International companies setting up in France benefit from a secure legal framework that offers a wide choice of options concerning the status of their operations and the type of contracts they enter into. They can select those best suited to their position and commercial strategy at every stage, from prospecting to business expansion. In practical terms, companies that opt for a particular status on arrival and wish to change at a later date can do so quite simply. In most cases, the tax impact is also limited. Foreign companies can operate in France without officially registered representation. They may, for example, rent an office or set up operations at a business-service center and open a non-resident bank account. They may also employ one person, to whom they pay a salary plus the relevant social security amounts and other levies. In this case, the employee is responsible for paying these amounts on to the bodies concerned. Once the company has its own premises and/or employs two or more people in France, it must be officially represented by a registered liaison office, branch or subsidiary. Registration takes place with the register of companies (Registre du Commerce et des Sociétés).



» Liaison Office

Liaison office: exempt from corporate income tax and VAT

A company whose activities in France are not of a commercial nature and are limited to advertising, the supply of information, or any other preliminary operation (i.e. "an observation post") may be represented by a liaison office (bureau de liaison).

A representative office of this type is not subject to corporate income tax or VAT, but is liable for some local taxes and wage-based levies. A representative office is suitable for a foreign company simply interested in establishing contacts in France.

The formalities are very simple. It is not subject to company law or accounting standards. As long as no legal acts are performed, the representative need not be registered. As a rule, over time a representative becomes a branch empowered to represent the foreign company. It must then be entered in the trade and companies register, for which reason some court clerk's offices will register representative offices which are destined to be turned into branches.



» Branch

• Necessary for industrial and commercial activities

If the company conducts industrial or commercial activities in France, it must set up a branch office or subsidiary. Branches are considered permanent establishments for tax purposes, and are subject to corporate income tax and VAT. If the company is taxed on its worldwide income in its country of origin, the profits or losses of its branch office are included in its taxable income. However, this inclusion has no effect on tax liabilities of the branch office in France.


• A good temporary arrangement

It is quicker to set up a branch office than a subsidiary. Managed by a legal representative, a branch office operates under the authority of company headquarters and there are no special procedures for decision-making.

Yet there are also drawbacks. In the event of financial difficulties, the company has unlimited liability for the debts of the branch office. A branch office also tends to have a less positive image with potential customers and suppliers, and its status is much less favorable as regards State aid, tax exemptions, taxation of intra-group transactions, etc. In some cases, it may also be difficult to turn it into a subsidiary or sell it at a later date, in particular for tax reasons. As a result, in general it is preferable to set up a subsidiary.

"Commercial activity" refers to any activity involving the signature of documents or contracts by an employee or representative and engaging the responsibility of the foreign company. Examples include contracts for direct sales in France, or contracts for providing services to a customer of the company.

There is no minimum legal capital requirement for branches of foreign companies.

They are managed by one or more managers, whose powers are established and may be limited by the foreign head office.

For legal purposes, a branch is not a separate legal entity; therefore, it is not subject to Commercial Law and, consequently, does not have to produce financial statements.

A tax return must be filed. The French Tax Authorities can investigate the branch record.

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