US citizens who form or acquire interests in French companies face a layer of US tax obligations that French nationals do not. France governs the entity’s French corporate tax, TVA, and employment obligations. The US imposes separate reporting requirements and potential current-year income inclusions on the US shareholder, regardless of whether the entity distributes any profits.
The core issue is entity classification. The French SA is a per se corporation under US Treasury regulations. The SARL, SAS, SASU, and EURL are eligible entities that default to corporate classification in most ownership structures, but are subject to check-the-box rules and default classification analysis. In practice, most French commercial entities owned by US persons are classified as foreign corporations, which determines the entire US tax treatment: potential CFC status, Form 5471 filing obligation, and exposure to Subpart F and GILTI.
French Entity Types and US Classification
Main Commercial Entities
| Entity | Full Name | US Classification Basis |
|---|---|---|
| SA | Société anonyme | Per se corporation (§301.7701-2(b)(8)) |
| SARL | Société à responsabilité limitée | Eligible entity; defaults to corporation (limited liability) |
| SAS | Société par actions simplifiée | Eligible entity; defaults to corporation (limited liability) |
| SASU | SAS unipersonnelle (single-member SAS) | Eligible entity; defaults to disregarded entity or corporation |
| EURL | SARL unipersonnelle (single-member SARL) | Eligible entity; defaults to disregarded entity or corporation |
| SNC | Société en nom collectif | Eligible entity; check-the-box available |
The SCI (Société Civile Immobilière) is not a commercial entity and is not on the per se list. Its US classification depends on its membership structure and is addressed in the context of French real estate holdings.
US practitioners sometimes compare the SARL to a US LLC and the SAS to a corporation, but these analogies are imprecise. The critical US tax distinction is not structural similarity to a US entity type. It is how the entity is classified under Treas. Reg. §§301.7701-2 and 301.7701-3. The practical consequences of corporate classification (CFC rules, GILTI, Form 5471, dividend treatment) have no direct LLC equivalent.
Determining how a specific French entity maps onto your US tax position depends on ownership structure, income type, and filing history. Request an introduction to a specialist.
Classification of French Eligible Entities
Only the French SA is listed as a per se corporation under Treas. Reg. §301.7701-2(b)(8). The SARL, SAS, SASU, and EURL are not on that list. They are “eligible entities” under Treas. Reg. §301.7701-3, subject to default classification rules based on liability and ownership structure.
Default classification for multi-member entities (SARL, SAS): A foreign eligible entity with two or more members in which all members have limited liability is classified as a corporation by default. SARL and SAS structures with multiple shareholders therefore default to corporate classification.
Default classification for single-member entities (SASU, EURL): A foreign eligible entity with a single member and limited liability defaults to a disregarded entity. A sole-owner SASU or EURL is therefore disregarded for US tax purposes by default, unless a Form 8832 election is filed to treat it as a corporation.
Form 8832 elections: Because SARL, SAS, SASU, and EURL are eligible entities, a Form 8832 check-the-box election is technically available. A multi-member SARL could elect partnership treatment; a single-member EURL that has defaulted to disregarded status could elect corporate treatment. Whether a Form 8832 election is advantageous depends on the specific ownership structure, income type, and the interaction with CFC rules, GILTI, and the §962 election. Classification elections have retroactive and prospective consequences that require professional analysis before filing.
The classification of a French SARL, SAS, SASU, or EURL under US tax law is not automatic. Default rules, ownership structure, and Form 8832 elections interact in ways that materially affect CFC status, GILTI exposure, and reporting obligations. Request an introduction to a specialist.
SARL vs. SAS: Key Structural Differences
The choice between SARL and SAS does not automatically determine US classification (both are eligible entities that typically default to corporate treatment), but it affects French social contribution treatment for the manager-owner.
| Feature | SARL | SAS |
|---|---|---|
| Manager title | Gérant | Président |
| Social security status (majority manager) | TNS (travailleur non-salarié) via URSSAF | Assimilé salarié (employee equivalent) |
| Social contribution level | Lower | Higher, but more comprehensive coverage |
| Structural flexibility | More constrained by statute | Highly flexible articles of association |
For US citizens who are also French social security contributors, the TNS vs. assimilé salarié distinction affects the total cost of owner compensation. See French Social Charges for rates by regime.
French Corporate Tax (Impôt sur les Sociétés)
French IS-subject entities pay corporate income tax on profits at the following rates:
| Taxable Income | Rate | Condition |
|---|---|---|
| First €42,500 | 15% (reduced rate) | SME conditions met (see below) |
| Above €42,500 | 25% (standard rate) | SME or non-SME |
| All income | 25% | If SME conditions not met |
SME conditions for the 15% reduced rate:
- Annual turnover (CA HT) does not exceed €10 million
- Capital (capital social) is fully paid in
- At least 75% of capital held by individuals (or by companies themselves meeting the SME conditions)
A French company wholly owned by a single US individual shareholder can qualify for the 15% reduced rate if the turnover and capital conditions are satisfied.
Local Business Taxes
The CVAE (Cotisation sur la Valeur Ajoutée des Entreprises) is being phased out under the Loi de Finances pour 2023. It remains operative for entities exceeding the applicable revenue threshold and is scheduled for complete elimination on 1 January 2030. The CFE (Cotisation Foncière des Entreprises), a local property-value-based business tax, continues to apply to all entities and individuals conducting professional activity in France.
CFC Classification and US Inclusions
When CFC Rules Apply
A French corporation is a Controlled Foreign Corporation (CFC) under IRC §957 when US shareholders (each owning ≥10% of vote or value) collectively own more than 50% of the total combined voting power or total value. A sole US owner of a French SASU or EURL is a CFC from the first day of ownership.
A US person owning ≥10% of a French corporation is a “US shareholder” under IRC §951(b) and has Form 5471 filing obligations regardless of whether the entity meets the CFC threshold. Subpart F income inclusions (IRC §951) and net CFC tested income inclusions (IRC §951A) apply only when the entity qualifies as a CFC under IRC §957 (when US shareholders collectively own more than 50% of vote or value).
Subpart F Income
Subpart F income (IRC §951) is included in the US shareholder’s gross income in the current year, regardless of whether the French entity distributes any earnings. For a French operating company earning active business income in France, Subpart F income is typically minimal. Passive income streams within the entity (dividends from subsidiaries, interest, royalties, capital gains) may trigger Subpart F inclusions.
GILTI and the High-Tax Exclusion
IRC §951A (as amended by the One Big Beautiful Bill Act, Pub. L. 119-21, for taxable years beginning after 31 December 2025) requires US shareholders to include their pro rata share of the CFC’s net CFC tested income in current-year US income.
French IS and the HTE: The High-Tax Exclusion (HTE) under Treas. Reg. §1.951A-2(c)(7) applies when the effective foreign rate on tested income exceeds 18.9% (90% of the 21% US corporate rate). French IS at the standard 25% rate exceeds this threshold; income taxed at 25% generally qualifies for the HTE and is excluded from the US net CFC tested income inclusion.
The 15% reduced rate tranche: The first €42,500 of IS income for qualifying SMEs is taxed at 15%, which falls below the 18.9% HTE threshold. This portion of income may not qualify for the HTE and may be includable in the net CFC tested income calculation even when the entity pays French IS.
The §250 Deduction: Unavailable to Individual Shareholders
Under IRC §250, a US C-corporation that includes net CFC tested income may deduct 40% of that amount for taxable years beginning after 31 December 2025 (as amended by the One Big Beautiful Bill Act, Pub. L. 119-21), reducing the effective US rate to approximately 12.6% before the indirect foreign tax credit. Individual US shareholders cannot claim the §250 deduction. A US citizen who owns a French SAS or SARL in their own name is taxed on any tested income inclusion at full individual ordinary income rates.
IRC §962 election: Individual US shareholders may elect under IRC §962 to be taxed as if they were a US corporation on net CFC tested income and Subpart F inclusions. This allows access to the §250 deduction and the indirect foreign tax credit under §960. The §962 election is structurally complex: it produces a second layer of US tax when the CFC’s previously included earnings are actually distributed. The election must be modeled across both the inclusion year and the anticipated distribution year before it is made.
Dividend Repatriation
French Withholding Tax
When a French IS-subject entity distributes a dividend to a non-resident shareholder, France withholds at source. The domestic rate for non-EU/EEA shareholders is 25%. The US–France tax treaty (Article 10) reduces this:
| Recipient | Treaty Rate |
|---|---|
| Company holding ≥10% of voting stock | 5% |
| All other beneficial owners (general rate) | 15% |
| Qualifying pension funds and tax-exempt organizations | 0% |
Claiming treaty rates requires filing Form 5000 (attestation de résidence fiscale) with the French paying agent before the distribution. Failure to file results in withholding at the full domestic rate.
French Resident Shareholders
For a US citizen who is also a French tax resident, dividends received from a French entity are subject to the PFU at 30% (12.8% French income tax component plus 17.2% prélèvements sociaux), or to the progressive barème by election. The company’s withholding at source is credited against this liability. See French Income Tax System for PFU mechanics.
Inter-Company Dividends (Régime Mère-Fille)
For French IS-subject holding companies receiving dividends from qualifying French subsidiaries held for at least two years with at least 5% ownership, 95% of the dividend is exempt from IS. The remaining 5% (the “quote-part de frais et charges”) is included in IS income. This participation exemption applies at the corporate level; it is not available to individual shareholders.
Form 5471 Filing Obligations
US persons with qualifying interests in French corporations must file Form 5471 with their annual US Form 1040 or Form 1120. The relevant filing categories are:
| Category | Who Files | When |
|---|---|---|
| 2 | US officer or director of a foreign corporation in which a US person acquires a ≥10% interest | Year of acquisition triggering the US person’s category 3 obligation |
| 3 | US person acquiring ≥10% of a foreign corporation | Year of acquisition |
| 4 | US person who controls a foreign corporation (owns more than 50% of vote or value) | Any year the control condition is met |
| 5 | US shareholder of a CFC | Any year the corporation is a CFC |
A sole US owner of a French SASU who serves as its président falls into categories 3 and 2 in the year of formation, and into categories 4 and 5 in each year the entity remains a CFC.
Penalties: The failure-to-file or incomplete-filing penalty is $10,000 per form per tax year. After IRS notification of a failure, an additional $10,000 penalty accrues for each 30-day period of continued non-filing, up to $50,000 additional per year. Unfiled Forms 5471 may also result in a reduction in the allowable foreign tax credit: 10% of foreign taxes available for credit, with an additional 5% reduction for each 3-month period of non-compliance after 90 days. Penalties are assessed per form per year; multiple entities and multiple unfiled years produce compounding exposure.
US EIN and Form SS-4: Does a French Entity Need One?
A common question when forming a French SAS or SARL is whether the French entity itself must obtain a US Employer Identification Number (EIN) by filing Form SS-4. The answer depends on what US tax obligations the French entity independently has, not on the US shareholder’s obligations.
Form 5471 Does Not Require a French Entity EIN
Form 5471 is filed by the US shareholder on their own US return. It identifies the foreign corporation using a Reference ID Number, which may be the entity’s French SIREN or SIRET number. The French corporation is not required to obtain a US EIN solely because its US shareholder must file Form 5471.
When a French Entity Does Need a US EIN
A French SAS or SARL must obtain a US EIN if it independently has any of the following US tax obligations:
| Obligation | Basis |
|---|---|
| Paying wages to employees in the United States | US payroll tax withholding and reporting obligations |
| Receiving US-source income as a withholding agent | Required to file withholding returns and remit tax to the IRS |
| Owning a US disregarded entity that files Form 5472 | Foreign-owned US disregarded entities must file Form 5472; the foreign parent needs an EIN for that filing |
| Opening a US bank account | Most US banks require an EIN for corporate accounts |
A French SAS or SARL that operates entirely in France, has no US employees, receives no US-source income, and owns no US entities has no independent requirement to obtain a US EIN. The US shareholder files Form 5471 using the French entity’s SIREN or SIRET as the Reference ID Number.
How to Obtain a US EIN (When Required)
Foreign entities with no US principal place of business apply by telephone at +1 267-941-1099 (IRS international line) or by fax or mail to the IRS International Operations center. Form SS-4 is the application form. Processing times vary; telephone applications receive an EIN immediately.
Technical References
Per se corporation classification is established by Treas. Reg. §301.7701-2(b)(8); only the French SA appears on the France entry. Entity classification elections are governed by Treas. Reg. §301.7701-3. The CFC definition is in IRC §957. Subpart F income is governed by IRC §951 and §952 through §965. The net CFC tested income regime (formerly GILTI) and the HTE are governed by IRC §951A as amended by Pub. L. 119-21, and Treas. Reg. §1.951A-2(c)(7). The §250 deduction is in IRC §250 (40% deduction for taxable years beginning after 31 December 2025, per Pub. L. 119-21). The §962 election is in IRC §962 and Treas. Reg. §1.962-1. Form 5471 penalties are in IRC §6038(b). French IS rates are set by Article 219 CGI (verified VIGUEUR, 2026). The participation exemption is governed by Articles 145 and 216 CGI (verified VIGUEUR, 2026). Treaty dividend withholding rates are in Article 10 of the US–France Income Tax Treaty (1994, as amended by the 2004 and 2009 Protocols).