Doing business in France

Business forms in France


- A branch is the French office of a company whose head office is located in a foreign country

- It is not a legal entity separate from its foreign head office,

- The foreign company has to register at the French local Trade Register within fifteen days of initiating business in France,

- The manager employed by the head office is entitled to contract with third parties.


- A sole shareholder (individual or legal entity),

- Minimum paid-in capital : none,

- Incorporation by private agreement (by-laws),

- Appointment of one or several managers (shareholder or not),

-The manager not shareholder or who owns less than 50% is considered as an employee (if not, as an independent professional).


- 2 to 50 shareholders (individual or legal entity),

- Minimum paid-in capital : none,

- Incorporation by private agreement (by-laws),

- Appointment of one or several managers (shareholder or not),

- Manager not shareholder or who owns less than 50% is considered as an employee (if not, as an independent professional).

4. SA

- At least 7 shareholders (individual or legal entity),

- Minimum share capital : €. 37.000 (payment of only one-half authorised when setting up the company),

- Incorporation by private agreement (by-laws),

- Appointment of a board of directors (individual and shareholder) with at least 3 members, who will elect a chairman and possibly a managing director,

- The chairman and managing director are considered as employees.

5. SAS

- At least 1 shareholder (individual or legal entity),

- Minimum share capital : €. 37.000 (payment of only one-half authorised when setting up the company),

- Icorporation by private agreement (by-laws),

- Apointment of a chairman (legal entity or individual),

5. General remarks (companies and branches)

- All French business entities must carry out their bookkeeping according to French accounting principles and methods.

- Annual Accounts (balance sheet, profit and loss account and notes) and Income tax return : preparation on a yearly basis.

- Statutory auditor (appointed for 6 financial years) :

• SA and SAS are submitted to statutory audit.

• SARL and EURL, when they reach certain limits (assets : 1.5 ME, revenues : 3 ME, employees : 50) are also submitted to statutory audit.

- The General Meeting must be held annually no later than six months after the end of the fiscal year to approve the Annual Accounts.

- Withholding tax at a 5% rate is due by :

• French subsidiaries, in case of distribution of dividends to their US parent company,

• French branches of US company, as their profits are deemed also distributed annually (tax refundable after 3 years).


- One individual, not a legal entity in France

- Contacts in France with companies on behalf of the foreign company but the nature and extent of his operations must never rise to the level of trade activity.

- Registered to the Social Security under his own name and personal address,

- Governed by French Labor Law, with a French labour contract,

- All French labor rules apply (CBA, paid holidays, dismissal procedures, etc…),

- All social contributions paid on a quarterly basis.

Tax issues


- The corporate income tax applies to the net income (difference between the company’s income and expenses).

- The corporate income tax rate is 33.33% for 2008.

- Down payments payable each quarter, the balance within 3 months following the fiscal year end.

- A total exemption from corporate income taxation (then degressive) is granted to new companies under the following conditions :

• The company is set up in an underprivileged area,

• The capital of the entity is directly or indirectly owned by other companies by less than 50%.

- When the above conditions are met, the tax exemption is calculated as follows :

• 100% for gains recorded for the two years following the year of creation,

• respectively 75%, 50%, 25% for gains recorded for the three following years.

2. VALUE-ADDED TAX : 19.6%

- VAT to be paid for one month =

- VAT on sales - VAT on purchases for the month.

- VAT becomes payable when :

• delivery is effective (supplies of goods),

• payment is made (supplies of services).

- In case of VAT credit, a VAT refund is possible on a quarterly basis.

Payroll and Social rules in France


Relations between employers and employees are governed by :

- Labor Code

- Collective bargaining agreements (CBA)

- Individual employment contracts

Labor code

- minimum legal term and conditions of employment.


- agreement signed at a national or local level between employer associations and the most representative employee unions,

- applies to all companies of the same sector of activity,

- covers many matters in connection with employment = job descriptions & levels, working time, days off for marriage or birth, paid leave, termination, etc…

Individual employment contract

- prepared according to the French Labor Law and to the CBA,

- must comply with a number of rules,

- definite or undefinite term contracts in French,

- divides management level employees (executives) and general employees (non executives).



- fixed in connection with applicable CBA,

- equal to at least the minimum applicable legal wage,

- include benefits in kind mandated by law, regulations, CBA, or even customary practice in the business sector.

Hours worked

- average workweek = 35 hours generally spread over 5 days,

- employer has 130 hours per annum of overtime available unless otherwise expressed by the CBA,

- most management (executives) level employees are not entitled to overtime.

Paid holidays & vacation

- approximately 10 national holidays per year (May 1st, is the only compulsory national holiday paid),

- employee ’s right to paid vacation calculated according to a reference year,

- reference year = June 1, N to May 31, N+1,

- employee working a full year = 5-week paid vacation (25 days).


1 / Reasons

- end of term (definite-term contracts),

- employee resigns,

- employee or employer has breached the contract = personal dismissal,

- employer has encountered financial difficulties or undertakes a reorganization = economic discharge.

2 / Dismissals

- procedural rules = convocation letter, pre-dismissal meeting, notification letter,

- variety of dismissal indemnities= notice indemnity, dismissal indemnity, vacation pay indemnity,

- employee & employer do not agree = transaction indemnities to avoid long and costly legal actions.


Social security system & coverage

French social security system is composed of 3 types of institutions :

- Social Security system & unemployment

- retirement schemes

- health & mutual insurance plans

Applies to all employers established in France.

Costs (rough estimates)

The social security (URSSAF) contributions are the most important.

Split in 3 types of risks :

- social insurance covering sickness, maternity, disability, old age and death,

- familly allowances covering payments to families who cannot afford correct housing, education and child care,

- occupational illness & accident = covers the financial cost of professional accidents or illnesses.

Unemployment system= managed by the ASSEDIC who is the institution from which the unemployed receive their benefits.

Retirement schemes

Compulsory retirement pension system= funds current pension obligations through payment of a set amount per retirement point earned by qualified pensioners.

Insurance plans

compulsory death benefit plan (providency) = pays death benefit to survivors and invalidity insurance

Providency = compulsory for executives / optional for non executives

Mutual insurance = pays for the medical costs not covered by the original social security body membership to mutual insurance is purely optional

Contributions & payments

system is financed by contributions from both employers and employees,

- contributions are based on the gross compensation and on fixed annual ceilings given annually by the Social Security,

- employer withholds each month employer and employee contributions and is liable for both payments,

- Companies ‹ 10 employees = Payments made on a quarterly basis,

- Companies ‹ 10 employees = monthly payments for Social Security and unemployment + quarterly payments for the rest,

- !!! Unlike some other countries, France does not practice withholding at source on the monthly pay slip. On the basis of the employees annual income tax declaration, the Tax authorities calculate the tax and issue a bill.