Introduction
Ideally located in the heart of Europe, France has everything you need to expand your business: a stable political environment, a strong domestic market, a skilled workforce, good road and rail infrastructure, and numerous international airports.
Entrepreneurs benefit from personalised support throughout their development. Organisations such as Chambers of Commerce – chambres de commerce or professional networks form a group of actors dedicated to entrepreneurial growth.
The development of economic activity abroad requires a perfect mastery of the legal and regulatory framework of the target country. As France is a country of civil law, the breadth of its regulations can quickly become a real headache! With this guide, we want to give you the keys for the development of your business in France.
Sommaire :
The main corporate forms
Below are the main corporate forms that exist in France. Certain activities, such as liberal professions, can benefit from specific corporate forms such as the SEL (Société d’exercice liberal). These particular legal structures will not be covered in this guide.
In France, a professional activity can be carried out under one’s own name or in the form of a company:
Carrying on business in your own name
1. The micro-enterprise
This is the simplest and most economical form of enterprise in France. It is possible to carry out artisanal, commercial or liberal activities, whether as a main or complementary activity (in parallel with an employee, retiree or student status). However, there are certain cases of exclusions: see the full details in our guide dedicated to the micro-enterprise.
To benefit from this status, the annual turnover must not exceed :
- 188,700 for the sale of goods, hotels or restaurants services;
- 77,700 for services.
Why is this status so interesting?
The micro-enterprise regime has simplified reporting obligations: every month or quarter, entrepreneurs report their turnover on a dedicated website to pay social security contributions and, optionally, taxes.
Social security contributions
Social security contributions are paid monthly, or optionally quarterly, through the URSSAF website, following the online declaration of the turnover amount.
The rate of these contributions are :
- 12.4% for traders, particularly for purchase/resale activities (BIC), food sale for on-premise consumption and accommodation services;
- 24,9% for craftsmen, liberal professions and services (BIC and BNC);
- 7% for the rental of classified furnished tourist accommodations.
The micro-entrepreneur status allows one to benefit from the same protection as other self-employed people. Under certain conditions, it will be possible to be reimbursed for medical consultations, sickness and maternity allowances, benefit from family allocations, as well as invalidity and death coverage and the right to retirement.
Income tax
1st case: option for monthly / quarterly estimated tax payments (or pay-as-you-go) for income tax
The micro-entrepreneur can choose to pay the income tax related to his activity monthly or quarterly, calculated according to a percentage of their turnover (Chiffre d’Affaires):
- 1% for purchase/resale activities, accommodation services (BIC) including classified furnished tourist accommodations;
- 1.7 % for services falling under the BIC category;
- 2.2% for other services (BNC), and liberal professions.
The release call payment option will be effective upon registration or upon written request to the social security agency Urssaf :
- at the latest the last day of the 3rd month following the month of creation;
- before September 30th of the year for application the following year.
Nevertheless, the payment in release call of income tax is reserved for micro-entrepreneurs whose reference tax income (revenu fiscal de référence – RFR) of the tax household for the second to last year (year N-2) does not exceed a certain threshold per family quotient.
Example: for the year 2025, the reference tax income for 2023 must be less than €27,478 for one share.
The option for the pay-as-you-go does not exempt micro-entrepreneurs from reporting their income on their annual tax return, as the amount received is taken into account for the calculation of the reference tax income and the effective tax rate of the tax household.
2nd case: without an option to the monthly/quarterly estimated tax payment
If no option has been made, the micro-entrepreneur’s taxable income is determined after deduction of a flat-rate allowance for expenses.
Amount of the allowance :
- 71% for sales activities ;
- 50% for BIC services ;
- 34% for BNC services and liberal activities.
- The minimum amount of the allowance is €305.
The resulting professional income is added to the reference income of the household and subject to the progressive scale of income tax.
The micro-entrepreneur must declare his income using form n° 2042-C-PRO.
2. Sole proprietorship – trader (normal regime, « régime réel »)
The micro-enterprise status is very interesting, but as soon as the activity generates a significant turnover (see thresholds detailed in the previous section), the entrepreneur can’t benefit from this regime anymore. In this case, the entrepreneur’s results are declared according to the normal regime: the taxable profit is then determined by the difference between the turnover and the actual expenses of the business.
Income tax
Every year, entrepreneurs must report on their activity by means of regular accounting (balance sheet, income statement), and their financial results are reported on a tax return (=profit and loss statement) sent electronically to the company tax office (centre des impôts des entreprises).
The result shown on the tax return must also be reported on the entrepreneur’s personal income tax return. The company’s annual result will therefore be subject to income tax (see progressive scale article).
Social security charges
Sole traders are subject to the social regime for self-employed workers. Their final social security contributions are calculated based on the result declared on the tax return. On average, the operator’s social security contributions represent 40-45% of the net result.
How are social charges declared?
The “Sécurité Sociale des Indépendants” (competent body) takes the professional income and information declared by the operator on their personal income tax return (see DRITI annex). In France, the income tax return must be sent in May N+1 (of the following year).
How are social security contributions paid?
Throughout year N (monthly or quarterly) the sole trader pays provisional social security contributions
When the results for year N are known to the social security agency (thanks to the income tax return established in May N+1), the “Sécurité Sociale des Indépendants” calculates the final social security contributions for year N, and determines the remaining balance to be paid.
Sample schedule (quarterly payment) :
- 5 February N: payment of provisional contributions for 1st quarter N
- 5 May N: payment of provisional contributions for 2nd quarter N
- 5 August N: payment of provisional contributions for the 3rd quarter N
- 5 November: payment of provisional contributions for the 4th quarter N
- September N+1: following receipt of the income tax return, the call for regularisation of N contributions = final contributions – provisional contributions already paid in N.
What risks are covered by social security contributions?
Social security costs mainly include :
- Sickness contributions, which cover the risks of sickness, maternity, disability and death.
- pension contributions, which provide a retirement pension.
- family allowance contributions, which provide support for children care.
- occupational accidents contributions, which cover the risks of accidents at work and occupational diseases.
Conducting business activity as a company
1. The Limited Liability Company, the SARL
The SARL is one of the most commonly used corporate forms in France. It is a commercial company whose partners’ liability is limited to the amount of their contributions.
How many partners are needed to form a limited liability company? An LLC can be formed by a minimum of one (1) partner, and a maximum of 100. The partners of an LLC can be natural persons or legal entities.
Share capital: The SARL can be established with a minimum share capital of €1.
Governance: the LLC is managed by one manager or several co-managers. It has a simple mode of governance, no collegiate body.
Social status of the manager: majority managers, i.e. those who hold more than 50% of the capital, either alone or together, are covered by the non-salaried workers’ regime (see section on “Social security contributions” for sole traders). On the other hand, minority managers are covered by the employee regime (see section III Hiring employees in France).
Important point: when the manager of a limited liability company is a majority manager, the basis for calculating his social security contributions includes not only his salary, but also his share of dividends representing more than 10% of the share capital, share premiums, and sums contributed to a partner’s current account.
Tax regime: in general, the results of the limited liability company are subject to corporation tax. In certain situations, however, it is possible to opt for income tax:
- when the LLC has a single natural person partner,
- or when it is set up by natural person partners linked by bonds of kinship (SARL de famille – family LLC regime).
Legal audit of accounts: in SARL, the appointment of a statutory auditor becomes compulsory when 2 of the following 3 thresholds are crossed:
- 10 million turnover excluding tax,
- 5 million in total assets,
- and 50 employees on average.
2. Société par Actions Simplifiée, SAS
The SAS is a simplified joint stock company whose shareholders’ liability is limited to the amount of their contributions. Unlike the LLC, whose operating procedures are defined by legal provisions, the SAS is governed entirely by the provisions of its articles of association. One of the main advantages of this legal form is therefore its operational flexibility: it is possible to regulate the practical arrangements for the operation of meetings (methods of convening, quorum, majority, etc.), to define collegiate decision-making bodies, etc.
How many shareholders are needed to form a SAS? A minimum of one (1) shareholder. There is no maximum.
Share capital: The SAS can be established with a minimum share capital of €1.
Governance: the governance of SAS is not defined by law. By default, the Chairman is the legal manager of the company. However, it is possible to define in the articles of association general managers and governance bodies: management committee, board of directors, etc.
Social status of the manager: unlike the managers of LLCs whose social status depends on their percentage of ownership in the company’s share capital, the Chairman of the SAS falls under the employees’ social regime . (see section III Hiring employees in France).
Tax regime: the results of the SAS are subject to corporation tax.
By option, and only during the first 5 years after its creation, the shareholders of the SAS can opt for the taxation of the company’s results to income tax, the company is thus temporarily fiscally transparent.
Legal audit of accounts: as for the SARL, the appointment of a statutory auditor becomes compulsory when 2 of the following 3 thresholds are crossed:
- 10 million turnover excluding tax,
- 5 million in total assets,
- and 50 employees on average.
Registering your company in France: the process
How to create a company in France?
- 1 Choosing the corporate form
- 2 Drafting the company’s articles of association: the articles of association contain all the company identification details, describing its activity, the composition of its share capital, the appointment of the first director, etc.
- 3 Deposit the share capital with a French bank into an account opened in the name of the company being formed.
- 4 Complete registration formalities with the Commercial Court Registry (Greffe du Tribunal de Commerce), publish the notice of incorporation in a legal notices newspaper Journal d’Annonces Légales.
- 5 Obtaining the company’s registration certificate, releasing the share capital from the bank.
Companies taxation in France
1. Profit tax
At the end of each financial year, the company sends its income tax return (tax reports) to its local tax center. Generally, this tax return must be submitted within three months of the end of the fiscal year. By way of derogation, and in order to take into account the overload of work in accounting firms, companies, the financial year of which ends on 31 December, benefit from an additional period of time and may send their tax return up the 2nd business day of May N+1.
How is the taxable income determined?
To be deductible in the calculation of taxable income, the expenses incurred by the company must meet the following criteria :
- they must be incurred in the direct interest of the business, and be related to the normal management of the business;
- Be supported by documentary evidence (invoices);
- Be included in the expenses of the fiscal year in which they were incurred.
The profit is therefore determined by the difference between the company’s turnover and the expenses allowed for tax deduction.
What is the corporation tax rate in France?
The reduced rate: SMEs whose share capital is fully paid up, at least 75% of which is held by individuals (or by a company that meets this condition itself), and which have an annual turnover of less than €10 million, can benefit from a reduced corporation tax rate of 15% on their first €42,500 of profits.
The standard rate: for the part of the profits exceeding this limit and for companies that do not meet the criteria for the reduced rate, the tax rate on profits is 25%.
Payment of corporation tax in France
If, when calculating the taxable income, the revealed result is a positive one, then the payment of the balance of the corporation tax must be sent at the same time as the tax return (i.e. on 2nd business day of May N+1 for fiscal years ending on 31 December N).
If the company pays more than 3,000 euros in tax per year, it will have to pay quarterly instalments on the following dates: 15 May, 15 June, 15 September, 15 December.
The treatment of tax deficits
If the tax result is negative, the tax deficit can be carried forward to subsequent profitable years, without any time limit.
2. VAT
VAT is a consumption tax applied to goods and services purchased by consumers in France and more broadly in Europe. This tax is collected by companies that market the products/services, then it is paid to the tax authorities.
What are the VAT rates applicable in France?
Standard rate of 20%
The standard VAT rate in France is 20%, which applies to most products/services sold in France.
However, there are reduced VAT rates on certain types of products or services:
Intermediate rate of 10%, which concerns, among others:
- Work in social housing, and improvement work in residential housing.
- Certain press publications (newspapers, magazines) which do not benefit from the reduced rate of 2.1%.
- Personal services activities (licensed company).
- Public transport.
- Medicines.
- Catering.
- Products for agricultural use.
- Firewood.
- Certain accommodation or camping services.
- Fairs and exhibitions, fairground games and rides, etc. …
Reduced rate of 5.5%, which concerns, among other things:
- Most food products (except alcohol, chocolate, confectionery, vegetable fats).
- Feminine hygiene products.
- The facilities and services provided for people with disabilities.
- Gas and electricity subscriptions.
- Ticketing for live performances.
- Energy renovation work.
- books.
Reduced rate of 2.1%, which concerns, among other things:
- Medicines reimbursed by the French Social Security.
- Sale of live butchery/charcuterie animals to non-taxable persons.
- Certain press publications registered with the Commission Paritaire des Publications et Agences de Presse.
What are the VAT reporting obligations of companies?
Exemption regime « franchise en base »
While all French companies are generally required to collect and declare VAT, certain small businesses may benefit, by option, from the VAT exemption regime. This scheme exempts companies from any VAT obligations when their turnover does not exceed the following thresholds:
- €85,000 for sales of goods, objects, supplies and food to be taken away or consumed on the premises, provision of accommodation (excluding furnished rentals, furnished tourist accommodation, rural gîtes and guest rooms);
- €37,500 for services.
Invoices issued by the company must state “VAT not applicable, article 293 B of the General Tax Code” « TVA non applicable, article 293 B du Code général des impôts ».
However, in return, the company loses its right to deduct the VAT paid on its own purchases. It is therefore important to carefully consider the pros and cons of this option.
Declarative regime
Companies that do not benefit from the exemption regime are therefore required to file VAT returns. There are several reporting systems:
The simplified regime (CA12) :
The company submits its VAT declaration annually, with the deadline for submission of the declaration being identical to that of the annual income tax return. For companies the accounting periods of which close on 31 December, the CA12 return must be filed by 2nd business day of May N+1.
Companies can benefit from the simplified regime under the following conditions:
- Their turnover is under €840,000 for companies trading/selling goods or less than €254,000 for companies providing services.
- The annual VAT due is less than €15,000.
In order to spread the payment of VAT, companies under the simplified VAT regime must pay two instalments in year N :
- An advance payment in July N, representing 55% of the VAT due the previous year.
- An advance payment in December N, representing 40% of the VAT due in the previous year.
The advance payments made in July and December N are of course deducted when the annual CA12 return is drawn up.
The normal regime
This regime is applicable when the company no longer meets the conditions set for the simplified regime or simply by choice, when the company considers that this regime allows it to manage its cash flow more efficiently.
Under the normal regime, the company draws up VAT returns monthly or quarterly when the annual VAT due does not exceed €4,000.
Transactions billed to customers located outside of France
The territoriality of VAT is a wide-ranging issue, and we will only discuss the basic scheme here.
Intra-Community transactions (classic rules, excluding special cases) :
Supplies of goods and services to a taxable company based in another EU country
If the client company is based in another Member State, it communicates its intra-community VAT number. The invoice issued in France does not include French VAT, and includes the standard wording: “Exemption from VAT, Article 262 ter I of the General Tax Code”. The invoice must also include the VAT number of the seller and of the customer.
Supplies of goods to a non-taxable person (consumer) based in another EU country
If the French company makes less than €10,000 of distance sales in the European Union (all of its sales in the EU combined), taxation of the sale takes place in the seller’s country = application of French VAT on the sale.
If the French company makes more than €10,000 of distance sales in the European Union = the taxation of the sale takes place in the country of the final consumer, through the European one-stop shop or single desk : “Guichet unique”.
Provision of a service to a non-taxable person (consumer) based in another European country
In principle, and except for derogatory cases, French VAT applies.
Export transactions
In principle and except for special cases, the supply of goods and services to a customer based outside the European Union is exempt from VAT. The invoice shall bear the standard wording: “Exemption from VAT, Article 262 ter I of the General Tax Code”.
3. Corporation property tax – cotisation foncière des entreprises (CFE)
The Cotisation foncière des entreprises is a local tax payable by any company carrying out a professional activity on French soil.
Tax calculation
This tax is mainly based on the rental value of the real estate used during one’s activity (one’s business premises). The tax rates vary from one municipality to another and are voted on each year.
If the company does not have premises dedicated to its activity (activity carried out at home, use of a simple domiciliation address, etc.), it remains liable for a minimum contribution, the amount of which varies according to the turnover achieved in N-2:
|
Turnover achieved in N-2 |
Minimum CFE due in 2025 (depending on the municipality) |
| Between €5,001 and €10,000 | Between € 243 and € 579 |
| Between €10,001 and €32,600 | Between € 243 and € 1,158 |
| Between €32,601 and €100,000 | Between €243 and €2,433 |
| Between €100,001 and €250,000 | Between €243 and €4,056 |
| Between €250,001 and €500,000 | Between €243 and €5,793 |
| From €500,001 | Between € 243 and € 7,533 |
Companies with a turnover of less than €5,000 are exempt from paying the minimum contribution.
Payment
Unlike other local taxes, the CFE payment notice is only sent by electronic means: it is generally published at the beginning of November on the company’s tax account previously created on the website www.impots.gouv.fr. The deadline for payment is 15 December.
When the amount of CFE for the previous year is greater than €3,000, the company must also pay an advanced payment equal to 50% of the tax paid the previous year, before 15 June.
Lorsque le montant de la CFE N-1 est supérieur à 3.000 €, l’entreprise doit par ailleurs verser un acompte provisionnel égal à 50% de l’impôt versé l’année précédente, avant le 15 juin.
4. The companies value-added contribution – Cotisation sur la Valeur Ajoutée des Entreprises
The CVAE is another local tax due by companies exceeding a certain turnover threshold.
Which companies are liable for the CVAE?
Companies with a turnover of more than €500,000 are liable for the CVAE. However, all companies with a turnover of more than €152,500 must establish the 1330-CVAE-SD declaration detailing the calculation of their value added and their employees’ number. It should be noted that the 1330-CVAE-SD declaration is an annex to the company’s annual income tax return, and must be submitted under the same deadlines as the latter (for companies whose accounting period close on 31/12: submission of the annual income tax return before the 2nd business day of May N+1)
How is this tax calculated?
Two components are necessary to calculate the tax:
- The value added carried out by the company in year N (= tax base) ;
- The company’s turnover during the year, which determines the tax rate.
CVAE tax rate according to turnover (excluding VAT)
| Turnover ex- tax | Effective tax rate |
| Less than €500,000 | 0 % |
| Between €500,000 and €3 million | 0.063% x (Turnover – €500,000) / €2.5 million |
| Between €3 million and €10 million | 0.063% + 0.113% x (Turnover – €3 million) / €7 million |
| Between €10 million and €50 million | 0.175% + 0.013% x (Turnover – €10 million) / €40 million |
| More than €50 million | 0,19 % |
Example :
A company has a turnover of €2 million excluding VAT. The taxable added value is €550,000.
The tax rate is: 0.063% x (2 000 000 – 500 000) / 2 500 000 = 0.0378%.
The amount of the CVAE is therefore : 550 000 x 0,0378 % = 208 €.
For 2025, an additional contribution to the CVAE is introduced. This contribution is calculated as follows: CVAE 2025 x 47.4%
Calculation of the additional CVAE contribution for 2025: 208 x 47.4% = 99 €
Payment of tax
Payment of the tax is due at the same time as the payment of the corporation tax: for companies whose accounts are closed on 31/12: payment of the tax before 2nd business day of May N+1.
When the amount of tax due for the year N-1 was higher than €1,500, the company must pay two advance payments:
- A first advance payment equal to 50% of the CVAE N-1 before 15 June
- A second advance payment equal to 50% of the CVAE N-1 before 15 September.
CET cap
The Cotisation Foncière des Entreprises (CFE) and the Cotisation sur la Valeur Ajoutée des Entreprises (CVAE) together form the territorial economic contribution – Contribution Economique Territoriale (CET).
A mechanism caps the CET at 1.438% of the value added produced by the company (for the year 2025).
By way of a claim, the company can request a refund if it has overpaid compared to the calculation of its added value. The claim for a refund must be submitted before 31 December of the year following the collection of the CFE, using form 1327-CET-SD.
Note : The capping mechanism does not apply to the additional contribution due for the year 2025.
5. Taxes on Company vehicles
The company vehicle tax has recently been replaced by two new taxes:
- The annual tax on CO2 emissions,
- The annual tax on atmospheric pollutant emissions.
Which companies are liable for these taxes?
All companies and individual businesses that use or own passenger transport vehicles as part of their business activities are subject to these taxes.
There are also exemptions for individual businesses that do not exceed the de minimis aid threshold (small amounts of aid granted to a company by a public authority).
| Sector | Threshold to be respected over 3 sliding fiscal years |
| All sectors (with exceptions) | €300,000 |
| Road haulage for hire or reward | €300,000 |
| Agriculture | €20,000 |
| Fishing and aquaculture | €30,000 |
Which vehicles are affected?
These taxes apply to passenger vehicles owned or used by the company. In particular, the following ones are affected :
- Vehicles registered in France in the name of the company.
- Vehicles, whether registered in France or not, leased or used by the company for more than 30 days during the quarter.
Commercial vehicles, as well as hybrid and electric vehicles that emit less than 60g of CO2 per kilometer are not subject to this tax.
How are these taxes calculated?
- Annual tax on CO2 emissions
For vehicles registered from March 2020 (WLTP system), the scale is as follows:
| Carbon dioxide (Co²) emission rate | Rate per gram applicable to vehicles covered by the new registration system (WLTP) – 2025 |
| Up to 9 g/km | €0 / g |
| From 10 to 50 g/km | €1 / g |
| From 51 to 58 g/km | €2 / g |
| From 59 to 90 g/km | €3 / g |
| From 91 to 110 g/km | €4 / g |
| From 111 to 130 g/km | €10 / g |
| From 131 to 150 g/km | €50 / g |
| From 151 to 170 g/km | €60 / g |
| Greater than 171 g/km | €65 / g |
For vehicles owned by a company since January 2006 and put into service after June 1, 2004 (NEDC system), the tax is calculated according to a different scale (not detailed here).
- Annual tax on atmospheric pollutant emissions
| Pollutant emission category | Vehicle characteristics | Annual tax rate |
| E | Vehicle powered exclusively by electricity, hydrogen or a combination of the two | 0 € |
| 1 | Vehicle powered by a spark-ignition internal combustion engine and complying with “Euro 5” or “Euro 6” emission limits | €100 |
| Most polluting vehicles | Other vehicles | €500 |
Declaration and payment of taxes on company vehicles
These taxes must be declared and paid annually by companies liable for VAT:
- For companies not liable for VAT: a 3310A declaration is filed in January following the tax period.
- For companies subject to VAT whose accounts are closed on December 31: declaration appended to the monthly (or quarterly) VAT return, to be filed within three months of closing, or by May 3 N+1 at the latest for companies closing their accounts on December 31.
6. Property tax (if the company owns its premises)
In France, real estate owners are liable for the taxe foncière: this is a tax based on the rental value of the properties, the rate of which is set by the local authorities.
Thus, when companies own real estate in France (e.g. their business premises), they are liable for property tax.
How is the rental value determined?
For business premises (excluding industrial establishments), the rental value is calculated by considering 3 criteria:
- the weighted surface area of the premises,
- the category of the premises (and the rate attributed to it),
- the location coefficient of the premises.
The weighted surface area of the premises
- Weighting of 1 for the main surfaces of the premises (essential to the activity).
- Weighting of 0.5 for secondary covered surfaces (storeroom, boiler room, covered parking, etc.).
- Weighting of 0.2 for uncovered areas (e.g. uncovered parking).
The category of the premises
Article 310 Q of the CGI defines 38 categories of premises. Each year, the departmental commissions assign rates to each of these categories.
The location coefficient of the premises
This coefficient is intended to take into account the geographical location of the premises: it is between 0.7 and 1.3.
Rental value of the commercial premises = weighted surface area of the premises x rate for its category x location coefficient
How is the property tax on business premises calculated?
The tax base is determined from the cadastral rental value after the application of a 50% allowance.
The tax rate is determined by the local authorities and therefore varies from one municipality to another.
How to declare and pay the property tax?
There is no particular procedure to follow. The property tax notice will be sent to the company during the 3rd quarter, via its impots.gouv.fr tax account. The deadline for payment of the property tax is generally 15 October.
7. Other taxes
Payroll tax
The payroll tax is due by employers not subject to VAT in the year of salary payment. In particular, this tax concerns employers whose activity is outside the scope of VAT: certain liberal professions, companies carrying out a civil activity, property owners, public establishments and groups of municipalities, etc.
Companies that do not pay VAT because of the application of a basic VAT exemption regime are not exempt from payroll tax.
How is payroll tax calculated?
The tax base is the gross salaries paid to employees. The tax rates are set as follows:
Standard rate:
- 4.25% on all wages paid.
Increased by:
- 4.25% (i.e. an overall rate of 8.5%) on the fraction of annual remuneration between EUR 9,147 and EUR 18,258
- 9.35% (i.e. an overall rate of 13.60%) on the fraction of the remuneration exceeding 18,258 euros.
Apprenticeship tax and the Contribution à la Formation Professionnelle Continue – Contribution to Continuous Professional Training
All employers are liable for these taxes if they have at least one employee.
In metropolitan France (excluding Alsace-Moselle), the apprenticeship tax represents 0.68% of gross salaries.
For the Contribution to Continuous professional Training, the rate varies according to the number of employees in the company:
- 0.55% for companies with less than 11 employees,
- 1% for companies with 11 or more employees.
The apprenticeship and continuous professionnal training taxes are calculated and paid via the monthly social charges declaration (DSN).
Other more specific taxes:
Some taxes are very specific and depend on the activity of the company or the assets it holds:
Tax on certain advertising expenses: tax due by companies subject to VAT whose turnover exceeds €763,000. This tax represents 1% of the expenses related to the production and distribution of printed advertising material.
The tax on commercial surfaces (Tascom): Tax due by businesses with a turnover of more than €460,000 excl. VAT and whose sales area exceeds 400m².
The contribution on rental income (CRL): Tax due by companies and organisations subject to corporation tax (IS) and which derive rental income not subject to VAT from buildings completed over 15 years.
Annual axle tax: tax due by companies using heavy goods vehicles of 12 tonnes or more.
The tax on insurance contracts: tax applied to insurance contracts (% of the insurance premium and ancillary products).
The domestic consumption tax on energy products (formerly TIPP): excise duty on energy products (electricity, gas, oil).
The general tax on polluting activities: concerns companies involved in the storage, thermal treatment or transfer of hazardous products or waste.
Digital Services Tax (TSN): targeting large digital companies (GAFAs)
Hiring employees in France
1. Labour regulations in France
The French Labour Code is a set of laws and regulations that govern the relationship between employers and employees. It defines the rights and duties of each party, as well as the standards to be respected in the workplace. It covers a wide range of subjects such as: working hours, minimum wage, paid leave, workplace safety, etc.
Working hours:
Legal working hours in France: the code sets the legal working week at 35 hours, but there are exceptions for certain sectors or types of contracts.
Overtime: overtime is allowed by law, subject to conditions. Indeed, the actual weekly working time must not exceed:
- 48 hours in one week
- 44 hours per week on average over a period of 12 consecutive weeks.
In the absence of a collective agreement, the annual limit for overtime defined by law is set at 220 hours per year per employee.
An employee who works overtime is entitled to a higher pay rate. In the absence of contractual provisions, overtime is increased by 25% from the 36th to the 43rd hour, 50% for subsequent hours.
RTT (Reduced Working Time): some collective agreements provide for compensation in the form of rest days. This applies if the weekly working time in the company exceeds 35 hours per week and is within the limit of 39 hours per week. In this case, an employee whose working time is 39 hours is entitled to 4 hours of RTT per week, i.e. a half-day.
Overtime worked beyond 39 hours is paid as overtime.
The employee’s remuneration
The salary is freely defined by mutual agreement between the employer and the employee. Nevertheless, French labour regulations set minimums below which the salary cannot be lowered:
– the Minimum Wage (SMIC): This is the hourly wage set by French regulations and indexed to inflation, below which it is forbidden to pay an employee.
SMIC amount on 1 January 2025:
Gross hourly minimum wage: €11.88
Gross monthly minimum wage (35 hours per week, i.e. 151.67 hours per month including leave): €1801,80
The conventional minimum salary: when the company is covered by an extended collective agreement, the employer is required to apply the minimum salary defined in the agreement.
Paid leave:
Employees are entitled to annual paid leaves, the duration of which varies according to seniority and company agreements. In general, employees accumulate 2.5 working days per month of effective work, which amounts to about 5 weeks of paid leave per year.
Health and safety at work:
The Labour Code lays down obligations for employers regarding prevention of occupational risks and employees’ health protection. The actions to be taken vary according to the sector of activity.
2. Employment contracts
The most common employment contracts in France are
The open-ended Contract (Contrat à Durée Indéterminée)
The open-ended employment contract is the most commonly used form of contract in France. It can be concluded on a full-time (35 hours) or part-time basis.
The contract is characterised by the absence of a definite term. The contract can be terminated for the following reasons:
- On the employee’s initiative: termination of the trial period, resignation.
- On the employer’s initiative: termination of the trial period, dismissal for gross/obvious misconduct, dismissal for economic reasons, compulsory retirement (after age 70).
- By mutual agreement: amicable termination.
The Fixed Term Contract (Contrat à durée déterminée (CDD))
This contract is concluded for a limited and specific duration.
Cases of recourse to a fixed-term contract
- The use of a fixed-term contract is only possible in cases specifically listed by law:
- replacement of an absent employee, or a temporarily part-time employee,
- temporary increase of the company’s activity,
- Seasonal jobs,
- employment linked to usage (use of fixed-term contracts for temporary projects: a building site, a fair, a cultural action, etc.). The sectors in which customary fixed-term contracts may be used are defined by law.
Can a fixed-term contract be terminated?
Normally, a fixed-term contract cannot be terminated before its expiration. However, there are exceptions: termination at the employee’s initiative if they have a CDI job offer, mutual agreement between the employer and the employee, unfitness diagnosed by the occupational physician, serious misconduct (by the employee or the employer), force majeure.
Remuneration of the fixed-term contract:
the remuneration must be at least equal to that provided for a job with a permanent contract. At the end of the contract, the worker in a fixed-term contract is entitled to holiday allowance equal to 10% of the gross pay received during the contract, and to a precariousness allowance also equal to 10% of the gross pay received during the contract.
Le Contrat de Travail Temporaire (ou contrat intérimaire)The Temporary Employment Contract (or interim contract)
The employee is hired by a temporary work company (temporary employment agency) which places him/her at the disposal of a user company for a limited period of time.
At the end of the assignment, the employee under a temporary employment contract also benefits from paid leave and insecurity pay, respectively equal to 10% of the gross pay received during the assignment.
The Apprenticeship Contract
This is a tripartite agreement between a company, a young person aged at least 16, and a training institute/school. This employment contract allows the young person to follow alternating periods of training in a company and in a training center. For the company, the system is interesting because the salaries paid to the apprentice are not subject to social security contributions, which makes it a low-cost contract and compensates for the apprentice’s training time. In addition, the French government regularly launches aid programs for companies to facilitate the recruitment of young people in apprentice training.
The Professionalization Contract
It is also a work-study contract, generally offered in highly qualified courses (bachelor, master). However, this contract has the disadvantage of being subject to social security charges and is ultimately more expensive for the company.
Fixed price agreements – conventions de forfait
Conventions de forfait are contracts that provide for a working time different from the legal or conventional working time, based on a lump sum established in hours (over the week, month or year) or in days (over the year).
This type of contract is usually offered to managers, and to employees who have some autonomy in managing their work schedule.
For example, in the context of a lump sum established in days, employees are no longer subject to the 35-hour working week legislation: they work independently within the limit of a number of days set by conventional provisions (generally 218 working days). Time tracking is in this case done using a counter.
3. Recruitment formalities
Once the company has found the right profile for the position, here are the different steps of the hiring process:
- 1 signing the employment contract.
- 2 establishing the Declaration Prior to Employment – Déclaration Préalable à l’Embauche (DPAE). This is a dematerialised declaration that allows the main information on the hiring to be transmitted to the main Social Security service, URSSAF.
- 3 Affiliating the employee with retirement, welfare health insurance organisations
- 4 Registering the employee in the Registre Unique du Personnel -Official employee registry (generally processed electronically and automatically through the payroll software).
- 5 Pre-employment occupational medical examination in an approved occupational health center
- 6 At the end of the first month of work, the first pay slip is established
- 7 Every month, the Déclaration Sociale Nominative is established to calculate and pay the various social charges due by the company and allocate payments to the various competent organisations (URSSAF, pension funds, etc.)
4. The cost of an employee in France
The average cost of an employee in France is typically calculated as being in the range of 170 and 180% of their net salary (before income tax). This translates to an estimated cost of between €3,400 and €3,600 for an employee earning a monthly net salary of €2,000.
Nevertheless, the cost of an employee based in France is subject to fluctuations depending on various factors such as the sector of activity, the characteristics and terms of the contract (short and fixed-term contracts are more expensive), the employee’s hierarchical position (employee or manager), etc.
Details of contributions paid (42% of total cost):
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Health: covers most of the health care costs of daily life and the full cost of treatment for serious illnesses.
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Pension: provides on average between 60 and 70% of the last working income after the age of 65.
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Family allowances: finance family support benefits: childcare, housing assistance, etc.
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Unemployment insurance: offers financial support to workers in search of a new employment.
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Vocational training: finances the enhancement of employees’ competencies.
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Additional contributions to the social system: coverage of the work related accidents and occupational illnesses, support for social dialogue, etc.
5. Employer obligations
The employer’s obligations necessarily vary according to the size of the company. As an indication, here are the obligations to be respected in companies of all sizes:
Health and safety at work
The employer must ensure the health of his employees by implementing prevention, information and training actions.
How does this obligation materialise?
Establishment of a Document Unique d’Evaluation des Risques Professionnels – Single Occupational Risk Assessment Document (DUERP)
The employer lists in this document all the occupational risks to which workers are exposed in the company. Failure to update the DUERP may be punished by a fine of €1,500.
Company membership of an occupational health service
Posting and information obligations: posting obligations vary according to the size of the company.
In companies with less than 11 employees, compulsory posting must include, among other things: contact details of the labour inspectorate, contact details of the anti-discrimination hotline, contact details of the occupational health organisation, safety instructions in the event of fire and warnings of danger zone, the collective labor agreement, information specific to gender equality, as well as information on moral/sexual harassment, collective working hours, and notices prohibiting smoking/vaping in the workplace.
Some companies sell the necessary posters according to the collective agreement to which the company belongs.
The training obligation:
in particular when the employee’s function requires the use of specific and potentially dangerous equipment, or a behaviour to adopt in the face of imminent danger, etc. The training obligation must be analysed taking into account the specificities of the company, its activity, its premises, the equipment used, etc…
Health insurance policy:
Since 2016, all employers in the private sector have been obliged to provide their employees with a collective health insurance policy and contribute at least 50% of the cost of the premiums.
Can the employee refuse it? Yes, there are cases of exemption in the following situations:
- The employee already has individual or collective supplementary coverage (as a beneficiary of his/her spouse, for example).
- The employee has a fixed-term contract (CDD) of less than three months.
- The employee is a part-time employee or an apprentice and the contribution represents 10% or more of their salary.
If an employee wishes to be exempted from joining the company health insurance, he must send his request in writing to his employer.
Holding a professional interview:
often carried out annually to discuss the employee’s achievements and prospects for development, the regulations stipulate that it must be held every two years.
6. Termination of employment contract
The most common cases of termination, i.e. those occurring in the case of an open-ended contract (CDI), will be discussed here:
Termination at the employee’s initiative:
Termination of the trial period: the duration of the trial period is indicated in the employee’s employment contract and is fixed taking into account the provisions of the applicable collective agreement in the company and varies according to the employee’s status (manager/non-manager). During the trial period, employees may freely terminate their contract, but they must respect a notice period in accordance with the provisions of the collective agreement (up to 48 hours).
Resignation: Outside the trial period, employees are of course free to resign for reasons of their own, without having to justify themselves. They must nevertheless respect a notice period in accordance with the conditions laid down in the collective agreement.
By mutual agreement (agreement of both parties):
Conventional termination: this is a specific procedure allowing the employer and the employee to agree, by mutual consent, on the conditions of termination of the employment contract. It is nevertheless a controlled procedure and the drafting of such a termination agreement must be approved by a body called DREETS. This type of termination offers several advantages to the employees:
- they are entitled to the same severance pay as in the case of dismissal.
- they are entitled to the same rights to unemployment compensation as if they had been dismissed.
On the employer’s side, this procedure is supposed to protect the company from future claims before to the Conseil des Prudhommes – Labor Court (the court responsible for settling disputes between employers and employees), but in practice, this protection is relative and an employee who considers himself to have been wronged may very well request a hearing and obtain compensation.
Termination at the employer’s initiative:
Termination of the trial period: like the employee, the employer is free to terminate the contract during the trial period. They must also respect a notice period defined by the company’s collective agreement.
Redundancy for personal reasons: to be a valid reason for termination, the reason for dismissal must be both genuine and serious, otherwise the dismissal would be considered unjustified and abusive, and the employer could be sanctioned (reinstatement of the employee in the company, payment of compensation, etc.).
Possible reasons for dismissal on personal grounds: professional inadequacy, repeated or prolonged absences making it impossible to continue the contract, gross misconduct, etc.
Redundancy for economic reasons: the redundancy is motivated by economic reasons, not linked to the employee’s person.
Possible reasons for economic redundancy: serious economic difficulties of the company (lasting drop in orders, drop in turnover, etc.), elimination or transformation of the job concerned, technological changes having a lasting impact on the job concerned, cessation of the company’s activity, etc.
Please note: Cases of dismissal (for economic or personal reasons, except for misconduct) generally give rise to the payment of severance pay.
The social charges of the manager
The social regime of the company director varies according to the type of company chosen.
In a limited liability company, the percentage of capital held determines the social regime applicable to the management:
- The management owns more than 50% of the company’s share capital: the manager(s) is (are) subject to the social security regime of travailleurs non salairés – non-salaried workers (TNS).
- The management (one or more co-managers) owns less than 50% of the company’s share capital: the manager(s) are subject to the social security regime of employees.
- The manager is not a shareholder: they are subject to the social security regime of employees.
NB: when determining of the shares to be included in the calculation of the percentage of share capital, not only the manager’s shares must be taken into account, but also those held by their spouse / PACS partner, minor children, and other co-managers.
Example 1: Mr. Xavier, manager of the LLC Zebulon, holds 20% of the company’s capital. His wife owns 40% of the capital. Is Mr. Xavier a minority or majority manager?
Mr. Xavier is the majority manager, as he and his wife own 60% of the share capital.
Example 2: Mr. Robert and Ms. Nicolas are co-managers of the LLC Turtle. Mr. Robert and Mrs. Nicolas each hold 35% of the company’s share capital. Are they minority or majority managers?
Mr. Robert and Mrs. Nicolas are both considered majority managers in the company for the purposes of social regulations, as the management as a whole holds more than 50% of the capital.
On the contrary, in the SAS, the chairman(s) always fall under the salaried employee regime.
1. The manager who falls under the self-employed persons’ regime
The majority manager of a limited liability company is subject to the social security system for self-employed workers. Their final social security contributions are calculated not only on their salary but also on their share of dividends representing more than 10% of the share capital, share premiums and sums contributed to a partner’s current account.
On average, social security charges represent 40-45% of the net amount paid to the employee, but this percentage is degressive: it decreases as the remuneration increases.
How are social security contributions declared ?
The “Sécurité Sociale des Indépendants” (competent body) takes the professional income and information declared by the manager on his personal income tax return (see DRITI annex). In France, the income tax return must be sent in May N+1.
How are social security contributions paid?
Throughout the year N (monthly or quarterly) the manager pays provisional social contributions.
When the final income is known to the social body (thanks to the income tax return established in May N+1), the Sécurité Sociale des Indépendants calculates the final social security contributions for the year N, and determines the remaining balance to be paid.
Sample schedule (quarterly payment)
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5 February N: payment of provisional contributions for 1st quarter N
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5 May N: payment of provisional contributions for 2nd quarter N
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5 August N: payment of provisional contributions for the 3rd quarter N
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5 November: payment of provisional contributions for the 4th quarter N
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September N+1: following receipt of the income tax return, sending of the regularisation call of N contributions = final contributions – provisional contributions already paid in N.
What risks are covered by these social contributions?
Social security contributions mainly include:
- health contributions, which cover the risks of sickness, maternity, disability, and death.
- old-age contributions, which provides a retirement pension.
- family allowance contributions, which provide support for children care.
- occupational injury contributions, which cover the risks of work accidents and occupational diseases.
2. The manager who is subject to the salaried employee regime
The minority manager of the LLC and the chairman of the SAS are subject to the salaried employee regime. Each month their salary and the corresponding social security contributions are reported on a payslip. Social security contributions are declared and paid monthly via the Déclaration Sociale Nominative – social security declaration.
Important point: Unlike managers who come under the social regime for self-employed workers, dividends paid to managers under the salaried employee regime are not included in the calculation of social contributions. On the other hand, the overall social cost of an employee under the salaried employee regime, including both employee and employer social charges, is considered more expensive for the company…
Annual accounting and legal requirements
1. Invoicing
Mandatory information
To be valid, invoices issued in France must include a certain number of compulsory information in the French language:
- the invoice number: invoicing must follow a continuous and uninterrupted chronological sequence,
- the date of issue of the invoice,
- the complete designation of the issuing company: company name, Siren (or Siret) number, NAF code (activity code), company address, intra-Community VAT number,
- the complete designation of the customer: company name, address, intra-Community VAT number
- Full description of the services invoiced
- Total excluding VAT, VAT collected, Total including VAT .
- VAT information:
- Service invoiced to a customer located in another EU country (B2B): in addition to the customer’s intra-Community VAT number, the words ” Autoliquidation par le preneur article 283-2 du CGI. Article 44 Directive 2006/112/CE » should be added – Reversal of VAT by the customer Article 283-2 of the CGI. Article 44 Directive 2006/112/EC”.
- Service invoiced to a customer located in a non-EU country: Addition of the words « Exonération de TVA art. 283-2 CGI » – “Exemption from VAT art. 283-2 CGI »
- Terms and deadlines for payment (usually a 30 days or 45 days end of month period), penalties and interest in case of late payment.
Invoicing in a foreign currency
The invoice can be issued in a foreign currency other than the euro. If the parties involved have negotiated an exchange rate for the payment of the invoice, this should also be added to the invoice.
For the recording of these invoices in the French accounting system, which is kept in euros, one of these two conversion rates must be used:
- the exchange rate on the due date of VAT (date of payment of the invoice for services),
- OR for simplification purposes: application of the customs exchange rate: rate published on the second last Wednesday of the previous month. Example: for services invoiced in March 2022, the customs exchange rates published by the Banque de France on Wednesday, February 16, 2022, should be used.
Is the use of invoicing software mandatory?
No, currently French regulations do not require professionals to use regulated invoicing software for issuing their invoices.
Therefore, it is possible to establish them by any means at your convenience, as long as the compulsory information appears correctly on the invoice.
Nevertheless, legislation is rapidly evolving in this area: electronic invoicing will gradually become mandatory as of July 1, 2024. For VSEs and SMEs with a turnover of less than €50 million, electronic invoicing must be implemented by July 1, 2026. The technical details of the implementation are not currently known, but it is expected that invoicing flows will transit through a public platform allowing the sending and receiving of inter-company invoicing flows.
2. Certified cash register software
Since 2018, the law requires French retailers equipped with cash register software to obtain a certificate of compliance, issued by an accredited body, or an individual certificate from the software publisher used. It should be noted that it is the responsibility of the professionals to request the certificate of compliance from their supplier, as it is not automatically provided with the cash register software.
This certification aims to prove that the equipment used complies with the following conditions:
- condition of inalterability: the software used must allow the recording of all data relating to the regulations without being altered;
- security condition: the software must be able to secure the original data, any possible modifications, and supporting documents;
- conservation condition: the software must record and close the data for a given period;
- archiving condition: the software must provide for an archiving period where data is frozen and dated with a technical device guaranteeing the integrity of the information.
3. Opening a business bank account
In corporate form (LLC, SAS…)
The registration of the company, whatever its form, requires that the share capital to be deposited in a bank account opened in the name of the structure being formed; this is a mandatory step. When the French bank receives the transfers of funds forming the share capital, it provides the partners with a “certificate of deposit of funds”.
Sole traders
Professionals operating as sole traders are required to open a dedicated bank account for their activity as soon as their annual turnover exceeds €10,000.
To avoid confusion, it is essential that this bank account is used for business purposes only (no personal expenses).
4. Professional insurance underwriting
Legally, it is only compulsory for certain professions to take out professional insurance: healthcare professionals, legal professionals, construction professionals (ten-year guarantee), etc. Nevertheless, taking out professional insurance is still strongly recommended for most companies. This insurance must cover the following risks:
- business assets: buildings, equipment, stocks, production tools, IT systems, car fleet….
- activity: damage caused within the framework of your activity that may engage the civil, environmental, legal or other liability of your company.
- People: social protection, retirement, complementary health insurance, business travel, etc.
5. Accounting obligations
Apart from micro-enterprises, which benefit from a status that allows them to keep strict minimal accounting records, most companies must comply with the following accounting obligations:
- recording all accounting documents (purchase invoices, sales invoices, etc.) and movements affecting the company’s assets;
- inventory control, at least once a year, of the existence and value of the elements constituting the company’s stocks;
- Establishment of annual accounts at the end of each financial year, including the balance sheet, the profit and loss account and the accounting annex.
The fichier des écritures comptables (FEC) – accounting records file
Since 1st January 2014, when a company keeps its accounts using computerised systems, it must, in the event of an audit, present them to the tax authorities in the form of a dematerialised file. This file, which includes all the entries in the accounting journals, must be presented to the auditor at the beginning of the audit of the accounting verification. Failure to present the FEC is punishable by a fine of €5,000 or, in the event of rectification and if the amount is higher, an increase of 10% of the tax due by the taxpayer.
6. Legal obligations
Once a year, and within six months of the end of their accounting year, the partners of companies must meet in a general meeting to approve the annual accounts.
During this general meeting, the method of convening varies according to the structures and their statutes, the shareholders approve a certain number of documents: the company’s annual accounts, but also the management report, the regulated agreements, the auditor’s report when the company has a legal audit obligation, etc.
Once these documents have been approved at the general meeting, the manager of the structure is responsible for filing the annual accounts with the registry of the Commercial Court. Failure to do so may result in a fine of €1,500 (€3,000 in case of repeat offence). Furthermore, the failure to file the annual accounts for a prolonged period of time may lead to the automatic tracking of the company.
Conclusion
Setting up a business in France is a rewarding venture, but it requires navigating through a complex legal and administrative framework. This guide has outlined the key steps, from selecting the legal structure to managing tax and social security obligations. However, since every project is unique, it is crucial to receive personalized guidance to ensure the success of each stage of your business creation.
Our team of experts is ready to help you bring your business plans to life in France, offering tailored advice suited to your specific needs. Contact us for personalized support, so you can move forward with confidence and avoid administrative hurdles
Sources of quoted content:
The Team Roche & Cie
Professionals or individuals, French or international, since 1948, Roche & Cie has been assisting clients from all horizons.
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