Benefits and problems of registering a company in France in 2023
Benefits of France company registration
A French limited liability company can be incorporated within 2 weeks with 1 director and 1 shareholder, who can be of any nationality. The minimum paid-up share capital required is €1 and our Clients do not need to travel to complete the engagement.
- While taxes are high in France, our Clients’ sales income can also be high because France boasts i) the 2nd largest consumer market in Europe, with 65 million locals spending €2 trillion annually ii) the world’s largest tourism industry with 83 million annual visitors and iii) EU’s 2nd and 4th largest exports of food & beverage products and pharmaceuticals respectively;
- If our Clients meets the required criteria, France can be a good source of funding for their companies because:
- The Public Investment Bank offers low-interest loans of up to €1.5 million to finance innovation projects in companies with i) less than 250 employees ii) less than 50 million in annual revenue and iii) operating for at least 3 years;
- Equity investment of up to €15 million is offered by the government to unlisted resident companies with i) at least €20 million in annual turnover and ii) one profitable year within the last three years;
- Companies with less than i) 250 employees and ii) €50 million in annual revenue can benefit from a public guarantee scheme on bank loans financing i) the design and development of new products/services and ii) R&D investments. Please note that the guarantee may represent up to 80% of the loan value, with a €300,000 cap;
- The French government provides low-cost trade credit insurance to all resident companies, covering up to i) 100% of the exports’ value for companies with less than €150 million turnover and ii) 95% otherwise;
- Global entrepreneurs registering their company in France are able to secure loans at interest rates averaging only 2.2% annually, the lowest figure since 2002;
- French banks boast the highest rate of financial advisors per Client among main EU countries, enabling them to provide very efficient costumer service.
- Resident companies benefit from generous government incentives including:
- Business losses can be carried forward indefinitely, up to €1 million annually plus 50% of subsequent profits exceeding that amount;
- All SMEs benefit from an unconditional reduced corporate tax rate of 15% of net profits up to €38,120. They are also exempted from an additional corporate tax surcharge of 1.1% paid by large companies;
- All limited companies with less than 50 employees can choose to pay income tax in lieu of corporate tax during the first five years after registration, allowing them to significantly reduce tax payments;
- Up to 30% of the costs of qualified government-approved R&D projects can be offset against the company’s annual corporate tax bill, the maximum annual deduction being €400,000. The OECD ranks this tax scheme as Europe’s 2nd most generous for SMEs;
- Businesses investing in priority areas will receive incentives including i) 100% corporate tax exemption for up to 7 years ii) reduced social security contributions and iii) grants up to €15,000 per job created for projects with more than 25 employees. Please note that incentives will cover up to 35% of an SME’s initial investment value;
- Subsidies are available for government-approved employee-training programs which can cover up to 75% of the cost for SMEs and 50% for large companies.
- Foreign entrepreneurs registering a company in France benefit from strong intellectual property protection laws because:
- France is ranked as the 12th best country in the world for registering patents by the World Economic Forum. Furthermore, France is also a signatory to WTO’s Agreement (TRIPS) which protects against IP violations;
- From 2014 onwards, French companies will benefit from a unified patent registration procedure that provide legal protection in other EU countries, greatly reducing patent registration and translation costs;
- The French government actively monitors electronic communication networks to prevent infringements to IP rights, with random checks and fines up to €7,500 per violation.
- France has a highly qualified workforce and when combined with advanced infrastructure, it reduces the costs of production;
- France is one of the top ranked European nations for quality of roads, railways, ports, and other infrastructure. The country has easy access to all of Western and Eastern Europe, meaning that goods are diffused throughout Europe easily.
- English proficiency levels are increasing. In 2021, the country’s ability to speak English is 28th out of 100 countries.
Problems with France company registration
- Together with Italy, France is the most expensive European country to do business in because:
- While foreign companies should expect high sales in France, our Clients should expect to pay a whopping 65% tax on net profits including i) corporate tax of 33% ii) VAT on sales of 20% and iii) employer’s social security contribution of 41% of gross salaries. Furthermore, it is likely the above taxes will increase in 2015 and 2016 as the French government struggles with its fiscal deficit;
- The country also suffers from an impressive amount of taxes and levies including i) wealth tax of up to 1.5% of total net worth ii) property tax of 13% of land registry’s rental value iii) fuel tax of 24% iv) tax on insurance products of 6% and v) local economic tax of up to 3% on a company’s value added;
- Business office monthly rents are i) €38 per sq. meter on average in Paris (up to €70 in Paris center) and ii) €10 to €20 per sq. meter in other main cities;
- French labor costs average €32 per hour worked, the highest level in Western Europe;
- Paris is ranked as the world’s 2nd most expensive city to hire expatriate staff by the Economist Intelligence Unit;
- Because of i) the above and ii) current adverse economic conditions, 63,000 French companies filed for bankruptcy in 2013.
- Foreign entrepreneurs will find starting a France company is difficult because:
- 50% of French people do not speak a foreign language. All Government documents are in French. All legal contracts must be fully written in French;
- Because the French tax system is so complicated, resident companies prefer to hire accountants and lawyers to help them navigate through the system, so as to minimize the tax burden.
- Our Clients find it difficult to deal with local employees because:
- Employee dismissals are costly for an employer, as severance pay averages of 3 months of salary. Even dismissal of an employee for gross misconduct must be duly warranted in case of appeal to the Labour Court;
- The Labor Code forbids work on Sundays in most sectors. Overtime must furthermore be paid at an extra 25% rate;
- Because the French unemployment rate is currently at 10.2%, it is difficult for employers to secure a work permit for non EU/EFTA staff;
- The French interpretation of European laws for selling products is more stringent than other EU members;
- Bureaucracy is another red flag for foreign businesses setting up in France, as the laws regarding licenses and business incorporation are quite complex and might be difficult to understand without the help of a consultant.
Best uses for a France company
- Our Clients find France a good EU base for manufacturing because:
- French resident businesses benefit from the 5th most efficient workforce in the EU, with an hourly labor productivity recorded at €46 against a €32 average in Europe;
- France is the leading hub for product distribution within Europe. The World Economic Forum ranks the French roadways and railways as the 2nd and the 4th best in the world;
- The electricity cost for industrial use averages 0.15€ per kWh, which is the 2nd lowest in Western Europe after Netherlands, and power supply is highly reliable thanks to nuclear energy.
- A French holding company enjoys these benefits:
- Dividends from global subsidiaries are effectively exempt of corporate tax. The sale of shares of a global subsidiary by its French parent is also quasi-exempt of French capital gains tax. To enjoy these exemptions, the French holding company must have owned at least 5% of the share capital of its subsidiary for at least 2 years;
- French dividends, loan interest and royalties paid to global holding companies suffer minimum withholding tax, if paid to one of these 123 countries that have signed a tax treaty with France.