27 Nov The complete guide for a foreign company to do business in FranceEmail This Post
The French Republic (France) is the largest country of the European Union. It also crowns as the second largest economy in the European Union and fifth largest in the world. In fact, it is one of the top 10 countries in the world in terms of GDP.
The territories of France extend from the Mediterranean Sea to the English Channel and the North Sea, and from the Rhine to the Atlantic Ocean. Thanks to its geographic location in the heart of Western Europe, it boasts of a world-class transport network with over 11,000 km of motorway and high-speed train links to other European cities.
The country offers a business-friendly environment with cooperative government, favourable tax laws and legal framework in line with European standards. With an emerging economy and strong public facilities, it is an ideal place to do business.
This article covers everything you need to know about doing business in France, right from understanding the country’s tax and legal compliances to knowing about the types of business entities that can be formed.
Doing Business in France
France has a well-developed economy and is known to have one of the highest Human Development Index in the world. The economy is based on a strong private sector as well as on a national economy. The major business sectors in the county are tourism, electronics, transportation, food processing, textiles and chemicals. Apart from a large industrial base, France is also known for having substantial agricultural resources and a highly skilled workforce.
As per the ‘Ease of Doing Business Report’ of The World Bank, France ranks 32 for the 2019 survey.
Types of Business Entities for Incorporation in France
You can incorporate the following types of business entities in France:
- Société à Responsabilité Limitée – Requires minimum 2 and maximum 50 shareholders and a managing director.
- Entreprise Unipersonelle à Responsabilité Limitée – This is a sole trader and requires only one shareholder.
- Société Anonyme – Requires minimum 7 shareholders and there is no upper cap. It is run by the board of directors.
- Société par Actions Simplifiées – Requires minimum 2 shareholders and minimum capital requirement is € 2,300.
- Société par Actions Simplifiées Unipersonnelle – This is set up by a single person and minimum capital requirement is € 37,000 or € 225,000.
- Société Civile Professionelle – This business structure is limited to certain regulated professions.
- Société d’Exercice Libérale – This is similar to the limited liability company, simplified joint stock company and public limited company, for specific professions.
- Société Civile – This is a non-commercial partnership.
- Société en Nom Collectif – This is a general partnership.
- Franchises – This is contract with the franchiser.
- Partnerships – This is identical to the franchise contract, the only difference being it is not standardized.
- Bureau de Liaison – This is a representative office.
- Branch – This is a branch office of a larger company.
- Subsidiary – This is set up by the French company using standard business entities.
- Location Gérance – In this business structure, the owner of the business rents his business to others.
- Associations – This is a non-profit association.
Depending on the type of entity that you choose to incorporate, the rules and regulations vary. Every type has its own advantages and disadvantages. Therefore, one must analyse all the conditions before incorporating a business entity in France.
Benefits of Registering a Company in France
Some of the advantages of registering a company in France include:
- World-class infrastructure with good public facilities
- Skilled labour force
- Conducive business environment
- Strong legal framework which is in line with European standards
- No restriction on the investors to open a bank account or apply for a loan in France
- Excellent intellectual property protection regimes and tax incentives for creation, holding and disposal of rights therein.
Tax Registration and Filing in France
The corporate taxation in France is based on the territorial principle. All kinds of foreign companies carrying on business activity in France are required to pay corporate tax on their profits earned from French sources. However, French companies that are carrying on a trade or business outside France are not taxed at all.
Corporate Income Tax (CIT) Rate
|33⅓% (prepaid in four instalments)|
|Capital Gains Tax Rate||0/15/33⅓|
|Branch Tax Rate||33⅓%|
|Value-Added Tax (VAT)||2.1/5.5/10/20 %|
|Business Activity Tax||3%|
|Royalties from Patents, Know-how||33⅓/75|
|Branch Remittance Tax||30%|
|Tax Return Filing||Within three months following the end of their Financial Year|
|Corporate Tax Instalment||Companies having financial year ending on 31 December must pay the instalments on 15 March, 15 June, 15 September and 15 December|
France’s Double Taxation Treaties
France has double taxation treaties with more than 100 countries including Singapore, India and Middle East nations like the United Arab Emirates, Oman, Qatar and Iran among others.
Legal and Compliance Requirements in France
All incorporated entities in France are required to comply with the below-mentioned laws:
- Foreign direct investments in France are subject to an administrative declaration. However, certain sensitive sectors are an exception.
- All incorporated entities are required to file their financial statements within 1 month of completion of the annual general meeting at the Registry of the Commercial Court.
- All incorporated entities are required to prepare a management report.
- It is mandatory for all large and medium size companies to prepare and file consolidated financial statements along with the group management report. The same must be audited.
- The consolidated financial statements must be prepared in accordance with the standards issued by the French Accounting Regulation Committee (CRC 99-02; “Consolidated French GAAP”).
- While hiring any employee, it is the duty of the employer to verify that the immigration rules are properly followed and declaration formalities are completed.
Company Secretarial Compliance in France
Before starting a business in France, following secretarial compliances are required to be followed:
- All companies in France are required to have a registered office of their own.
- Companies must hold the general meeting within 6 months after the balance sheet date.
- All companies must prepare full financial statements including balance sheet, profit and loss statement and notes to the financial statements.
- Small and medium sized companies or LLCs can file abbreviated financial statements with the Registry of the Commercial Court.
- An intimation must be sent to the Registry of the Commercial Court in the prescribed application for any change in the company details.
It is mandatory for the companies in France to prepare accounting statements in accordance with the French GAAP. It is mandatory for public companies to publish International Financial Reporting Standards (IFRS) accounts annually. Moreover, Listed Companies have to prepare a group financial statement based on the IFRS. All the other companies or LLCs are required to prepare their annual financial statements based on the widely known accounting principles of the French Commercial Code and the General Accounting Chart (Plan Comptable Général; “French GAAP”).
As per the French law, all French companies and LLCs have to get their annual financial statements audited along with the consolidated financial statements. However, an exemption is available for small private corporations and LLCs. Typically, shareholders appoint the auditors by a resolution or by the constitution of the entity, for a period of six years.