In France, the principle of taxation is based on a declaratory system, applicable to both individuals (for income tax, wealth tax or gift/inheritance tax) and legal entities (for corporation tax).
On the one hand, individuals are naturally subject to income tax when (i) they are domiciled in France for tax purposes – in which case they are liable to French income tax on all their income, whether from French or foreign sources – or when (ii) they have their tax domicile outside France but have income from French source – in which case they are liable for tax on such income only.
As soon as a person becomes liable for French tax under the rules set out above, he/she must, in the year following that in which he or she becomes liable in France, declare his/her income by filing an income tax return to the tax service he/she depends on, namely the tax service of his/her place of residence in France, or the non-residents tax service he/she lives abroad). In addition, taxpayers liable for wealth tax (on real properties) must declare their taxable assets at the same time as their income.
Similarly, inheritance and gifts must be declared spontaneously by the taxpayer when the event occurs, and the corresponding tax must be paid at the same time.
On the other hand, only profits made from “businesses” carried out in France are subject to French corporate income tax (“CIT”), regardless of whether the company has its residence in France or abroad.
“Businesses” means the regular conduct of an activity that may:
- either be carried out in the context of an independent establishment;
- be carried out, in the absence of an establishment, through representatives who have no independent professional personality; or
- or result from the performance of transactions forming a complete commercial cycle.
Regardless of their legal form (sole proprietorship, micro-business, company) or field of activity (craft, commercial, liberal or agricultural), such businesses will need to register online with the business formalities office. This organism automatically transmits all the relevant information to the appropriate bodies, in particular social and tax organizations. This will enable the company to be assigned a registration number (SIREN) and, where applicable, an intra-Community VAT number.