Loss-making SAS: stay on corporate tax in 2026?

Quick answer. A loss-making SAS can elect the partnership tax regime (article 239 bis AB of the French Tax Code) for five non-renewable financial years, so the loss flows up to the shareholders instead of being frozen at corporate-tax level. The election is reserved for companies less than five years old, with fewer than 50 employees and under 10 million euros in turnover.

When a SAS posts two or three consecutive loss years, the instinct is reassuring: the loss is carried forward and will eventually offset a future profit. That is true under corporate income tax. But the loss sits idle inside the company. It produces nothing until a profit absorbs it, and it can even be lost if the activity changes or a poorly prepared sale occurs. The real strategic question is not just whether to carry the loss forward, but where it is worth the most: in the company, or in the hands of the shareholders.

In early-stage technology files, this is one of the most underused trade-offs. The income-tax election, temporary and tightly framed, can turn a sterile loss into an immediate tax saving for the founders. Provided the conditions are met and the shareholder profile fits.

A SAS is by default subject to corporate income tax (impôt sur les sociétés, IS). Any loss stays locked inside the legal entity. Under corporate tax, the loss can be carried forward indefinitely, but its annual use is capped at 1 million euros plus 50% of the profit exceeding that threshold (Tax Code, article 209 I). For an SME, the million-euro cap is rarely binding; the real issue is waiting.

In practice, as long as the company makes no profit, the loss generates no saving. A startup losing money for four years before turning profitable holds a latent tax asset that only converts into cash when profits return, often long after the founders have personally paid tax on their other income. This timing gap is exactly what the income-tax election seeks to fix, by making the loss immediately usable at the individual level.

We separately cover how loss carry-forward and carry-back work under corporate tax, which remains the standard route for most established companies.

Article 239 bis AB of the Tax Code allows certain unlisted capital companies (SA, SAS, SARL) to elect the partnership tax regime, often called fiscal translucency. While the election is in force, the company is no longer taxed at corporate level: its result, whether a profit or a loss, is allocated to each shareholder in proportion to their stake and taxed directly in their hands under personal income tax.

For a loss-making company, the benefit is direct: the loss is no longer trapped inside the structure, it flows down to the shareholders. Depending on their situation, they may offset it against their other income and reduce their personal tax in the very year of the loss. This mechanism departs from the standard tax treatment of an SAS, which keeps a complete separation between company-level and shareholder-level taxation.

The election is not a permanent change of legal form. It is fiscal, temporary and strictly framed. The company keeps its SAS legal form; only its tax regime switches for a limited period.

Eligibility is deliberately narrow. The election targets young operating companies, not asset-holding structures. All of the following conditions must be met at the opening date of the first financial year of application.

The age condition is the most restrictive. The election must be made within the company's first five years. A SAS that discovers this tool after six years of losses has missed the window. This is why we raise the point from the earliest financial years with technology startups in their loss phase.

The election produces its effects for five financial years and cannot be renewed. At the end of that period, the company automatically returns to corporate income tax. An early exit is also possible: a waiver notified within the first three months of a financial year ends the regime from that year onward.

Here is the procedure, in order:

1. Check that all conditions of article 239 bis AB are met at the opening date of the first financial year concerned.
2. Obtain the agreement of all shareholders: the election requires unanimity, because it changes how each one is taxed.
3. Notify the election to the corporate tax office within the first three months of the first year of application (a model letter is available in the BOFiP tax doctrine).
4. Adapt the accounting and filings: the company files a partnership-style result return and reports each shareholder's share to them.
5. Carry each shareholder's share onto their personal income tax return, in the relevant category.

The three-month deadline is strict. An election filed late only takes effect for the following year, postponing the intended tax benefit by twelve months.

This is where the heart of the trade-off lies, and the point many directors misread. The loss flowing up is not automatically deductible against total income. Everything depends on whether the shareholder's involvement is professional or not.

A shareholder carrying on a professional activity within the company, meaning personal, direct and continuous involvement in the business, receives a share of loss classified as professional BIC. This loss is deductible against their total income for the year, with any excess carried forward against total income for the following six years (BOFiP, BOI-IR-BASE-10-20-10).

A passive shareholder, a mere provider of capital with no operational involvement, instead receives a non-professional BIC loss. Under article 156 I-1° bis of the Tax Code, this loss is only deductible against income of the same nature, realised in the same year or over the following six years. It does not reduce the shareholder's salary or other income.

The income-tax election is therefore most relevant when the founders are active in the company and also have taxable income (a salary from another job, a spouse's income within the same tax household) against which to offset the loss.

Several situations sharply change the value of the election.

A company benefiting from innovation incentives must reason holistically. A startup relying on the research tax credit, innovation tax credit and JEI status already stacks cash-flow levers; the research tax credit remains refundable under corporate tax in standard conditions, which can make staying on corporate tax preferable despite the losses. The trade-off must factor in the 2026 reform of the JEI status before any decision.

The presence of investors complicates the required unanimity. A funding round with passive financial shareholders often makes the election unrealistic: they have no interest in receiving a non-deductible, non-professional loss, and may oppose a regime that would expose them to tax.

Leaving the regime is not neutral. At the end of the five years or on early exit, real estate and goodwill contributed to the company become subject to transfer duties on their market value, unless the shareholders commit to holding their shares for three years (BOFiP, BOI-IS-CHAMP-20-20-20-20). This deserves particular attention for companies holding appreciated assets.

The underestimated risk. The election causes the loss of prior corporate-tax deficits. The change of regime entails losing the right to carry forward losses incurred before the election, as well as long-term capital losses still available (BOI-IS-CHAMP-20-20-20-20). A company that has already built up a corporate-tax loss stock therefore wipes out that asset by electing: you must weigh the value of that stock against the expected gain at shareholder level.

What the tax authority checks. The professional nature of the involvement is reviewed. To offset the loss against total income, the shareholder must demonstrate personal, direct and continuous involvement in the business. A director with no real role in the company could see their loss reclassified as non-professional, making it useless against other income.

Consistency with remuneration. During the income-tax election, the result is taxed in the shareholders' hands, but the cash stays in the company. Withdrawals and remuneration must be managed carefully, otherwise you pay tax on a result you have not collected. Close monitoring through financial steering and an outsourced CFO secures this balance.

Our reading is straightforward: the income-tax election under article 239 bis AB is a powerful tool but with a short window, suited only to a precise configuration. It shines for a young company with active founders, losing money at the start while holding taxable personal income. In that case, monetising the loss immediately beats waiting for it.

Recently, a director of a tech SAS in its seed phase asked us why his previous accountant had never raised this avenue, even though he also earned a comfortable salary from a consulting activity. After reviewing the shareholding structure and the company's age, the election was still open for two financial years: the decision then came down to a careful calculation between the corporate-tax loss stock already built up and the expected personal tax saving, while watching the five-year window closing in.

Conversely, as soon as a funding round brings in passive investors, or the company holds real estate, the trade-off almost always tips toward staying on corporate tax. The same logic applies when the research tax credit already secures the cash. Our firm, registered with the French Order of Chartered Accountants, systematically quantifies both scenarios before recommending anything: there is no universal answer, only one tailored to your shareholding and your path to profitability. This trade-off echoes the work we do on the corporate-tax versus income-tax election for the EURL and sole proprietorship, with reversed logic but neighbouring questions.

Hayot Expertise advice. If your SAS is losing money and is under five years old, have the eligibility for article 239 bis AB assessed before the next year-end close. The three-month deadline offers no catch-up: a late decision costs you a full year of tax benefit. We quantify both paths, corporate tax and income tax, to put the trade-off on solid ground.