Electing Corporate Tax for a Sole Trader or EURL

Quick answer. A French sole trader (through the EURL assimilation under article 1655 sexies of the Tax Code) or an EURL with a single individual partner may elect to be taxed under corporate income tax (IS). The election is a commitment, but it stays reversible: you can waive it up to the fifth financial year following the election; beyond that, it becomes irrevocable. Corporate tax offers a reduced 15% rate on profits up to EUR 42,500, then 25%, and the ability to balance salary and dividends that personal income tax does not allow.

The choice between personal income tax and corporate income tax is one of the most structural decisions a founder faces as profits grow. Under personal income tax (IR), the full profit is taxed in your name, whether you draw it or leave it in the business. Under corporate income tax (IS), you separate the company's result from your personal income and decide how much you pay yourself. This shift can lower the overall bill, but it is a multi-year commitment. Before switching, it helps to understand the mechanism, its conditional irrevocability, and to test it on a worked example.

Two situations open the corporate-tax election to a single entrepreneur.

A EURL whose sole partner is an individual is taxed by default under personal income tax (the partnership regime). It can elect for corporate tax under article 239 of the Tax Code. A EURL whose sole partner is a company is already subject to corporate tax automatically.

A sole trader, since the single-status reform, can no longer elect for corporate tax directly: it must first request assimilation to a EURL under article 1655 sexies of the Tax Code. The wording is explicit: these elections "are irrevocable and constitute an election for corporate income tax." Assimilation triggers the cessation of the sole trader business and the transfer of assets at fair value, with effects comparable to a contribution to a company. Many founders overlook this: electing corporate tax as a sole trader is not a simple checkbox, it is an operation that must be prepared in the accounts.

This dual regime explains why our first move, when a client asks, is to identify their exact structure: choosing between a sole trader business and a EURL is not the same question before and after incorporation.

This is the most persistent misconception. The election is not immediately final. Article 239 of the Tax Code provides a waiver window: in the absence of a waiver before the end of the month preceding the deadline for the first corporate-tax instalment of the fifth financial year following the one for which the election was made, the election becomes irrevocable.

In practice:

1. You elect for corporate tax for a year N.
2. You can waive and revert to personal income tax for years N+1 to N+5.
3. The waiver must be notified before the end of the month preceding the first corporate-tax instalment of the relevant year.
4. After the fifth financial year following the election, reverting is no longer possible: corporate tax applies definitively.
5. A waiver permanently removes your right to re-elect for corporate tax later.

This five-year window is genuine protection, but it does not remove the need to plan. Waiving triggers the tax consequences of a cessation (article 221 of the Tax Code) and the permanent loss of the option. It is therefore not a neutral reversal: it is a second structural choice. For anyone considering a later transformation, moving from a EURL to a SASU or comparing SASU and EURL are distinct paths to map before electing.

Under corporate tax, two layers of taxation follow each other: the company pays corporate tax on its profit, then you, the director, are taxed on what you draw (salary taxed under the income tax scale, dividends taxed under the flat tax).

The corporate-tax rate depends on the profit and on company-level conditions:

On the dividend side, the flat tax (PFU) stands at 31.4% in 2026: 12.8% income tax and 18.6% social levies (including CSG raised to 10.6%, CRDS at 0.5% and a solidarity levy at 7.5%), applicable to investment income received from 1 January 2026. The option for the progressive scale (with a 40% allowance on the dividend) remains available and can be more favourable for low brackets: we detail the trade-offs in our review of how the flat tax works in 2026 and dividend taxation.

Take a consultant operating through a EURL, single with no children, generating EUR 80,000 of result before pay and before tax. Let us compare two scenarios for the same year. Figures are rounded and simplified for illustration; they do not constitute personalised advice.

Scenario A — EURL under personal income tax. The EUR 80,000 profit is the self-employed professional income. It bears self-employed social contributions (around 35-40% of net income depending on activity; assume EUR 30,000), then income tax on the scale over the remaining income. The entire result is taxed in your name, whether drawn or not.

Scenario B — EURL under corporate tax. You pay yourself a manager's salary of EUR 40,000 (deductible from the company's result and subject to self-employed contributions). The profit taxable under corporate tax then falls to EUR 40,000. The company pays corporate tax, then you distribute the net profit as dividends, subject to the flat tax.

On this profile, corporate tax delivers a modest but real advantage, mainly because it lets you avoid socialising and taxing the entire result in the same year: amounts left in the company (here, part of the result kept in reserves rather than distributed) bear only corporate tax, not self-employed contributions. That is the core leverage of corporate tax: control. Under personal income tax, this leverage does not exist — you are taxed on 100% of the result.

The trade-off reverses, however, when the profit is fully consumed each year by your standard of living: the double layer of corporate tax plus flat tax can then cost more than personal income tax alone. That is the whole point of the self-employed director's pay trade-off.

Dividends and self-employed contributions in a EURL under corporate tax. Beware of a trap: in a EURL under corporate tax, the share of dividends exceeding 10% of the share capital, share premiums and current-account balances is subject to self-employed social contributions, not just the flat tax (article L. 131-6 of the Social Security Code). With EUR 1,000 of capital, almost all dividends are exposed. This rule does not apply in a SASU, where the president is treated as an employee — often a decisive argument when choosing the structure.

Liberal professions. The corporate-tax election of a professional-practice entity follows the same logic, but the switch can affect the contribution base for your pension fund. For liberal professions, the analysis must factor in specific pension schemes.

Low profit. Below a few tens of thousands of euros of result and with a low marginal income-tax bracket, personal income tax often stays simpler and cheaper. Corporate tax makes sense when the result durably exceeds your income needs.

• A sole trader's corporate-tax election first requires EURL assimilation (article 1655 sexies): it is not instantaneous and triggers the cessation of the sole trader business.
• The waiver window runs to the fifth financial year following the election; beyond that, corporate tax is final and waiving bars any future re-election.
• The reduced 15% rate requires paid-up capital held at least 75% by individuals and turnover below EUR 10m.
• The 2026 flat tax is 31.4%: the dividend layer is not neutral, especially if you distribute everything each year.
• The 10%-of-capital threshold shifts part of dividends into self-employed contributions in a EURL under corporate tax.

A consultant operating a EURL under personal income tax recently came to us: her result had just crossed EUR 90,000 and her tax bill had surged, although she only needed EUR 45,000 to live on. The diagnosis was clear: under personal income tax, she paid contributions and tax on EUR 90,000 she did not consume. We modelled the corporate-tax election over three financial years, factoring in the 10%-of-capital threshold and the 31.4% flat tax. The election was chosen, with a prior capital increase to widen the base of non-socialised dividends. The first-year gain was not spectacular, but the ability to leave profit in the company changed her wealth trajectory.

The lesson we draw: the corporate-tax election is never a single-year calculation. It is a trajectory decision, to be measured over at least five years — exactly the length of the waiver window. As a firm registered with the Order of Chartered Accountants, we refuse gut-feel trade-offs: every election is validated against a numerical model covering salary, dividends, pension and capital.

Hayot Expertise advice. Do not decide the corporate-tax election on a rate comparison alone. Model your real income needs, the share you intend to leave in the company, and the effect of the 10%-of-capital threshold on your dividends. If you elect, use the waiver window as a safety net: elect, measure over two to three years, and keep the option to revert to personal income tax if circumstances change. Our business creation support in Paris and our tax strategy and holding service always include this simulation.