Practical advice

Guide to "Starting a Business in France"

When setting up a business abroad, questions inevitably arise, particularly regarding the choice of the most suitable legal structure for the host country and the tax implications of establishing a company.

Below you will find answers to the most frequently asked questions about developing a business in France. However, before launching your project in France, we strongly recommend that you consult a professional who can take into account the specific characteristics of your business.

How to set up your business in France?

Foreign companies wishing to market their products or services in France have several options for establishing a presence.

They can create a stable commercial structure (such as a branch or subsidiary) or “explore the market” through a more flexible structure, such as a liaison office.

THE LIAISON OFFICE

The liaison office cannot engage in commercial activity; its purpose is limited to researching and providing technical and pricing information, i.e., preparing commercial contracts between clients and the foreign parent company. Under no circumstances may the liaison office sign contracts or issue invoices on behalf of the parent company. Consequently, it is not subject to corporate income tax or VAT. The office representative, who must reside in France, must obtain a residence permit if they are not a citizen of the European Union.

As the office does not have legal personality, it is not required to register with the trade register. Therefore, if it so wishes, a simple declaration of existence can be filed with the Chamber of Commerce and Industry of the department where it will be located. This process will allow us to obtain a SIREN/SIRET identification number (equivalent to the Spanish NIF/CIF) which will be necessary to communicate with the administration in the context of the office’s tax and social obligations (for example, with social security or the general directorate of labor for matters relating to the office’s employees).

However, it may be necessary, for example, to have a company registration certificate to open a bank account in France. In this case, the company registration must be carried out following the same procedure as for registering a branch.

THE BRANCH AGENCY

Although it does not possess its own legal personality, a branch is considered to manage a business distinct from that of the parent company. Therefore, unlike a liaison office, a branch:

It can conduct business like a French company (and can therefore sign contracts, issue invoices, carry out imports, etc.).
It has tax personality and is therefore subject to the same taxes as a French company (For more information on this subject, see our article “What accounting and tax obligations does a branch of a foreign company in France have?”).
It is mandatory to register with the trade register of the geographical area in which the establishment is located (For more information on this subject, see our article “How to create a branch of a foreign company in France?”).

For registration, the parent company must:

Appoint a legal representative for the branch in France.
Regarding the qualifications of the branch’s legal representative, there are no specific requirements. The foreign parent company may appoint a French or foreign national as the branch’s legal representative, who is not required to reside in France. However, if the branch representative is neither a national nor a resident of an EU Member State and must reside in France, they must apply for a temporary residence permit authorizing them to conduct business in France.
Obtaining an address for the branch in France.
In this regard, French law allows the branch to be registered at its own address (leased or purchased premises), at a registered business address, or directly at the personal address of its legal representative.

THE SUBSIDIARY

If a subsidiary is used to conduct business in France, a legally independent company, governed by French law, must be created. This subsidiary can adopt one of the legal forms provided for under French law: limited liability company (SARL), public limited company (SA), simplified joint-stock company (SAS), limited partnership, etc. With its own legal personality, the subsidiary can enter into contracts and manage its business in France in its own name. It will also be fully subject to French tax law.

May 2016

This document is for informational purposes only and does not take into account the specific circumstances of each case. For complete information tailored to your situation, we recommend consulting a professional. We are available to advise and support you in your project to establish or develop your business in France.

How to create a branch of a foreign company in France?

This notice is for informational purposes only and does not take into account the specific circumstances of each case. For complete information tailored to your situation, we recommend consulting a professional. We are available to advise and support you in your project to establish or develop your business in France.

The application must be accompanied by the following documents:

A duly completed application form with information relating to the foreign company creating the branch (legal form, capital, main activities, information on partners and managers, information on the representative in France).
Two copies of the articles of association of the foreign company.
A certificate from the commercial register of the country of origin of the foreign company or any other official document justifying the existence of the foreign company.
A copy of proof of residence for the location where the branch will be situated (lease agreement, direct debit agreement, etc.).
Documents relating to the identity and powers of the person who will represent the foreign company in France:
– The document appointing the branch representative, if the representative in France is not a legal representative of the parent company.
– Sworn statement from the branch representative regarding the absence of any conviction or civil or administrative sanction prohibiting him from engaging in commercial activity.
– If the representative is a national of a Member State of the European Union, a copy of his/her valid identity card or passport.
– If the representative is a national of a third country:
- If the person resides in France, a copy of the temporary residence permit authorizing them to engage in professional activity;
- If the person does not reside in France, a copy of their valid identity card or passport.
In the event that the person making the registration is not the branch representative, the power of attorney authorizing said person is granted by a legal representative of the company.

Once registered, the permanent establishment can be closed at any time by simply submitting a request to the Trade and Companies Register.

May 2016

This information is provided for guidance purposes only and does not take into account the specific circumstances of each case. For complete information tailored to your situation, we recommend consulting a professional. We are available to advise and support you in your business establishment or development project in France.

What are the accounting and tax obligations to which a branch of a foreign company in France is subject?

Unless otherwise stipulated by the applicable international tax treaty, a branch of a foreign company in France is subject to all business taxes, just like a French company, and must therefore file an annual income statement with the tax authorities.

This obligation to declare profits directly implies the branch’s obligation to keep its own accounts, even if it does not possess capital or specific assets distinct from those of the parent company.

However, the branch is not required to keep accounts under French law and may therefore keep them in accordance with the regulations of the parent company’s country. In all cases, the branch’s taxable profit will be calculated according to the specific principles established by the tax authorities for cases of activity carried out simultaneously in France and abroad.

The main taxes to which a branch of a foreign company is subject include the following:

CORPORATE TAX

The standard corporate tax rate is 33.3% of taxable profit.

A reduced rate of 15% applies to taxpayers whose turnover for the fiscal year was less than €7,630,000 and who meet the following conditions:

The capital of the company wishing to benefit from the reduced rate has been fully paid up;
At least 75% of the company’s capital is owned by natural persons or another company
that meets all the above conditions (turnover less than €7,630,000, fully paid-up capital held by natural persons, up to 75% of the capital).

It should be noted, however, that in the case of foreign companies operating in France, the turnover taken into account by the tax authorities will be that generated by all the group’s operations and not just that generated by the branch in France.

TERRITORIAL ECONOMIC CONTRIBUTION

Any natural or legal person who, carrying out a self-employed professional activity in France, is subject to corporation tax or personal income tax, will also be subject to the “Territorial Economic Contribution” or CET, which consists of:

The Business Property Tax or CFE.

The tax base for this tax is the estimated rental value of the premises used by the company for its business activities during the reference period. However, new establishments benefit from a full exemption in the year of their creation and a 50% reduction in the tax base in the first year of taxation, i.e., the second year following creation.

The applicable rate depends on the location of the premises, as the tax amount is set by the municipalities.

In all cases, all liable companies must pay a minimum amount of the Consumer Price Index (CPI). Thus, even if the company is simply registered in a municipality and therefore does not occupy any premises, it must pay a minimum amount of tax, calculated based on its turnover at the group level.

The Business Value Added Tax or CVAE.

Companies with a turnover exceeding €152,500 (excluding VAT) are also subject to value-added tax (VAT). Turnover is calculated at the group level, not at the level of each individual establishment.

The taxable base is the “value added,” that is, the turnover generated during the reference period, less “attributable expenses” (excluding rent, payroll taxes, and royalties).

The applicable rate is progressive and depends on the company’s turnover. It ranges from 0% for companies with a turnover of less than €500,000 to a maximum of 1.5% for those with an annual turnover exceeding €50 million.

Companies with a turnover between €152,000 and €500,000, even if a rate of 0% is applied, are considered subject to VAT and must therefore make the corresponding declaration.

THE SOCIAL CONTRIBUCTION OF SOLIDARIDAD DE SOCIEDADES

This tax, which will likely be abolished in 2017, applies to companies with annual revenue exceeding €19 million. The taxable base will therefore be the revenue exceeding €19 million.

For foreign companies, the relevant revenue is that generated by their branch in France.

May 2016

This document is for informational purposes only and does not take into account the specific circumstances of each case. For complete information tailored to your situation, we recommend consulting a professional. We are available to advise and assist you with your business establishment or development project in France.

How to transfer employees from a foreign company to France?

A company established abroad may temporarily second its employees to France to carry out a specific task or service.

The transfer of employees from the foreign company can take place in two cases:

Intragroup mobility, that is to say the provision of employees from the foreign company to a subsidiary or branch established in France;
The performance of a service provision, that is, the direct provision of workers from the foreign company to the client within the framework of the execution of a service contract.

In both cases, you must:

NOTIFY IN ADVANCE THE STAFF BEING REPLACED

This declaration must be made to the Regional Directorate for Enterprises, Competition, Consumer Affairs, Labour and Employment (DIRECCTE) of the region where the workers will be transferred.

Demonstrate that the foreign company was not established solely for the purpose of relocating workers who might be subject to less favorable labor laws.
To this end, it is necessary to prove that the foreign company conducts significant business activity in its country of origin, demonstrating that it is legally established there and that its incorporation and management comply with the laws of that country.
Ensure that the contractual link between the foreign company and the posted worker exists before and throughout the duration of the posting.
Appoint a representative of the foreign company in France who will be the point of contact with the French administration for the duration of the service.

OBTAIN THE NECESSARY WORK PERMITS TO WORK IN FRANCE.

Regarding this requirement, it should be clarified that only workers posted from a third country and who are not EU nationals will need a work permit to be posted to France.

Indeed, in accordance with the principle of free movement of workers, EU nationals and third-country nationals posted by a company legally established in an EU Member State may be exempt from the work permit requirement.

However, in the latter case, the work permit exemption will be subject to compliance with the following criteria:

To be a regular employee of the community company that moves them;
The holder of an authorization to leave the workplace for countries of the European Union, valid for a fixed period (and which expires after the duration of the leave);
To be relocated to take up the same job one held in one’s country of origin.

The procedures for obtaining work permits will depend on the type of travel undertaken, i.e. whether it is an intra-group move (a) or a move for the purpose of providing services (b).

Relocation of employees as part of intra-group mobility

To obtain a work permit for workers who wish to be transferred, for a period exceeding three months, to a subsidiary or branch of the foreign company in France, the following conditions must be met:

- The posted worker must have worked for the foreign company for at least three months before applying for authorization.
- The work assignment in France must have a minimum duration of three months.
- The worker must provide the French company that will host him with specific technical knowledge.
- The worker must receive in France a gross remuneration at least equal to
  the French minimum wage (as provided for by the collective agreement applicable in France) x 1.5.

If these conditions are met, the company must submit the work permit application to the Direccte accompanied by several supporting documents, which must include:

- A letter explaining the worker’s mission and the functions he/she will perform in France;
- Your curriculum vitae or any other evidence of your qualifications and professional experience;
- The initial employment contract between the posted worker and the foreign company.
- or an equivalent document that can justify the employee’s seniority within the company;
- Registration in the trade register of the French subsidiary or branch that will host the workers;
- Supporting documents relating to the links between the French subsidiary or branch and the foreign company.

If the French authorities approve the work permit application, the French consulate in the country where the foreign company is established will send the worker a certified employment contract, approved by the immigration services, along with a renewable three-year “worker on assignment” residence permit.

Once in France, the posted worker must provide proof annually that the employment and salary conditions are maintained. If these conditions are no longer met, despite the initial three-year period, the immigration services may revoke the residence permit.

Travel of workers in the context of the performance of a service

If the foreign company wishes to transfer its workers to the premises of the French client as part of the execution of a service contract, the following conditions must be met:

- The contractual relationship between the foreign company and the posted worker must exist before and throughout the entire duration of the posting. In other words, a relationship of subordination with the posted worker must exist for the entire duration of their employment.
- The salary of a posted worker must be equivalent to that of a French worker occupying the same position.

If these conditions are met, the foreign company must submit the work permit application to the Direccte accompanied by several supporting documents, which must include:

- a letter explaining the worker’s mission and the functions he/she will perform in France;
- A document justifying the price the client will pay for the contractual service.

After processing the application, the French consulate in the country where the foreign company is established will issue the employee an employment contract, certified by the immigration authorities, as well as a long-stay visa for temporary workers.

This visa has a maximum duration of 12 months. Upon its expiration, it can be renewed for another 12-month period, after which the employee will be issued a temporary work permit (not just a visa). This permit is renewable indefinitely for periods of 12 months for the entire duration of the employee’s assignment.

May 2016

This information sheet is provided for informational purposes only and does not take into account the specific circumstances of each case. For complete information tailored to your situation, it is recommended that you consult a professional. We are available to advise and assist you with your business establishment or development project in France.