Entrepreneurs who have chosen to tax their profits to IR when setting up their business can, for multiple reasons (mentioned here: IR or IS?), Consider an option for taxing their profits to IS. This file informs you about the transition to IS for companies subject to IR.
Table of Contents
Companies imposed on IR by default
The companies whose profits are by default taxed to the IR, in the name of the entrepreneur or the partners, are sole proprietorships, EIRLs , EURLs with a natural person partner, SNC, EARL and civil companies.
All these companies, with the exception of the sole proprietorship, have the right to formulate an option for a taxation of their profits with corporate tax.
This option is irrevocable, except in the event of renunciation notified to the administration before the end of the month preceding the deadline for payment of the first corporate tax installment of the fifth financial year following that in respect of which the option was exercised.
Companies subject to IR on option
The SARL , the SAS , the SASU and SA, initially subject to corporation tax, can opt for taxation of their profits to the IR (or imposed directly into the hands of their partners legal persons) for up to 5 years, or without time limit in the case of a family LLC
If this option for IR has been exercised, however, these companies have the option of terminating it and therefore reverting, but irrevocably, to taxation with corporate tax. How can you make such calculations? Make use of the taxfyle’s tax calculator now.
How to exercise the option for IS?
When the company is by default taxable at IR, the option for IS must be exercised:
For a sole proprietorship: by decision of the operator.
For a company: under the conditions provided for by the articles of association or, failing that, by all the partners (unanimous agreement is necessary).
The option for corporate tax must be notified to the tax service at the latest before the end of the third month of the financial year for which the company wishes to be subject for the first time to corporate tax. It is possible to formulate the option before the start of the financial year concerned.
When the company is by default taxable for IS but an option for IR has been made, the waiver of the option to switch to IS must be notified to the tax service:
Within the first three months of the opening date of the fiscal year from which it applies, when the company had temporarily opted for IR (5 fiscal years maximum). Before the opening date of the first financial year to which it applies , when the company is a family limited liability company and it had opted for IR (without time limit).