The reduced corporate tax rate (IS) of 15% is a valuable tax advantage for small businesses, particularly for start-ups and growing companies. However, a recent ruling from the Council of State, confirmed by administrative courts, reminds us that a misinterpretation of its application conditions can lead to a tax adjustment.

Following a new clarification on March 13, 2025 (ruling CE, March 13, 2025, n° 481538, Sté TDA) and a statement from the tax administration, companies belonging to a group, even if not fiscally integrated, are invited to check their situation and regularize before May 20, 2026 without penalty.

This article proposed by PRAX Avocats, a firm of lawyers specialized in business law and legal advice for start-ups, clearly explains the stakes, risks, and actions to be taken.

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1. The context: a reminder of the reduced IS rate rule

The reduced IS rate of 15% applies, under certain conditions, to the portion of taxable profit below €42,500 (for the 2025 fiscal year). This favorable regime was designed to support independent SMEs, particularly innovative young companies and start-ups whose cash flow is often fragile.

To benefit from this rate, several cumulative criteria must be met, including the revenue threshold: the company must not exceed €10 million in revenue (as defined in b of I of Article 219 of the General Tax Code).

Until recently, many companies applied this threshold at the level of the company itself. However, case law has modified this interpretation.

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2. A major clarification: analysis at the group level

In its decision of March 13, 2025, the Council of State specified that to verify compliance with the revenue threshold, it is necessary to consider not only the revenue of the beneficiary company but also that of the related companies belonging to the same economic group, as defined by European regulations on state aid.

In practical terms, this means that if your start-up is majority-owned by a holding company, or if it holds significant stakes in other companies, the revenue of these entities must be aggregated to assess eligibility for the reduced rate.

In other words, even without formal fiscal integration, the entire group is taken into account.

Concrete example

A start-up A generates revenue of €5 million and applies the reduced rate of 15%. It is 80% owned by a holding B that generates €12 million in revenue. The economic group thus exceeds €10 million: company A can no longer benefit from the reduced rate, even if it is legally autonomous.

This interpretation was confirmed by the Administrative Court of Appeal of Lyon, in its decision of April 9, 2026 (CAA Lyon, n° 24LY00243, SARL SELAE), explicitly rejecting the request of a subsidiary company that incorrectly applied the reduced rate.

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3. Regularization: a grace period until May 20, 2026

Following these decisions, the tax administration published a statement on impots.gouv.fr inviting companies to spontaneously regularize past fiscal years.

Affected companies are encouraged to file corrective IS declarations before May 20, 2026. The statement specifies that no penalties will be applied for regularizations made within this timeframe.

This is a valuable opportunity for companies that, often in good faith, applied the reduced rate without identifying the concept of "economic group."

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4. Impacts for start-ups and innovative companies

For many start-ups, especially those that have structured their activities around a holding or investment vehicle, these decisions have direct consequences on their tax optimization.

a. Increased vigilance on capital structuring

Structures in a "group" in the broad sense — even if not fiscally integrated — must now analyze the economic and capital links that unite them. Simply having a controlling shareholder exceeding the thresholds can compromise eligibility for the reduced IS rate.

b. Cash flow issues

The challenge to the reduced rate can generate a significant tax reassessment, especially if the normal rate (25%) applies retroactively over several fiscal years. Hence the importance of proactive regularization before May 20, 2026, to avoid penalties.

c. An opportunity for compliance

This transitional period offers the chance to secure the tax policy and adapt the legal structure to growth prospects. Start-ups can, for example, rethink their grouped organization or review their capital holding choices to remain within the framework of state aid.

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5. Best practices to adopt

To reduce the risk of reassessment and secure your tax situation, some essential reflexes are necessary.

1. Conduct a group audit

Identify all existing capital and control links between companies. The goal is to determine the existence of an economic group under European law.

2. Reconstruct the tax bases

Simulate your tax result according to the normal rate and compare it to that declared at the reduced rate. This will allow you to assess the financial impact of a potential regularization.

3. Regularize within the deadlines

If an error is found, file a corrective declaration before May 20, 2026. This voluntary step will protect you from any penalties.

4. Anticipate future tax decisions

The administration's criteria may still evolve, particularly under the influence of European law and the notion of "related companies." Specialized legal support remains essential to adjust your tax strategy.

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6. Support from PRAX Avocats

At PRAX Avocats, our teams support start-ups, entrepreneurs, and business leaders daily in their tax and legal decisions.

Our approach is based on three pillars:

Expertise: a technical mastery of tax law and business law.

Pragmatism: concrete solutions tailored to your structure.

Proximity: human and customized support, accessible even to non-lawyers.

Our lawyers in business legal advice can help you:

Analyze your situation regarding the group threshold,
Identify risks related to a misapplication of the reduced rate,
Prepare your regularization within the set deadlines,
Adapt your legal structure to sustainably optimize your tax situation.

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Conclusion

The recent decisions of the Council of State and the Lyon Administrative Court of Appeal remind us that the reduced IS rate is not automatic when a company belongs to a group, even if not fiscally integrated. For start-ups and innovative companies, the stakes are twofold: avoid past mistakes and secure future tax choices.

The good news: regularization without penalty is still possible until May 20, 2026.

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Need support to secure your tax situation?

Contact the firm PRAX Avocats for a personalized assessment of your eligibility for the reduced corporate tax rate and to bring your company into compliance with peace of mind.

Reduced corporate tax rate: beware of eligibility conditions in case of group membership.