Damalion France desk
Doing business in France
France is beautiful and multi-cultural country, that attracts millions to visitors each year across the globe. It is world’s sixth and Europe’s third largest economy in terms of GDP volume. Thousands of entrepreneurs wishing to start business prefer to choose France over other European countries due to flexible laws, easy investments vehicles and political certainty.
Being world’s sixth largest economy, France is important member of European Union and NATO. The population till year 2020 was 67.39 million. The Per Capita income rank at 18th with $42,877.56. France contributes around 23 Billion Euros to the annual budget of European Union, only behind the Germany.
In very Jurisdiction before starting business, it is imperative to accumulate in-depth knowledge of the laws, regulations, social customs, political regimes and economic pathways. Although Its pro-business laws, business friendly financial markets and highly skilled force makes it attractive spot for doing business and attracting foreign investors, yet there are intricate procedures in setting up businesses, for which we provide in-depth knowledge.
ADVANTAGES AND CONSIDERATIONS FOR DOING BUSINESS IN FRANCE
- Investment climate: France is at center of European Union and has easy access to largest markets of Europe and World. Highly Skilled and Talented Workforce, Innovative Business Centers, world class transportation infrastructure ad IP protections make is highly volatile for Investments.
- Industrial Powerhouse with leading automobile and aircraft manufacturers.
- Vibrant Tourism Sector, with over 85 million annual visitors, that contribute to 10% of the country’s GDP.
- Lower set-up costs of new businesses in comparison to Japan, USA and Germany,
- Favorable Business environment with various tax conventions and simplification of running of the businesses
- Popular destination for business conferences, for tourists and a support system in shape of French Tech Ticket for encouraging innovative business man and entrepreneurs to France
- Technological advancement and 4th ranked globally in terms of Online Administration
- Strategic Location bordering economic giants like Germany, Belgium, Luxembourg, Switzerland, Italy and Spain; making way for multiple opportunities to new investors.
- In a World Bank survey on the ease of doing business, France came in at number 29 out of 189 nations. The French government also works to advance the nation.
- Often termed as a Nation of Innovation. It has attracted over 1300 new entrepreneurs who were engaged in new innovations in year 220
- Banking Sector of France is France’s main Economic Assets
France is a republic and governed by Constitution of the Fifth Republic, passed on October, 1958. There were various legal reforms in year 2008 to give new shape to law making process, giving parliament a stronger vote in enactment of laws. The French legal system is based upon civil law. The legal system places its emphasis on codified laws.
France has dual chambers of parliament and a Quasi-Presidential system where the President is elected for term of five years. The President then chooses a Prime Minister and ministers from the Parliamentary Majority.
The other distinction in legal system of France is its concept of dual laws. The branch that deals with the Public entities and matters is known as Droit Public or Public law. The other branch of law that deals with the private matters or private entities is called Droit Private or Private law.
Along with, the French courts are also divided into two parts i-e, Judicial courts and administrative courts. Judicial Courts deal with civil and criminal matters while administrative courts deal with application of public laws.
France is very welcoming to foreign investors and entrepreneurs. There are many sectors that provide myriad of opportunities for investment. Some of these two sectors are:
- Automobiles Sector
- Aircraft & its parts Manufacturing
- Spacecraft Manufacturing
- Pharmaceuticals and its allied Industries
- Scientific and Technical Activities
- IT and Information Services
- Bio-technological and Environmental Technologies
- Exceptional Infrastructure and Quality of Life
The various business entities in France, which can be formed legally for starting a business, their description has been summarized in a succinct but accurate manner by us in the following lines. All the types of the companies/entities have a different functioning structure and varied legal ramifications for shareholders. The tax and social security systems that apply to the income from the activity of the company/entity primarily depends on choice of business structure.
Here is the succinct overview of business entities:
LIMITED LIABILITY COMPANY (SARL)
LIMITED LIABILITY COMPANY (SARL) is one of favorite choice among the entrepreneurs because of having a straightforward business and functioning structure. It limits the responsibility of the owners/partners to the extent of their contributions.
For the purposes of its formation, there is no minimum capital requirement. It can be set-up by two or more partners and can be managed by one or more managers, whether partners or not.
SINGLE PERSON LIMITED LIABILITY COMPANY (EURL)
SINGLE PERSON LIMITED LIABILITY COMPANY (EURL) can be formed by only one shareholder. There is no minimum capital investment requirement for its formation. Its operational procedures are almost similar to the SARL’s functioning procedures. The shareholder has limited liability but one of unique feature and distinction is that profits of the shareholder/owner are automatically subject to income tax. Whereas, as far as payment of Corporate Tax is concerned, there is no such restriction.
PRIVATE LIMITED LIABILITY COMPANY (SELARL)
PRIVATE LIMITED LIABILITY COMPANY (SELARL) is another effective form of business entity for liberal and sole professionals. The laws regulating the PRIVATE LIMITED LIABILITY COMPANY (SELARL) are almost identical to those of the SARL.
- There is no minimum capital investment requirement for setting-up the Private Limited Company.
PUBLIC LIMITED COMPANY OR FRENCH JOINT STOCK COMPANY (SA)
Another type of very famous business entity is PUBLIC LIMITED COMPANY OR FRENCH JOINT STOCK COMPANY (SA). The founders of such a company can either be individuals or legal entities. For its formation,
- the minimum share capital for SA is 37 000 €. And the capital is divided into shares.
- There must be at least two shareholders (and seven if it is listed on the stock exchange).
- It is headed by a Board of Directors which is composed of three persons such as President, Chief Executive Officer, and director. Another requirement is that the company must appoint an auditor for its entity as well.
The public limited company is normally used for projects which are having a huge volume of investment. Or in those cases, where the shareholders wish to operate the business through the board of directors. The responsibility of shareholders is restricted to their percentage of investment.
SIMPLIFIED JOINT STOCK CORPORATION (SAS)
SIMPLIFIED JOINT STOCK CORPORATION (SAS) is relatively new form of business entity, which has had some success. Consequently, many SAs have been changed into SAS as a result. For its formation and constitution,
- There is no minimum share capital requirement.
- It can be constituted with two or more member or partner.
- However, there are required to appoint auditors for the proper audits of the accounts of the corporation.
- A chairman or President must be appointed by shareholders
However, there are several strategic advantages of it. The shareholders have maximum liberty to freely organize the operation of the Articles of the Association. Therefore, its formation and operation functioning is guided through professionals.
GENERAL PARTNERSHIP (SNC)
Another business entity that French laws allow for the formation is GENERAL PARTNERSHIP (SNC). This business structure does not safeguard the assets of its shareholders. Hence, the shareholders are jointly responsible for the firm’s obligations on their personal property. Therefore, it has limited use.
For its formation and constitution,
- there must be at-least two members.
- there is no minimum capital requirement.
- It can be operated either by partners or by managers.
- As far as taxation is concerned, GENERAL PARTNERSHIP (SNC) is liable for income tax, with partners liable to pay tax based on their profits but the GENERAL PARTNERSHIP (SNC) can choose to pay Corporate tax as well.
- The activities’ must be performed by partners under the same name.
The Banking Sector of France is one of its six main economic assets. There are 337 banks in France and dozens of financial institutions. All the banks and financial institutions have been grouped under a single supervisory system. The French banking and financial system is governed and supervised by the BANQUE DE FRANCE. It is headed by governor. The governor also serves as the head of the Prudential Control Authority, which issues or revokes banking licenses, monitors banks’ compliance with banking laws, and oversees insurance firms.
The financial institutions offer financing tools including secured and unsecured overdrafts, short- and medium-term credit facilities, and short- and long-term loans. Additionally, commercial banks support mergers, acquisitions, and takeovers as well as public sales of stock and corporate debt. There are 132 foreign banks in France as well.
Most of the banking institutions have their presence in other European countries as well. Therefore, the investors have easy access to the banking facilities and vehicles.
There are two types of investment funds offered to the investors.
Money Market Funds: Which provide reasonable profits to short terms investments. The government as well as private sector is contributor to these funds.
Non market Money Funds: The investments in these funds provide reasonable and sustained profits for long term investments. There were over 10 billion Euros investments in these funds in the year 2021.
The French Constitution has laid down the principles of taxation, which are applicable to All and Sundry. As far as personal taxation is concerned, there are three types of taxes in France:
PERSONAL INCOME TAX
There are different categorizes of income taxes applicable depending upon the income brackets. The Income tax is applicable at the progressive rates. There different factors contributing to the taxation rate such as family status etc. After keeping in view these factors, there are dozens of tax slabs.
Social surcharge is also applicable to several types of income. They are levied on wages, rent, interest, dividends, and capital gains.
TAX ON GOODS AND SERVICES
This kind of tax is applicable on trading of Goods and Services. The standard TVA rate in France is 20%. At same time, there are reduced TVA rates for certain industries, such as public transport, restaurants, food, books, TV licenses, newspapers and pharmaceuticals.
FRENCH PROPERTY TAX
There are property taxes applicable on the sale, purchase and renting out of the property. The tax is calculated at the end of the financial year and is based on purported sale of assets and rental income.
FRENCH CAPITAL GAINS TAX
Capital Gains tax is also applicable on the sale of buildings, land and shares. The tax is applicable at flat rate of 30% on savings and investment income and gains. It also includes flat rate of income tax at 12.8% and social charges of 17.2%. As far as property is concerned, it includes income tax of 19% plus 17.2% social charges, making a total of 36.2%.
FRENCH CORPORATE TAX
French Corporate Tax is applicable on the Resident Companies from their income from the French Sources. Along with, any foreign entity having business in France is also treated as Resident Company for purposes of taxation. The General Standard Corporate tax rate is 25%. This rate is limited for companies with turnover up to 7.63 Million Euros. With companies, whose turn over exceeds 7.63 Million Euros, there is another 3.3% tax applicable.
The Corporate tax is applicable to t paid in four installments. For the companies having several businesses or operating under hood of different entities, the regime offers consolidated taxations as well.
IMMIGRATION TO FRANCE
The Ministry of Foreign Affairs in France is responsible for immigration services. There are different types of resident permits and visas available. One of such visa which can be easily accessed in Visitor Visa. There are other pathways as well, which provide for Short and Long Term Resident Permits. These visa permits are quite difficult to obtain in France. Recently, many permits have also been allowed such as Talents Resident Card, Retired Resident Card etc.
If you wish to stay in France for more than three months for purposes of work, there are different contracts available from the employers.
- Seasonal Contracts – Such contracts are offered by employers for seasonal works primarily in agricultural fields
- Short Term Contracts – These contracts are for employers and employees wishing to engage for short period ranging from 3-12 months
- Long Term Contracts – These types of Job contracts for Jobs beyond 12 months’ period.
International treaties and multilateral agreements have a significant impact on the protection and enforcement of intellectual property rights in France. France is signatory to both The Paris Convention for the Protection of Industrial Property of March 20, 1883, and The Berne Convention for the Protection of Literary and Artistic Works of September 9, 1886.
- Patents filed and registered in France are applicable for a period of 20 years. The primary ingredient for Patent Registration is France is the public publication of the information contained in the patent application disclosure of the contents of the application. The patent rights expire after 20 years, and become publicly available for re-registration.
- Designs are registered for period of 25 years whereas, unregistered Community designs are safeguarded for three years beyond the date of their initial disclosure. If both registered and unregistered designs comply with the standards for author’s rights in France, they may both be protected by those rights.
- All Community Trademarks all have legal effect in France and permit reserving a right to a sign for a period of ten years’ renewable without any restrictions. Therefore, trademarks may continue to be used and enforced indefinitely. However, trademarks may lose their distinctiveness or be cancelled for inactivity.
- There is no copyright per se applicable in France instead there are only writer’s rights. For an author to be able to safeguard their work and reap the benefits of the exclusive rights over such a work, no formalities of registration are required. The writing in the piece must be original. Authors’ rights include moral rights with exclusive economic rights.
- A party may benefit from protection for its trade secrets without having to go through any procedures of registration with any French authority. They are protected If it is not easily accessible to the person’s familiar with this type of information, has commercial value and has in place certain measures to maintain secrecy.
Application for intellectual property rights protection should be filed to the appropriate national or regional authority.
The National Institute of Industrial Property has been conducting a thorough analysis of patents since 2020, including a determination of the inventive step (INPI) in France.
LABOUR AND EMPLOYMENT LAWS
France has comprehensive system of codified laws for governing Employer-Employee relationship through set of complex laws and regulations. The French Labour Code and Collective Bargaining Agreements provide framework for negotiating the employment and allied issues.
The laws are favorable to employees. In cases where there is conflict in the provisions of law, the law would favor the rights and claims of the employee.
There is standard 35-hour working week approved by the government, yet the employees can work beyond that and would be applicable for overtime and other benefits. A specialised labour tribunal made up of representatives of employers and employees first hears employment issues.
- The national health insurance coverage offered to French citizens (CMU-C) provides universal health coverage to the citizens. Additionally, people have the choice to add public and private care choices to their coverage. The funding for insurance is collected through payroll taxes.
- Maternity leaves regime is comprehensive and may extend from 16 to 48 weeks of paid leaves.
- Four weeks of Paternity leaved is also provided to fathers on birth of their babies.
- Paid vacation – According to the legislation, all employees are entitled to at least 30 calendar days (or 25 working days) of paid vacation every year.
- Paid holidays – Employees are legally entitled to one paid holiday each year (Labor Day).
- Labor Day is the sole legal paid holiday in France, but there are still 11 other federal holidays.
There are different types of employment contracts in France:
PERMANENT EMPLOYMENT AGREEMENT (CDI)
The most common type of employment contracts in France is the PERMANENT EMPLOYMENT CONTRACT (CDI). The termination date is not specified hence, it ensures a certain level of job stability.
Thus, a person recruited under a permanent contract may remain in that position for as long as they see fit, unless the employee opts to quit, or mutually agree to end their employment relationship through a traditional rupture.
FIXED-TERM AGREEMENT (CDD)
A FIXED-TERM CONTRACT (CDD) is an agreement reached between an employer and an employee for a certain work to be performed. It is to be completed for a set amount of time. It terminates either on the specified date or, when the intended outcome is realized. Such contracts are required to be in writing.
TEMPORARY EMPLOYMENT AGREEMENT
A TEMPORARY EMPLOYMENT AGREEMENT may only be reached for the performance of a specific, momentary work with a time restriction. An employee who is covered by a temporary employment contract is therefore one who is employed and paid by an ETT.
Workers who are employed temporarily have a right to remuneration, particularly given the insecure nature of their jobs. Additionally, they are given a reimbursement for paid time off.
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