Revoking the corporate-tax election: the 5-year window (2026)

Quick answer. A partnership-type company (EURL, SCI, SNC, family SARL) or a sole trader that elected for corporate income tax (impot sur les societes, IS) can revoke the IS election up to the fifth financial year following the year of the election. After that, the election becomes irrevocable. Revocation is notified to the tax authorities before the end of the month preceding the first IS instalment of the relevant financial year.

You elected for corporate income tax two or three years ago, and the maths no longer adds up: the business generates little profit, you carry costs personally, or you would benefit from offsetting a loss against your other income. The good news is that the IS election is no longer the permanent trap it was before 2019. Since the 2019 Finance Act, you have a five-year window to revoke the IS election and return to taxing profits in the hands of the partners. The bad news is that this window closes quietly, and the revocation itself can be costly if it is not anticipated.

This article explains who can revoke, within what deadline, under what procedure, and above all what the revocation triggers from a tax standpoint. This is a topic where timing and the cessation mechanics matter as much as the decision in principle.

The IS election concerns structures that fall under personal income tax (IR) by default but may choose the corporate-tax regime. It mainly covers:

• the EURL (single-member SARL taxed under IR by default);
• the SCI and civil companies;
• the SNC;
• the family SARL;
• the sole trader, through the specific election under article 1655 sexies of the French Tax Code (CGI).

The legal basis for the election is article 239 of the CGI (and article 1655 sexies for the sole trader). Key point: electing for IS does not change the legal form. An SCI that elects remains an SCI; only the tax regime applied to its result shifts. Revocation follows the same logic in reverse: you return to the partnership regime without touching the bylaws.

Before the 2019 Finance Act, the IS election was irrevocable from its very first year. It was a one-way street. Article 50 of Law no. 2018-1317 of 28 December 2018, applicable to financial years ending on or after 31 December 2018, introduced a right of return: the company may now revoke the election up to the fifth financial year following the one for which the election was exercised.

In practice, you have the year of the election, then five financial years to change your mind. If you have not revoked by the end of that fifth following year, the election becomes irrevocable and the company stays under IS permanently.

Typical window timeline#

The table below illustrates an election exercised for financial year 2021 (calendar years, closing on 31 December). The years are indicative and serve only to show the mechanics.

The practical reading: for a revocation to take effect on a given financial year, you must act before that year begins (the notification precedes the first IS instalment). The last useful opportunity therefore arrives earlier than one might think.

The procedure comes down to a few acts, but meeting the deadline conditions everything. Here is the ordered process.

1. Confirm eligibility and the starting year. Identify the financial year for which the election was exercised. It sets the starting point for the five following years. A one-year error here distorts the whole reasoning.
2. Check that the window is still open. If the fifth following year has already closed without revocation, the election is irrevocable and nothing more can be done on that front.
3. Decide the financial year the revocation takes effect. Revocation applies to a specific year: the one for which you want to become a partnership again. That year's result will be taxed in the partners' hands.
4. Notify the authorities within the deadline. Revocation is notified to the corporate tax office before the end of the month preceding the deadline for paying the first IS instalment of the year for which it applies (Decree no. 2019-654 of 27 June 2019). In practice, for a calendar year, this means notifying by the end of February at the latest.
5. Document and keep proof of dispatch. The notification is a dated act; keep proof of the dispatch and receipt date. As the deadline is binding, traceability protects the company.
6. Anticipate the cessation consequences. Before notifying, have the tax impact of the return to IR quantified (see the dedicated section). You notify with full knowledge, not before.
7. Adjust the returns and instalments. The effective year no longer generates IS; the company files a result return under the partnership regime, and the partners include their share in their own taxation.

Order matters: you do not notify before having quantified the exit cost. Many unpleasant surprises stem from a revocation decided for an immediate cash-flow reason, without measuring the cessation bill.

This is the point directors most underestimate. Irrevocability cuts both ways.

• If you do not revoke within the window, the IS election becomes irrevocable from the fifth following year: you are under IS for good.
• If you revoke, the revocation is also definitive: a company that has revoked its election can never elect for IS again.

In other words, the five-year window is not a back-and-forth. It is a single decision, taken one way or the other, with no return. Revoking for a cyclical reason (one isolated loss-making year) while telling yourself you will re-elect later is a flawed line of reasoning: the return to IS will be closed.

Revocation brings profit taxation back into the partners' hands, under the partnership regime. But moving from IS to IR is not neutral. It entails in principle the tax consequences of a business cessation: immediate taxation of profits not yet taxed and of latent capital gains.

Reliefs exist where the activity continues without the creation of a new legal entity, which is the case here since the legal form does not change. These reliefs may, under conditions, allow part of the taxation to be deferred. But they are neither automatic nor universal: this is precisely the point to analyse case by case, file by file.

The underestimated risk: a company that has accumulated latent capital gains (an SCI property whose value has risen, goodwill, securities) may, through its revocation, trigger immediate taxation that is disproportionate to the cash-flow gain hoped for. This is our number-one watch point on the subject.

IS is not "better" than IR in the absolute; it suits certain situations and is ill-suited to others. The five-year window exists precisely to correct a poorly calibrated election.

The typical reasons for revocation we encounter: an activity that ultimately generates little profit, where the IS tier adds nothing; a director whose tax household has a low marginal rate; or a wish to offset losses against overall income, a possibility closed under IS. To explore the initial trade-off, see our analysis of the IS election for a sole trader or an EURL and the SASU versus EURL comparison.

A few situations deserve specific attention before deciding.

SCI under IS holding an appreciated property. This is the most sensitive case. The return to IR may surface a significant latent capital gain on the property. Before any revocation, valuing the asset and quantifying the cessation are essential. Revoking without this step means proceeding blind.

EURL whose partner has contributed shareholder loans. The structuring of shareholder current accounts and their treatment at the change of regime should be checked beforehand. See our note on the taxation of the shareholder current account.

Company still in the initial choice phase. If you are still hesitating between staying under the actual-profit IR regime, electing for IS, or even leaving the micro regime, the question arises before any election. Our guide micro-business or company: when to switch addresses this pivotal moment.

Sole trader who elected via article 1655 sexies. The regime of the election and its revocation follows logic specific to the sole trader. The five-year window principle applies, but the filing arrangements deserve a dedicated check.

Shifted (non-calendar) closing date. If your financial year does not close on 31 December, the calculation of the notification deadline shifts according to the date of the first IS instalment. Do not default to "end of February": recalculate from your own instalment calendar.

In the files we handle, the five-year window is rarely used, not because it is useless, but because it is poorly known and closes before the question is even raised. The common pattern: an IS election made a little too quickly at incorporation, an activity that does not take off as expected, and three years later a director discovering they "could have" returned to IR. The window still exists, but the countdown has started.

Our reading: the IS election should be reviewed every year while the window is open, especially for young structures and activities with irregular results. It is not a decision to file away after incorporation; it is a recurring management point. And the decision to revoke is never taken on the annual tax gain alone: it is taken after quantifying the cessation and factoring in the definitive nature of the return.

• Precisely identify the year of the election and count the five following years.
• Check that the window is still open for the targeted effective year.
• Recalculate the notification deadline from the actual instalment calendar.
• Have the cessation impact quantified: untaxed profits and latent capital gains.
• Value sensitive assets (property, goodwill, securities) before any notification.
• Factor in the definitive nature: no re-election for IS after revocation.
• Notify within the deadline and keep dated proof of dispatch.
• Adjust the effective year's returns to the partnership regime.

For the accounting and filing implementation, our team supports these operations as part of bookkeeping and accounts review. If the question arises from the outset, it is better handled at the time of setting up the business.