Liberal Professions Practised Through a Company: The Headache of Professional Practice Companies

A Change in Tax Regime as of January 1, 2024

Remuneration paid to managers had not previously raised any tax issues, as it was taxable under the “wages and salaries” category.
However, since January 1, 2024, the technical remuneration received by partners in professional practice companies (sociétés d’exercice libéral, or SELs) must, in principle, be taxed under the “non-commercial profits” (Bénéfices Non Commerciaux, or BNC) category.

A clear distinction must now be made between remuneration for managerial duties and remuneration for technical functions (e.g. lawyers, doctors, etc.).
This change, which stems from consistent case law by the Conseil d’État, was clarified in the BOFiP, particularly in a rescript dated April 24, 2024.

Previous Tax Treatment of Remuneration in SELs

Until recently, technical remuneration received by SEL partners was taxed under the progressive income tax scale in the “wages and salaries” category.
The remuneration of majority managers in SELARLs (private limited SELs) and managers of SELCAs (limited partnership SELs) was taxed under Article 62 of the French General Tax Code (CGI), and thus also treated as wages and salaries. These individuals benefited from a standard 10% deduction for professional expenses.

A New Interpretation: BNC for Technical Activity

From now on, “Remuneration received by SEL partners for the exercise of their liberal profession within the company is, in principle, taxed in the BNC category.” (BOI-RES-BNC-000136)

Therefore, in the case of majority managers in SELARLs and managers in SELCAs, a clear distinction must be made between:

• Remuneration received for the liberal activity (BNC), and
• Remuneration received for managerial duties (Article 62 – wages and salaries).

Managerial Functions: A Defined Scope

The BOFiP (BOI-RSA-GER-10-30) specifies that remuneration for managerial duties includes actions such as convening general meetings, representing the company in dealings with partners and third parties, or deciding to move the company’s registered office.

Conversely, client or patient billing, payment collection, appointment scheduling, or team management are considered part of the liberal activity.

The Case of Inseparable Functions

However, if managerial and professional functions are inseparable, all related remuneration will be taxed under Article 62 (as wages and salaries).
In such cases, it is the manager’s responsibility “to provide by any means all evidence necessary to justify this inseparability.” (BOI-RSA-GER-10-30)

The 5% Flat-Rate Deduction Overturned by the Conseil d’État

The tax authorities had previously accepted a flat-rate approach, allowing 5% of total remuneration to be considered managerial income — whether or not it could be clearly distinguished from income related to the liberal activity.

Following a challenge for abuse of power, the Conseil d’État annulled the relevant BOFiPs that:

• Accepted the 5% flat-rate for majority managers in SELARLs, and
• Classified certain tasks (like appointment scheduling or billing) as inherently part of the liberal activity.

(Conseil d’État, April 8, 2025, No. 49214)

Specifically, the Conseil d’État annulled the inclusion of the terms “client or patient billing, payment collection, appointment scheduling, supply procurement, team management” in point 530 of BOI-RSA-GER-10-30.
The 5% rule was deemed an addition to the law and thus invalidated.

Dual Taxation Depending on the Nature of Duties

Therefore:

• Remuneration received by majority managers in SELARLs for their corporate office continues to be taxed under Article 62 of the CGI.
• Technical remuneration — for the liberal professional activity — is now taxed under the BNC category.

The tax administration does allow for an exception: if there is a subordination link between the partner and the SEL, then income may still be taxed as wages and salaries.

As such, careful attention must be paid when declaring the income of SELARL managers, ensuring a clear distinction between the two types of remuneration.

Possibility of Using the Micro-BNC Regime

Since technical remuneration is now taxed under the BNC category, the rescript published in the BOFiP on April 24, 2024, states that SEL partners can benefit from the micro-BNC regime, subject to meeting the income thresholds.

Reminder: The micro-BNC regime applies if annual pre-tax revenue from non-commercial activities is less than €77,700.

If eligible, a 34% standard deduction applies to the income.
SEL partners may also deduct certain expenses from their income, provided these are:

• Not expenses that should be borne by the SEL as part of its regular operations.
• Directly related to their technical functions, and