Corporate Tax in France 2026: Standard Rate, 15% Reduced Rate and Thresholds

Quick answer. In 2026, the standard rate of French corporate income tax (IS) remains 25%. Eligible SMEs benefit from a 15% reduced rate on the portion of taxable profit up to 42,500 euros, provided their turnover before tax stays below 10 million euros and their share capital is fully paid up and held at least 75% by individuals.

The 2026 corporate tax rate has not moved for the vast majority of companies: the standard rate of corporate income tax remains 25%, under Article 219 I of the French General Tax Code. This rate applies to a company's entire taxable profit, except where part of it qualifies for the reduced rate.

The 2026 Finance Act did not change the 25% standard rate, the 15% reduced rate, or the 42,500 euros threshold. The core scale is therefore stable. The only notable shift concerns very large companies, through the exceptional contribution discussed below.

For a company, corporate tax is not a single rate applied mechanically. For eligible SMEs it is a two-tier scale: a first band at 15%, then the rest at 25%. Understanding this structure is the first step to anticipating your tax charge and your cash flow needs.

The 15% reduced rate set out in Article 219 I-b of the General Tax Code is not automatic. A company must meet three cumulative conditions, checked for each financial year. Many directors believe they qualify when a single condition is in fact missing.

The three conditions to meet:

1. Turnover before tax below 10 million euros for the relevant financial year. For companies belonging to a group, turnover is assessed at group level.
2. Fully paid-up share capital at the year-end: capital that has been promised must actually have been paid in.
3. Capital held at least 75% by individuals, directly or through companies that themselves meet this ownership condition.

Where all three conditions are met, the 15% rate applies to the portion of profit up to and including 42,500 euros. Above 42,500 euros, profit is taxed at the standard 25% rate.

The calculation follows a simple banded logic. Here is the method we apply in our files:

1. Determine the taxable result after tax add-backs and deductions.
2. Apply 15% to the portion of that result between 0 and 42,500 euros (if the SME conditions are met).
3. Apply 25% to the portion of the result above 42,500 euros.
4. Add the two amounts to obtain gross corporate tax, before offsetting any tax credits and instalments already paid.

Here is the concrete effect of this scale depending on an eligible SME's taxable profit:

The maximum saving from the reduced rate is capped by design: the difference between 25% and 15% on 42,500 euros is 4,250 euros per year. It is a real but limited advantage, one to secure without overstating its scope.

Yes, and this is a point many overlook. The 42,500 euros ceiling applies to a twelve-month financial year. For a year of a different length, the BOFiP guidance (BOI-IS-LIQ-20-20) provides that the amount eligible for the reduced rate is adjusted by a coefficient equal to the number of months in the year divided by 12.

A company whose first financial year runs from 1 January to 15 September, that is eight and a half months, only benefits from the reduced rate on a ceiling reduced to around 30,104 euros (42,500 euros multiplied by 8.5/12). Conversely, an exceptional year of more than twelve months increases this ceiling proportionally.

This mechanism mainly arises in the year of incorporation and when the year-end date changes. A pro-rating error leads either to overpaying corporate tax or to applying the reduced rate on an excessive base, which the tax authority can reassess.

Basic corporate tax is not always the only levy. Two additional contributions exist, but they do not concern ordinary SMEs.

The 3.3% social contribution only affects companies whose turnover reaches 7.63 million euros, and its 763,000 euros allowance on reference corporate tax effectively neutralises most SMEs. The vast majority of companies we support do not pay it.

The exceptional contribution on the profits of large companies, created by the 2025 Finance Act, is renewed in 2026 but refocused: the 2026 Finance Act raises its threshold to companies with turnover of at least 1.5 billion euros, against 1 billion previously, thereby excluding mid-sized enterprises.

Several situations affect how the 2026 corporate tax scale applies:

• Holding company. A holding can benefit from the reduced rate if it meets the capital and turnover conditions. However, the parent-subsidiary regime and the tax consolidation regime change the tax base and the scope for assessing turnover.
• First year of activity. The 42,500 euros ceiling is pro-rated according to the length of the first financial year, often longer or shorter than twelve months.
• Loss-making company. With no taxable profit, no corporate tax is due: the loss can be carried forward indefinitely, and carried back under conditions.
• Income-tax company opting for IS. Opting for corporate tax opens access to the reduced rate if the SME conditions are met, but it is in principle irrevocable after the legal deadline. It is a structuring decision that deserves prior modelling, just like the trade-off between dividends and salary.

The underestimated risk. The most frequent trap we encounter is the capital ownership condition. Where a parent company subject to corporate tax holds more than 25% of a subsidiary's capital without itself meeting the 75% individual ownership test, the subsidiary loses the reduced rate. Many directors are unaware of this when setting up a holding.

What the tax authority looks at. On this topic, audits focus first on whether capital is actually paid up and on the ownership chain. Capital not fully paid up at year-end is enough to deny the reduced rate for that year. The pro-rating of the ceiling on short or long financial years is also checked.

Other common mistakes to avoid:

• Confusing the 42,500 euros threshold with a former 38,120 euros threshold, applicable to years closed before 31 December 2022.
• Believing the reduced rate applied up to 100,000 euros: that ceiling circulated in bills that were never adopted and never took effect.
• Forgetting to assess turnover at group level for a consolidated company.

Our reading. The 2026 corporate tax scale is stable, but its value does not lie in the reduced rate taken in isolation. The maximum saving of 4,250 euros per year remains modest compared with the genuinely structuring decisions: director's remuneration, distribution policy, the use of a holding, or the offsetting of losses. The reduced rate is an entitlement to secure, not a strategy in itself.

Recently, the director of an SME in the services sector approached us after applying the reduced rate alone for two financial years, without checking that a corporate shareholder held 30% of the capital. The 75% individual ownership condition was not met. We secured the position for the future and quantified the risk on past years. This kind of check, seemingly trivial, prevents a reassessment and underpins any corporate tax advisory work.

As a firm registered with the French Institute of Chartered Accountants, we treat corporate tax as one component of an overall reasoning. Rigorous bookkeeping and accounts review makes the taxable result reliable ahead of the calculation. For a broader view, our overview of business taxes and our business tax memo place corporate tax in context, as do our reminders on SME accounting obligations.

Hayot Expertise tip. Check the three reduced-rate conditions every year before the year-end, not after. Keep evidence of capital being paid up and of the ownership structure. For the payment timeline, anticipate the corporate tax instalment schedule to avoid any cash-flow strain at the end of the year.