds, or available by election. It allows deduction of all costs, constitution of provisions (warranty reserves, job-dispute provisions, stock write-downs), one-year loss carry-back and full balance-sheet filing with notes. This is the reference regime for BTP SMEs employing staff, with turnover above €500,000 or managing complex operations including public contracts, multiple subcontracting layers and retention money.

Corporate tax (Article 219 FTC): 15% and 25% rates#

When the BTP company is subject to corporate tax (impôt sur les sociétés — IS), profits are taxed at 15% up to €42,500 of taxable profit (SME reduced rate, Article 219 I b FTC — conditions: turnover below €10M, share capital fully paid up and at least 75% held by natural persons) and at 25% above that threshold. The social surtax (contribution sociale sur les bénéfices) at 3.3% applies to companies whose IS liability exceeds €763,000 — uncommon for BTP SMEs.

IS vs IR arbitrage: the comparison is not self-evident. A single artisan with €120,000 net profit will pay 20–30% income tax under IR depending on family circumstances, plus ~45% SSI contributions on TNS remuneration. Under IS, the 15% rate on the first €42,500 is attractive — but the salary paid to the owner carries its own social charges (TNS in a SARL, or assimilé salarié in a SASU). The correct arbitrage requires a five-year projection integrating remuneration policy, retained-profit strategy and any future disposal plan.

SARL de famille: electing income tax without time limit#

The SARL de famille (all shareholders are natural persons linked by marriage, civil partnership or direct family line, or as siblings) may irrevocably elect income tax in the BIC category without time limit. This is the only structure allowing a multi-shareholder SARL to remain at IR indefinitely. For co-owning artisan couples, it combines limited-liability protection (valuable against decennial risk) and fiscal transparency allowing losses to offset personal income.

SASU: higher social charges but better pension coverage#

A SASU allows the sole shareholder-president to be classified as an assimilé salarié, attracting higher social charges than TNS status (~80% of contributions on €100 net pay vs ~45% in a SARL) but with better pension coverage (general regime + AGIRC-ARRCO) and potential unemployment insurance eligibility under conditions. For a BTP artisan focused on retirement savings, the SASU can be relevant above a certain remuneration level — but its high contribution cost in growth phase is often prohibitive.

EURL: the natural transition structure#

The EURL is the natural transition structure for a sole-trader artisan seeking limited liability. By default at IR, it can elect IS. It is particularly relevant for artisans exceeding the €203,100 threshold whose profits are reaching the higher IR brackets.

Depreciation of public-works and construction equipment#

Heavy construction plant (excavators, cranes, lifting equipment, heavy tooling) is depreciated according to standard useful lives set by Annex II to the FTC. Common rates are 20–25% straight-line for mobile plant and 10–15% for fixed installations. Declining-balance depreciation (coefficient 1.75 for 3–4 year assets, 2.25 for 5–6 years, 2.75 beyond — Article 39 A FTC) accelerates the tax deduction in early ownership years, improving cash flow in investment phases.

Super-deduction for clean construction machinery (Article 39 decies F FTC)#

Article 39 decies F of the FTC allows construction businesses (and a few other sectors listed in the text) subject to IS or to actual-cost IR (normal or simplified) to deduct from taxable profit an amount equal to 40% of the original value (60% for SMEs as defined by EU law) of new non-road machinery running on natural gas, electricity or hydrogen (plus certain combined engine types defined in the text), acquired or taken under a finance lease or a lease with purchase option between 1 January 2024 and 31 December 2026 (a window reopened by the 2024 Finance Act after a first 2020-2022 period). The deduction is spread on a straight-line basis over the asset's normal useful life and counts towards the de minimis aid ceiling. This mechanism is particularly relevant for BTP SMEs renewing their fleet to meet environmental clauses in public contracts or to operate in Paris and inner-suburb Low Emission Zones. The Article 39 decies A scheme remains open until 31 December 2030; its rates vary according to the vehicle's weight and energy and were reworked by the 2025 Finance Act in favour of electric and hydrogen vehicles (BOI-BIC-BASE-100 et seq.).

Deductible provision for decennial warranty liability#

The decennial warranty under Article 1792 of the Civil Code exposes every BTP firm to ten years of liability for defects that compromise the structural integrity or habitability of a completed work. This liability may be covered by a deductible provision for future costs, subject to cumulative conditions under the PCG (Article 322-2) and BOFiP doctrine (BOI-BIC-PROV-30-30):

1. Sufficient probability of the risk: the provision must correspond to an identified risk on a specific job site or category of works, supported by documentation — reported defect, expert report, ongoing procedure or sector loss statistics.
2. Reasoned quantification: the amount must be justified by an expert estimate, a remediation quote or reliable sector data.
3. Accounting entry: the provision must appear in the annual accounts and in the provisions schedule attached to the tax return (form 2033 or 2050–2051).

A blanket global provision without job-by-job justification will be rejected on audit. Conversely, a properly documented provision allows the firm to anticipate real future costs fiscally and smooth the tax charge across the years following delivery.

Article 44 octies A of the FTC grants a five-year IS or IR exemption, followed by a three-year tapering, to businesses that set up in a Zone Franche Urbaine — Territoire Entrepreneur (ZFU-TE) and effectively operate there. The scheme has been closed to new set-ups since 1 January 2026: extended until 31 December 2025 by the 2025 Finance Act, it was not renewed by the 2026 Finance Act. Businesses already exempt keep the benefit for the remaining term; businesses created or taken over since 1 January 2026 fall under the new priority urban neighbourhoods regime (Article 44 octies B CGI), open until 31 December 2030. Conditions of the former regime: creation or acquisition of a business before the scheme's closure date, employment of at least one third of staff or one manager residing in the ZFU, and genuine, permanent business activity in the zone.

For Paris: neighbourhoods in the 18th, 19th and 20th arrondissements were listed as ZFU-TEs. A BTP SME that set up there before 1 January 2026, with its registered office, warehousing or operational base in these zones and predominantly working on sites within them, keeps the exemption on its profits for the remaining term. The exemption does not cover VAT or employer social contributions (which fall under a separate employment-exemption regime). For a new set-up, it is now the priority urban neighbourhoods (QPV) zoning that must be checked, on the urban policy portal.

SSI for self-employed artisans#

A BTP artisan operating as a sole trader or majority manager of a SARL is affiliated to the SSI (Sécurité sociale des indépendants), integrated into URSSAF since 2020. Contributions cover: health insurance (~7.2% of professional income), daily allowances (~0.85%), disability-death cover (~1.3%), basic pension (~17.75%), supplementary pension (variable), family allowances (~3.1% or 0% below threshold), and CSG/CRDS (~9.7%). The effective aggregate rate ranges from 40% to 46% of net professional income — a key input for the IS vs IR arbitrage.

Pension: SSI supplementary for artisans, not CIPAV#

BTP artisans affiliated to the SSI are covered for supplementary retirement by the SSI supplementary scheme — not by CIPAV, which covers certain liberal professions. A SASU president classified as assimilé salarié is covered by the general pension regime and AGIRC-ARRCO for supplementary pension. This distinction materially affects long-term retirement projections and is a key factor in the structure choice.

Three arbitrages that determine BTP tax cost in Paris#

In the BTP client files we manage at Cabinet Hayot Expertise in Paris, three recurring decisions drive most of the fiscal outcome.

Arbitrage 1 — Set the correct VAT rate at quote stage, not at invoicing stage. Rate errors — charging 20% on 10%-eligible renovation works, or applying 5.5% without the client's certified mention on the quote or invoice — account for the majority of VAT reassessments in BTP audits we have reviewed. The document discipline (certified mention on the quote or invoice, copy kept in the accounting records) is non-negotiable. We embed this check in the annual accounting review of every BTP client.

Arbitrage 2 — Switch to corporate tax at the right moment. The IR-to-IS transition is not universally beneficial. For a single artisan with no major investment and €150,000 profit, IS can be neutral or even unfavourable if the remuneration drawn is too high. Once the firm starts retaining undistributed profit to fund equipment or growth, IS becomes structurally more efficient. We model this at each year-end close.

Arbitrage 3 — Do not confuse VAT reverse charge with small-business VAT exemption. A subcontractor below the small-business VAT threshold (Article 293 B FTC: threshold of €37,500 of turnover for services in 2026, increased threshold €41,250) invoicing a VAT-registered principal is simply exempt from VAT, not in a reverse-charge situation. Once they cross the threshold, the reverse charge becomes mandatory on subcontracting invoices. This transition is frequently mismanaged, generating incorrect invoices and downstream risk for both parties.

The under-estimated risk: the decennial warranty provision that was never made#

Decennial warranty is well understood by BTP artisans as an insurance obligation. It is far less understood as a fiscal lever to activate at project delivery. In files Cabinet Hayot Expertise takes over from other advisers, we find that fewer than 30% of BTP SMEs that faced decennial claims had constituted a deductible provision in advance. The result: remediation costs — sometimes €50,000 to €200,000 — land in the accounts as a single-year charge, creating an unexpected loss that could have been spread and managed across multiple years with proper provision accounting.

Frequent scenario: the Paris tile-layer who exceeds €200,000 in turnover#

A tile-laying artisan in Paris, on micro-BIC for three years, exceeds €200,000 HT in year 4. He is mandatorily switched to the actual-cost regime for year 5. His real costs (materials, tooling, van, decennial insurance, SSI contributions) represent 68% of turnover — well above the 71% micro deduction. The switch to the actual-cost regime is therefore favourable in tax-base terms, but it requires: reconstructing the materials stock and fixed-asset schedule at the transition date, adjusting VAT instalments and recalibrating SSI contributions to the new real income. This transition, if unprepared, generates painful catch-up charges. Cabinet Hayot Expertise accompanies these transitions at least six months before the threshold is breached.

• Quotes or invoices bearing the client's certified mention for every job site at a reduced VAT rate (5.5% or 10%), copies kept in the accounting records
• Subcontracting contracts bearing the Article 283, 2 nonies reverse-charge mention
• Fixed-asset schedule (construction equipment, vehicles, tooling) with acquisition dates and depreciation plan
• Provisions schedule (warranties, disputes) with job-by-job technical documentation
• ZFU-TE eligibility evidence if applicable (registered office, list of zone-resident employees)
• Shareholders' resolution or statutory document recording the IS or IR election
• Valid decennial insurance certificate (required for the provision to be both legally and fiscally sound)

Written by Samuel Hayot, expert-comptable in Paris. Reviewed and updated 21 September 2026. This article sets out the general framework; it does not replace analysis of your specific situation, documents and current legislation at the date of your decision.