Opening a subsidiary in France

Everything you need to know about opening a subsidiary in France

France is a strategic destination for international companies looking to establish themselves in Europe. With its diversified economy, modern infrastructure, and privileged access to the European Union, it offers a stable and attractive environment for business development. Additionally, France boasts a robust consumer market and a structured legal framework that provides security for foreign investors. In this article, we will guide you through the key steps of opening a subsidiary in France, offering practical advice and essential information.

Choosing the right legal structure

When setting up a subsidiary in France, selecting the right legal structure is a critical step. Several options are available, including the Société à Responsabilité Limitée (SARL), the Société par Actions Simplifiée (SAS), and the branch.

SARL: A limited liability company with a relatively simple structure, managed by one or more managers. The managers’ powers may be restricted by provisions outlined in the company’s articles of association.

SAS: One of the most flexible structures, allowing for significant freedom in internal organization and drafting bylaws. This structure is often favored by companies planning rapid growth or looking to raise funds from investors.

Branch: Less formal than a company, a branch allows the parent company to maintain direct responsibility for its activities in France, without creating a separate legal entity. This can be advantageous if you want to avoid the formalities of setting up a new company.

Which structure is best for you?

The decision depends on several factors, such as the size of your business, your financing needs, and your long-term goals. It’s often advisable to consult with a professional to ensure you choose the structure that best fits your specific requirements.

Stages in forming a French company

Once you have chosen your legal structure, there are several administrative steps involved in setting up your company in France.

Drafting the bylaws: The company’s bylaws define how it will operate. These must be carefully drafted and tailored to your specific needs. It’s essential to seek professional assistance to ensure all legal aspects are covered.
Opening a bank account and depositing share capital: Before registering the company, you will need to open a business bank account in France and deposit the required share capital. This process can be time-consuming, especially for non-resident companies, as it typically requires the future director to travel to France to meet identification requirements set by the banks.
Registering the company: Once the bylaws have been finalized and the capital has been deposited, the next step is to register the company with the Registre du Commerce et des Sociétés (RCS). This registration is mandatory to obtain legal recognition in France.
Publication in a legal gazette: All newly-formed companies must publish an announcement in an authorized legal gazette to inform the public of their formation.
Obtaining a SIRET number: After registration, your company will be assigned a unique SIRET number, which is essential for tax and administrative purposes. You will also be issued an intra-Community VAT number.

Managing reporting obligations in France

Once your subsidiary is set up, you must comply with various tax and accounting obligations:

The main taxes in France

Corporate income tax (IS):

All companies operating in France, including subsidiaries, are subject to corporate income tax. The current standard rate is 25% (2024).

VAT (Value Added Tax):

VAT is an indirect tax applied to most goods and services. The standard VAT rate in France is 20%, with reduced rates of 10%, 5.5%, and 2.1% for specific sectors. If your subsidiary sells goods or services in France, you will need to collect VAT and remit it to the tax authorities. You must submit regular VAT declarations (usually monthly) to calculate the tax owed and reclaim any deductible VAT on purchases and expenses.

CFE (Cotisation Foncière des Entreprises):

This local tax applies to all businesses in France and is calculated based on the rental value of the real estate the company uses.

CVAE (Cotisation sur la Valeur Ajoutée des Entreprises):

The CVAE applies to companies with annual revenue exceeding €500,000. It is calculated based on the value added by the company.

Accounting obligations

Statutory audit obligations

Certain companies in France are required to have their financial statements audited by a statutory auditor. The purpose of the audit is to ensure that the financial statements accurately reflect the company’s financial position and that all legal obligations have been met. Subsidiaries of foreign companies are subject to a statutory audit if they exceed two of the following three thresholds:

Total assets exceeding €4 million.
Annual turnover exceeding €8 million.
An average of more than 50 employees.

At the end of each financial year, companies must prepare and file annual financial statements, including the balance sheet, income statement, and notes to the accounts. These must be submitted to the Commercial Court Clerk within six months of the end of the fiscal year. This documentation provides an overview of the company’s financial situation and is publicly accessible, ensuring transparency for stakeholders (investors, creditors, etc.).

Employee management in France

As an employer in France, it’s crucial to understand the specific aspects of French labor law and the costs associated with managing employees.

Labor costs: In France, labor costs include not only salaries but also social security contributions, which can represent a significant portion of a company’s expenses. On average, the total cost of an employee in France is approximately 170–180% of the net salary. For example, for a net salary of €2,500 per month, the company will need to spend between €4,250 and €4,500.

Recruitment and employee management: Recruitment in France is regulated by strict laws. You will need to draw up employment contracts, observe trial periods, and comply with collective bargaining agreements relevant to your industry.

Labor law: French labor law provides strong protections for employees. It is important to be familiar with the rules concerning working hours, minimum wage, paid leave, and dismissal procedures to avoid any legal disputes.

Financing and business support

France offers a range of schemes to support new businesses:

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Grants and subsidies: BPI France, regional authorities, and certain government agencies offer grants and low-interest loans to support companies establishing themselves in France.

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Public and private financing: In addition to public funding, businesses can access private financing from banks or private investors.

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Support for innovative companies: If your subsidiary is involved in research or innovation, you can benefit from schemes such as the Research Tax Credit (CIR) or Young Innovative Company (JEI) status, which offer significant tax advantages.

Conclusion

Opening a subsidiary in France can seem complex due to the numerous legal, tax, and social obligations involved. However, by working with the right partners—chartered accountants, lawyers, and notaries—you can ensure compliance with all regulations and optimize your strategic decisions. Our firm is here to support you at every step, ensuring the success of your project in France.