
France stands tall as one of the most significant markets within the European Union. With a nominal GDP of $3.130 trillion, it proudly secures the 7th spot on the global GDP growth index. These figures highlight France’s position as a thriving and economically advanced nation.
If you’re considering expanding your business into France by establishing a subsidiary, there are several important aspects to keep in mind. You’ll need to determine the type of subsidiary that aligns best with your business goals, navigate the country’s legal and regulatory requirements, recruit the right talent, and more.
In this comprehensive guide, we’ll break down everything you need to know about setting up a subsidiary in France. From the step-by-step process to understanding the taxation rules for foreign subsidiaries, and the advantages they offer, we’ve got you covered!
Do you want to set up a new company in France?
How to set up a subsidiary in France?
The following steps you need to follow in order to set up a subsidiary in France are:
- Choose the appropriate legal structure: Decide on the type of subsidiary that aligns with your business objectives. Common structures include the Société à Responsabilité Limitée (SARL) for small to medium-sized enterprises and the Société par Actions Simplifiée (SAS) for larger entities seeking flexibility.
- Select a unique company name: Ensure your chosen business name is unique and not already in use. You can verify its availability through the French National Institute of Industrial Property (INPI).
- Draft the articles of association: Prepare the company’s bylaws, detailing its purpose, management structure, and operational guidelines. These documents must be notarized and submitted to the relevant authorities.
- Open a corporate bank account: Establish a bank account in France to deposit the initial share capital and facilitate financial transactions.
- Register with the French authorities: Submit all necessary documentation to the Centre de Formalités des Entreprises (CFE) to officially register your subsidiary. This step includes obtaining a SIRET number, which serves as your company’s unique identification.
- Publish a legal notice: Announce the formation of your subsidiary in an authorized legal gazette to inform the public of your new business entity.
- Comply with tax and social security obligations: Register your subsidiary with the French tax authorities and social security system. Ensure adherence to all local tax laws and labor regulations, including employee registrations and contributions.
Types of subsidiaries in France
When setting up a subsidiary in France, understanding the types of subsidiaries available is crucial. The choice you make will depend on your business goals, operational needs, and legal requirements. Here’s a breakdown of the main types of subsidiaries in France:
1. Société à Responsabilité Limitée (SARL) – Limited Liability Company
- SARL is a popular choice for small to medium-sized businesses.
- It offers limited liability protection, meaning the owners’ personal assets are safeguarded from business debts.
- Requires a minimum of one shareholder and one director, who can be of any nationality.
- Flexible structure, making it suitable for businesses aiming for operational simplicity.
2. Société par Actions Simplifiée (SAS) – Simplified Joint Stock Company
- The SAS is ideal for larger businesses or those seeking a more flexible governance structure.
- Shareholders’ liability is limited to their capital contributions.
- Requires at least one shareholder and one president (can be an individual or a company).
- Offers more flexibility in defining corporate governance in its statutes, which appeals to investors and entrepreneurs.
3. Société Anonyme (SA) – Public Limited Company
- The SA is designed for larger businesses planning to raise capital through public investment.
- It requires at least two shareholders (or seven if listed) and a minimum capital of €37,000.
- Governed by a board of directors and strict regulatory requirements.
- Ideal for companies intending to trade publicly or undertake large-scale projects.
4. Branch Office (Succursale)
- A branch office is an extension of the parent company and does not have a separate legal identity.
- It is directly managed by the parent company and is fully liable for its operations.
- Offers simplicity in setup but limits autonomy, as it functions as part of the foreign parent organization.
5. Representative Office (Bureau de Liaison)
- A representative office is best suited for non-commercial activities like market research or promotional efforts.
- It cannot engage in revenue-generating operations.
- A low-cost option for businesses exploring the French market without full operational commitments.
Each type of subsidiary offers unique benefits and operational scopes, so selecting the right structure depends on your specific business goals, expansion plans, and compliance capabilities.
Benefits for setting up a subsidiary in France
Some of the benefits for setting up a subsidiary in France are:
- Access to a thriving economy: France boasts a robust economy, with a nominal GDP of 3.1 trillion Euros, making it one of the strongest in the European Union. Setting up a subsidiary here provides access to a large, stable, and diverse market.
- Gateway to the European market: By establishing a presence in France, you gain access to the entire European Union market. France’s strategic location and well-developed infrastructure make it an ideal hub for expanding into neighboring EU countries.
- Legal and operational autonomy: A subsidiary operates as a separate legal entity from its parent company, providing autonomy in day-to-day operations. This separation limits the parent company’s liability for the subsidiary’s debts or legal obligations.
- Favorable business environment: France supports foreign investments through various incentives, such as tax breaks, research and development (R&D) credits, and subsidies. Programs like the “French Tech Visa” also attract innovative businesses and talent.
- Strong workforce: France is home to a skilled and highly educated workforce. Its emphasis on innovation and technology ensures access to top talent, especially in industries like fintech, aerospace, pharmaceuticals, and luxury goods.
- Brand visibility and reputation: Operating in France enhances your brand’s credibility and visibility. France is renowned for its high standards in business and quality, which can significantly boost your brand’s reputation on a global scale.
- Tax benefits and treaties: France has an extensive network of double taxation treaties with other countries, reducing the tax burden on foreign investors. Additionally, certain tax incentives encourage foreign businesses to invest in specific industries or regions.
- Stability and legal framework: France offers a stable political and legal environment, with a well-defined regulatory system. This stability provides businesses with a predictable environment to operate and grow.
Documents required to register a subsidiary in France
The list of documents required to register a subsidiary in France are:
- Articles of association (Statuts)
- Proof of registered office address
- Director(s) identification
- Parent company documentation
- Certificate of incorporation
- Board resolution
- Bank certificate (Attestation de Dépôt de Fonds)
- Declaration of beneficial owners (Déclaration des Bénéficiaires Effectifs)
- Publication of legal notice
- Proof of compliance for regulated activities
Taxes on Subsidiaries in France
Establishing a subsidiary in France entails understanding the country’s corporate tax framework, which includes corporate income tax, withholding taxes on dividends, and potential tax benefits. Here’s an overview:
Corporate Income Tax (CIT)
- Standard Rate: As of 2024, France imposes a standard CIT rate of 25% on corporate profits.
- Reduced Rate for Small Enterprises: Eligible small corporations benefit from a reduced CIT rate of 15% on the first EUR 38,120 of taxable profits, applicable to companies with annual turnover up to EUR 10 million.
Withholding Taxes on Dividends
- General Rate: Dividends distributed by French subsidiaries to non-resident parent companies are generally subject to a withholding tax of 25%.
- EU Parent-Subsidiary Exemption: Under the EU Parent-Subsidiary Directive, dividends paid to parent companies within the EU may be exempt from withholding tax, provided the parent company holds at least 10% of the subsidiary’s capital for a minimum of two years.
- Tax Treaty Reductions: France has numerous tax treaties that may reduce or eliminate withholding taxes on dividends, depending on the terms agreed upon with the recipient’s country of residence.
Conclusion
Setting up a subsidiary in France opens the door to one of Europe’s most dynamic markets, offering economic stability, access to skilled talent, and a gateway to the broader European Union. With the right planning and execution, your business can thrive in this globally connected hub.
Let OnDemand International guide you through every step of establishing your subsidiary, from legal compliance to operational setup. Our team of experts ensures a seamless process, so you can focus on growing your business. Contact OnDemand International today and take your first step toward success in France!
Frequently Asked Questions
Can a foreigner set up a subsidiary in France?
Yes, non-resident can set up a subsidiary in France. Any foreign entrepreneur who wants to start a business in France will have to go through the business immigration process if the entrepreneur wants to run the business while being in France.
What is the minimum capital required to set up a subsidiary in France?
For a SARL, the minimum capital is €1, while for a SA, it’s €37,000.
Do I need a local director to set up a subsidiary in France?
Yes, at least one director or legal representative must reside in France.
What is the corporate tax rate for subsidiaries in France?
The standard corporate tax rate is 25%.
Can I set up a virtual office for my subsidiary in France?
Yes, a virtual office can serve as the registered address for administrative purposes.
What are the most common types of subsidiaries in France?
SARL, SA, and SAS are the most common types of subsidiaries.
Do I need to hire local employees for my subsidiary?
There is no legal requirement, but hiring local employees can be beneficial for navigating local markets.
What are the accounting requirements for subsidiaries in France?
Subsidiaries must adhere to French accounting standards and may require annual audits.
Can a foreign company own 100% of a French subsidiary?
Yes, foreign companies can own 100% of a subsidiary in France.
Is VAT registration mandatory for subsidiaries in France?
Yes, VAT registration is required for most businesses operating in France.
How long does it take to set up a subsidiary in France?
The process usually takes between 21 days to 28 days , depending on the complexity of the business.