Corporate Income Tax (France)

French Corporate Income Tax (Impôt sur les Sociétés, IS) is levied at a standard rate of 25% on the taxable profit of French companies (for fiscal years beginning on or after 1 January 2022). Smaller companies (turnover below €10 million, capital fully paid up, held ≥75% by individuals) benefit from a reduced rate of 15% on the first €42,500 of taxable profit. The IS base is the accounting profit adjusted for numerous tax-specific revaluations (depreciation rules, provisions, long-term capital gains, etc.).

In a business valuation context, the French IS rate is a critical parameter in the DCF model: the free cash flow is calculated after a 25% theoretical tax charge on EBIT (NOPAT), regardless of the company's actual tax position. The French IS rate is above the Swiss cantonal equivalent in most cantons (effective combined rate typically 11–21% in Switzerland), making Swiss holding structures attractive for groups with significant French operations that can legally shift profits upward.

Key French IS specificities in an M&A context include: the research tax credit (CIR) reducing the effective IS burden for R&D-intensive companies, the parent-subsidiary dividend exemption (95% of dividends received from subsidiaries with ≥5% participation are exempt), the long-term capital gain regime for shares held more than two years, and the tax consolidation regime allowing groups to offset profits and losses across members. Each of these regimes has an impact on the company's normalized earnings and hence on its valuation.

At Hectelion, we integrate the French IS regime and its specificities into our business valuations and our normalized earnings analyses.