Offshore Company in France

1. Why France?

France possesses the fifth largest economy by nominal GDP eighth largest economy by purchasing power parity. France is the largest state in the Europe behind Russia and Ukraine, and has a very good infrastructure and communication networks: high speed trains (TGV) network, Euro star. France is also the top tourist destination worldwide, receiving 82 million foreign tourists annually.

2. Legal Framework

The French Legal System is constituted of a set of written and codified laws. The French legal system is characterized by the principle of separation between legislative, executive and judicial powers.

     The French legal system is divided into:

1. Public law- subdivided into several branches among which: constitutional law, administrative law, finance law, European law, and on public procurement law - and
2. Private law - divided into many branches among which: civil law, criminal law, company law, labor law.

3. Banking

The financial and banking sector plays an important role in the French economy. In late 2008, 36 French credit and investment institutions were listed on the Stock Exchange, and over the last ten years this sector has represented on average 2.7% of France's GDP. In 2008, 722 credit institutions were operating in France among which there were 394 banks with a network of 27,500 branches.

    However, over the last decade this sector has undergone a deep restructuring which has resulted in a significant decrease of the number of credit organizations. Consequently, today nearly half of the operating credit institutions belongs to only six groups.

4. Financial Regulatory Authority

French banking activity is regulated by different bodies, among which the French central bank (Banque de France), which is responsible for verifying the stability of the banking and financial system, and the respect of the compulsory legal; requirements in matter of financial ratios.

   The French central bank is part of the European Central Bank (ECB) and the European. It participates in the most important international debates: international Monetary Fund, meetings of G7 and G20, meetings of the Basel Committee on banking supervision.

    Beside the French national Bank, the financial Markets Authority (AMF) is an independent agency whose mission is to ensure the protection of saving investments and financial markets at the European and International level.

5. Taxation

5. a. Corporate Tax

The standard corporate tax rates amounts to 33.33%. An additional social security levy of 3.3%, calculated on the basis of the reference amount of corporate tax less Euros 763,000 is applied at the standard rate exceeds Euros 2,289,000.

      For small businesses (under conditions) the corporate tax rate amounts to 15% on the First Euros 38,120 profit, and then 33.33% on the remaining profits.

      Capital gains on the sale of shareholdings are totally exempt, except for the 5% representing expenses.

        Losses can be carried forward indefinitely. It is also possible to deduct the current year's losses from income in the 3 previous years (carry back). Moreover French businesses may be subject to others taxes such as: taxes on immovable, social taxes, etc..

5. b. Personal Tax Rates

Resident individual of France is taxed on his worldwide income while non resident individual of French is taxed on his individual French source income (or, if he is not resident of country having signed tax treaty with France and dispose of residence in France, on three times rental value if higher than their French source income) subject to tax treaty provisions.
    Individual income tax is assessed per household. total net income is total of net results of each taxpayer's income categories. Rates vary from 0% to maximum of 40% for 2010.


5. c. Social Security


The French Social Security system consists in two main statutory schemes:

1. The compulsory general scheme for all workers, covering health insurance unemployment insurance and pension scheme. Contributions are calculated on the basis of percentage rates decided at national level and are borne partly by employers and partly by employees. The total contributions rate of the general scheme varies depending on wages, from 19% to 21% of the wages for the employees, and  30% to 42% of the wages for the employers.
2. The health insurance scheme and the compulsory basic and supplementary pension schemes for self employed workers, which covers non-salaried workers.

The contribution rate depends on the basis of calculation (earnings) used and represents the average of 30% of gross income.


5. d. Customs & Excise Duties


As an EU member State, France customs regulations follow European Union Customs Procedures. In general goods from other EU member's state are subject to VAT, while good from outside the EU are subject to Customs and Excise rules.
   Exemptions of customs duties may apply to merchandise that merely passes through France, that stays in France only temporarily, that is imported in order to be re exported later after modification in France, or that is re imported after having been exported. Excise taxes apply to intra community transactions bearing on specific products such as mineral oil, alcohol, alcoholic beverages and tobacco. Said taxes become due when products are put on market at rates varying depending on nature of products.


5. e. V.A.T.


Value-added tax (VAT) is noncumulative tax levied at every stage of production, distribution, delivery of goods or services. Burden of tax is generally borne in final consumer.
Normal VAT rate is 19.6% and low rate is 5.5%.


5. f. Tax Incentives:


1. Research tax Credit- The French Research tax credit (RTC) is very attractive. It is the first support measure to encourage Research & Development in France. It represents a budget of Euro 3 bn in 2008 and concerns nearly subject to income tax, spending money on eligible expenses on research is entitled to benefit from the Research tax credit.


2.  Innovative young companies- Specific measures have been taken to help new companies whose R&D expenses represent at least 15% of their tax deductible costs. Conditions: small and medium-sized Companies with less than 250 employees, whose sales are inferior to Euro 50 m and total assets inferior to Euro 43 m. The incentive is granted for a period of eight years from the setting up of the company.


3.  Other Incentives- Besides the Research tax credit and the Innovative new Companies incentive, other tax credits are granted to certain sectors of activity: film and audiovisual industry, fashion and leather industries.

6. Main Types of Corporate Forms

1. Corporations in General - French corporations are either "societe anonyme" ("S.A."), "societe par actions simplifiee" ("S.A.S."), "societe en commandite par actions" ("S.C.A.") or "societe a responsabilite limitee" ("S.C.A.") or  "societe a responsabilite limitee" ("S.A.R.L."). Liability of shareholders of these companies is limited to amount of their investment.
2. Foreign corporations -  Such corporations desiring to do business in France through branch must comply with exchange control regulation. Foreign corporations doing business in France are subject to same taxation as French corporations for profits made in France, but with special provisions with regard to dividends.
3. Partnerships - French partnerships are either simple ("societes en commandite simple"), or special by shares ("societes en commandite par actions"). there is also form of association similar to joint venture ("societe en participation"). All forms of partnerships except "societe en participation" are subject to bankruptcy proceedings.

7. Company Incorporation

There are no administrative restrictions on foreign investments in France, but some business sectors require special declarations or permits, and some activities are regulated or require the possession of diplomas.

    Companies wishing to prospect for business in France can start by hiring one employee or opening a 'liaison office'. These two solutions do not involve the creation of a permanent establishment and there is no tax impact, as long as the company does not make any profit in France.

    If the company wants to open a permanent establishment in France, it can open a branch or a subsidiary. Both of them are permanent establishments subject to taxation in France, and must be registered with the registry of trade and companies ("Registre du commerce et des societes").

   The registration of a business (branch or subsidiary) takes 7 days on average. The cost of administrative formalities depends on the option. For a LTD, cost is approximately Euro 85 plus approximately Euro 250 for publishing a notice in the legal gazette.

8. Reporting & Auditing

1. Date of Accounts closure- There is no legal obligation in France concerning the date of closure of the accounts for business concerns. Actually most companies close their accounts on 31th December. For other entities including tax payers the fiscal year corresponds to the calender year. The tax declaration must be sent to the tax authorities within a 3- monthly period if the accounts are closed on 31st December. 
2. Appointment of an external auditor- This is compulsory in the case of joint stock companies and in some other types of entities (charities, foundations, or any type of organisation benefiting from public subsidies, mutual funds...) French SAS owned by Companies. The appointment of an external auditor is also compulsory for the other types of companies under certain conditions (revenue, number of employees, total balance sheet).

9. Special Notes / Country Update

1. Credit to consumer- Since 2003, the protection in consumer credit contracts has been strengthen. In compliance with EC Directive of February 16, 1988 any advertisement or any credit offer shall include statement of annual (and not monthly) percentage rate of charge.
2. Trust - Since February 19, 2007, France provides itself with a new legal vehicle allowing to create arrangements equivalent to the trusts of other countries: the "Fiducie".The French Fiducie  allows an independent patrimony to be created that is not that of the settler (the constituent) but which does not form part of that of the fiduciary either. Indeed, the latter is obliged to keep the transferred property, rights and securities separate from its own patrimony, which was not possible under former French Law.

Double Taxation Agreement

France has double Taxation Treaty with different countries:

·                     Argentina

·                     Austria

·                     brazil

·                     Bulgaria

·                     Cyprus

·                     Czech Rep.

·                     Germany

·                     Hungry

·                     India

·                     Indonesia

·                     Israel

·                     Italy

·                     Japan

·                     Kuwait

·                     Malaysia

·                     Malta

·                     Mauritius

·                     Mexico

·                     Morocco

·                     Netherlands

·                     Poland

·                     Portugal

·                     Romania

·                     Russia

·                     Singapore

·                     Slovenia

·                     Spain

·                     Switzerland

·                     Tunisia

·                     Turkey

·                     UAE

·                     UK

·                     USA

·                     Venezuela