SAS: Taxation of profits

An SAS (Société par Actions Simplifiée - simplified joint stock company) is a commercial company with a relatively flexible operating structure compared with other legal forms.

Most of the principles governing its operation are set out in the company's articles of association: taxation, decision-making procedures, appointment of directors, etc. It can even be set up as a single-person company (SASU) when only one partner is involved in the project.

The taxation of profits is not the same for all SAS, as it depends on the preferences of the directors.

This choice must be made when the company is set up, and is not a trivial matter.

How are SAS profits taxed? When and how is VAT collected? What other taxes are SAS subject to?

These are just some of the questions and answers we propose to answer in this article.

Benefits: How are SAS taxed?

SAS companies are subject to corporation tax (impôt sur les sociétés - IS) by default at the time of formation. Profits are defined as sales minus all deductible expenses.

They are taxed at the following rates:

• 15% up to €38,120 in sales. This is the reduced rate of corporation tax.
• 28% between €38,121 and €75,000. This is the intermediate rate of corporation tax.
• 33.33% thereafter. This is the standard rate of corporation tax.

SAS whose capital is not at least 75% owned by individuals and whose sales exceed €7,630,000 are taxed at the standard rate from the first euro, and therefore do not benefit from the reduced corporate income tax rate. The 28% rate is sometimes applied on a case-by-case basis.

It is important to remember that taxing the company on its profits does not exclude the partners from paying income tax if they pay themselves a salary.

Recent tax reforms planned by the Philippe government should lead to a simplification of taxation methods for SAS, and a reduction in the corporate tax rate to 25% by the end of the five-year period.

If associates so wish, they can opt to be taxed under the French income tax system (Impôt sur le revenu - IR).

In this case, the company is no longer taxed directly, as it is the associates who will pay the tax calculated on the amount of profits they receive.

This decision can be taken if the partners are unanimous in their support.

An SAS may choose to operate as a partnership for a maximum of 5 financial years.

VAT: What are the rules governing VAT liability?

Not all SAS companies collect and remit VAT according to the same rules

 There are three main cases:

• Some SAS companies are completely exempt from VAT. They do not collect it, do not pay it back, and therefore cannot reclaim it on their expenses. This measure applies to SAS with sales of less than €82,800 for the sale of goods to be taken away or consumed on the premises, and the provision of accommodation; and €33,200 for other commercial or non-commercial activities.
• Certain SAS benefit from the simplified VAT regime if their sales are below €789,000 for the sale of goods to take away or for consumption on the premises, or the provision of accommodation; and €238,000 for other commercial or non-commercial activities. They are required to file an annual VAT return, and can therefore reclaim VAT on their expenses.
• Above these amounts, SASs are subject to the normal actual VAT regime. Reporting becomes monthly, and all SASs can apply for this regime whenever they wish.

Other taxes: what other contributions must be paid?

Among the additional taxes to be paid, the CFE (Cotisation Foncière des Entreprises) is certainly the most famous, and applies to the majority of SAS companies.

Companies with sales in excess of €152,500 are required to pay the CVAE (Cotisation sur la valeur ajoutée des entreprises).

Companies with employees must pay the taxe d'apprentissage (apprenticeship tax), and those with more than 20 employees are subject to the Participation à l'effort construction (participation in the construction effort).

Ultimately, the tax regime for your SAS should be chosen according to the nature of your project, the number of partners involved, and your objectives.

The complexity of certain structures often requires the intervention of professionals to support the entrepreneur and his teams in building the best possible project.