France continues to be the most attractive European country for foreign investors. We explain how to make the most of French government incentives to encourage investment
France is a founding member of the European Union and the second-largest economy in the bloc. Its world-class business sectors range from aerospace to heavy industry, luxury goods, construction, banking and energy.
The French government has introduced a raft of reforms aimed at bolstering the national economy and attracting international investors.
With 1,222 new foreign investment decisions in 2021, France remained the most attractive country in Europe for foreign investment for the third year in a row.
The country is also rebounding more strongly post-pandemic than its neighbours, according to a report from business consultants EY.
1. Make the most of government support
The EUR100bn Relaunch France package – one of Europe’s most ambitious stimulus packages – aims to make it easier for foreign investors to set up business.
It has also reduced corporate tax.
Foreign companies can now access the same subsidies as French companies to support investments, research and development (R&D), vocational training and job creation.
Innovative businesses can benefit from an extensive network of incubators and accelerators all over France.
These include Station F in Paris, the world’s biggest start-up campus, which is attracting many foreign companies.
In addition, the French Tech Visa offers a simplified fast-track scheme for non-EU start-up employees, founders and investors who want a French residence permit.
2. Decide on the type of entity you wish to set up
The choice of entity depends on the investor’s business strategy and how much independence the French operations are expected to have from their parent company.
The business structure will determine its legal status, taxes, assets and employment relations. The entity’s form can be changed as the business grows.
Foreign companies planning to prospect for business in France can opt to open a liaison office, hire a single employee in France or send an existing employee to France as a representative.
The most common business entities for international investors include:
- Liaison offices
- Branch offices
There are several options for forming a subsidiary in France, catering for different needs and expectations. The most popular with foreign investors are:
- Limited liability company (SARL)
- Simplified limited company (SAS)
3. Understand tax law
Business profits are liable for corporate tax only if derived from a business operated in France, real estate assets located in France or activities taxable in France under a double tax treaty.
As of 1 January 2022, the standard corporate tax rate is 25%, irrespective of profits.
France levies personal income tax on French residents in respect of their worldwide income, and on non-residents in respect of their French income only.
The highest personal tax rate is 45% plus an additional levy of up to 4%, resulting in a 49% maximum rate (excluding social security contributions).
A pay-as-you-earn (PAYE) withholding tax system on employment income has been in effect since 1 January 2019.
Dividends paid to non-resident corporate shareholders are subject to withholding tax.
4. Comply with social security and HR requirements
Both employer and employee pay social security contributions calculated as a percentage of the employee’s income.
The employee’s share, which ranges between 22% and 27% of gross salary, goes towards health insurance, unemployment insurance and the national pension scheme.
The employer deducts contributions from the employee’s income and transfers them to the relevant government agency. The employer’s share ranges from between 45% and 50% of the employee’s gross salary.
A Social and Economic Committee (CSE) must be elected in all companies with at least 11 employees for 12 consecutive months.
In companies with 50 or more staff, the committee must be consulted on all projects affecting health and safety issues, general running of the company and its economic or legal structure. For collective redundancies, specific consultations are required.
5. Get the correct work permits for your staff
EU, European Economic Area and Switzerland nationals have the right to work in France provided they have valid identification.
Non-EU nationals must obtain either a work permit or a visa allowing them to work in France.
If the non-EU national lives outside France, their employer must apply for a work permit from the local authorities. If the prospective non-EU employee already lives in France, the employer must ensure they hold a valid visa.
How Intertrust Group can help you in France
Before entering the French market, foreign investors should rely on professional advice to navigate these complex matters.
Working with a trusted partner is, therefore, essential. We are experts in management and administration services for operational companies and holding structures across the globe.
In France, we ensure compliance with French accounting rules, cash management and company secretary services – including legal matters – as well as company directorships for clients based overseas.
Why Intertrust Group?
- Intertrust Group is a publicly listed company with more than 70 years’ experience providing world-class trust and corporate services to clients around the world.
- We are experts in management and administration services to operational companies and holding structures across the globe.
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