This publication is a joint project with
Doing business in France Contents
Executive summary 5 Disclaimer
This document is issued by Foreword 6 HSBC Bank France Company Limited (the ‘Bank’) in France in partnership Introduction – Doing business in France 8 with PricewaterhouseCoopers (PwC). It is not intended as an offer or Conducting business in France 10 solicitation for business to anyone in any jurisdiction. It is not intended Taxation in France 16 for distribution to anyone located in or resident in jurisdictions which Audit and accountancy 23 restrict the distribution of this document. It shall not be copied, Human Resources and Employment Law 26 reproduced, transmitted or further distributed by any recipient. Trade 36 The information contained in Banking in France 40 this document is of a general nature only. It is not meant to HSBC in France 42 be comprehensive and does not constitute financial, legal, tax or Country overview 44 other professional advice. You should not act upon the information Contacts and further information 46 contained in this publication without obtaining specific professional advice. This document is produced by the Bank together with PricewaterhouseCoopers (‘PwC’). Whilst every care has been taken in preparing this document, neither the Bank nor PwC makes any guarantee, representation or warranty (express or implied) as to its accuracy or completeness, and under no circumstances will the Bank or PwC be liable for any loss caused by reliance on any opinion or statement made in this document. Except as specifically indicated, the expressions of opinion are those of the Bank and/or PwC only and are subject to change without notice. This document is not a ‘Financial Promotion’.
The materials contained in this publication were assembled in August 2012 and were based on the law enforceable and information available at that time. Executive summary
France is the largest country s #ORPORATIONS RESIDENT IN s #ERTAIN ACQUISITIONS MERGERS of the European Union. Its France are subject to Corporate and creations of joint ventures economy is well developed Income Tax at a 34.43% rate. might require a notification and, as such, France is also Foreign companies are also to the French Competition one of the main host countries subject to a limited tax liability Authority. Anticompetitive chosen for direct foreign on their French source income. practices such as concerted investments in the world practices and abuses of (especially as it is the largest s !LTHOUGH &RANCE HAS A LOT OF a dominant position are country in the EU). France favourable tax regimes applicable punishable offences. provides a business-friendly to companies belonging to the environment with strong public same group, it also has transfer s &OREIGN INVESTORS ARE FREE TO facilities and a legal framework pricing rules that follow open bank accounts and apply in line with European standards. OECD principles. for loans in France. In that respect, generally speaking, The document below aims s &RENCH TAX RESIDENT INDIVIDUALS no withholding tax applies to provide the key elements are subject to personal income to French source interest paid pertaining to the French tax on their worldwide income to non-French tax residents. business environment. at a progressive rate going up to 41%. In that respect, the key points an investor has to bear in mind s !CCOUNTING STATEMENTS SHOULD when considering a French be made in compliance with investment are the following: French GAAP, although public companies are required to s 4HE MAIN &RENCH BUSINESS publish IFRS accounts annually. sectors are electronics, transportation, tourism, textiles, s 4HE HIRING OF ANY EMPLOYEE food processing and chemicals. must be declared to the local Social Security Authorities s 3ETTING UP A &RENCH COMPANY within an 8-day period can be done quickly and easily. preceding the start of All formalities can be dealt with the employment. Payments in a single place: the Business of salaries are subject to Formality Centre (the BFC). social contributions that vary depending on the amount s 4HE &RENCH LEGAL FRAMEWORK of the salary paid and the provides for efficient IP nature of the employee’s job. protection regimes as well In addition, the French legal as specific tax incentives for framework is protective of the creation/holding/disposal employees, as an employee of IP/IT rights. can only be dismissed in very specific circumstances and after the completion of a regulated process. Foreword
France is, and will remain for Our commercial banking number of customer managers Jean Beunardeau the next decades, one of the activities offer an extensive with an international focus, CEO top 10 countries in the world range of domestic and strengthening payments and HSBC France in terms of GDP. It is also a international products and cash management, enhancing leading country in terms of services providing daily trade services teams dedicated international trade, with Europe support to businesses ranging to international. still the major partner (circa from very small enterprises 60% of trade) but emerging to multinationals, through a In France, as in the rest of economies representing a fast domestic network specialised Europe, the economic climate increasing share. by type and size of business. became steadily unstable in This network comprises 10 2011. During the first quarter, HSBC France is a priority Corporate Banking Centres, 51 in line with the end of 2010, market for HSBC Group, ‘Centres d’Affaires Entreprises’ there were encouraging one of the world’s leading dedicated to SMEs, 15 ‘Pôles signs of an economic upturn financial institutions, and Entrepreneurs’ dedicated to (improvement in economic the first international bank very small enterprises (VSEs) growth, rise in the stock on the French market. Based and direct banking services markets) but as of the second on a universal banking model, with dedicated customer quarter, the economic climate it offers a comprehensive managers, longer branch was affected by concerns over range of services aimed at a opening hours and attractive the sovereign debt situation corporate, business and retail banking packages for small in the southern Euro zone clientele wishing to benefit business clients or associations. countries. from the robustness, the infrastructure and network Commercial Banking is closely In this environment, our of the HSBC Group. connected to other businesses Bank benefits from strong which efficiently allows for capital and liquidity positions, HSBC France strategy, in entrepreneurs to have a dual a disciplined risk control, line with the Group’s, aims relationship. On one hand there robust commercial positions at leveraging on its unique are the Retail and Private banks across all its businesses, and positions on the French for personal banking, and a clear strategy that delivers market, and accelerating its on the other is Investments results and paves the way for growth while improving its & Markets to meet corporate profitable growth. overall efficiency. It focuses requirements. Both of these on wealth management for offerings are furthered personal customers; it bolsters through our international international connectivity needs network and local commercial for corporate and business presence in 65 countries. customers; it strengthens Commercial Banking strategy its position as a strategic hub in France aims at continuing for investment services and to strengthen our international market activities. capabilities by increasing the
6 Introduction Doing business in France
Economic environment responsible for nearly all job Language Legal protection is available Investments in protected Despite the formality of creation in recent years. when the IP is not already sectors (such as gambling, French business culture, it France is considered to have According to the French Office French is the official language protected by a trademark, weapons, cryptology etc.) is not uncommon practice to a well-developed economy for National Statistics (INSEE), in France. a copyright or used by a require obtaining a prior stray from the agenda during and has one of the highest HDI 2011 showed a global increase third party, for instance as authorisation from the French meetings. Initial meetings are (Human Development Index) of 1.7% of the French economy, Ease of doing business a company/trade name or Ministry of Finance. Non-EU often dedicated to information in the world. Its history, its up from 1.5% in 2010. The first in the territory as a domain name. investors are required to seek sharing and discussion, rather culture and the diversity of quarter of 2012 showed a prior authorisation from the than reaching final decisions. its landscapes attract over stable GDP (0.0% in volume), The Ease of Doing Business Trade relations and Ministry of Finance in other 75 million tourists per year. following a small increase of Index is an index created regulatory requirements specific cases (such as the Do not be put off by frequent The tourist sector is, as a 0.1% during the last quarter by the World Bank. Higher acquisition of a controlling differences in opinion and consequence, an important of 2011. rankings indicate better, There are no administrative stake in a company having rigorous debate during business source of profit for France. usually simpler, regulations restrictions on foreign its registered office in France), negotiations. The French will The European Commission, for businesses and stronger investment in France, with the Ministry of Finance appreciate your ability to defend The French economy is based the OECD and the International protections of property rights. although mandatory having two months to respond your position. both on a strong private sector Monetary Fund have forecast declarations or permits to the request, the authorisation and on a national economy. GDP growth for 2012, between France ranks 29 in this index are required in some cases. being deemed to have been Lunch is one of the best places Since the mid-eighties, public 0.2% and 0.5%. for 2012, compared to 26 for granted if no response is made to forge business relationships policies have tended to transform 2011 and 31st for both 2009 Whatever your business within this time period. in France, but business lunches the nation’s economy from Main business sectors and 2008. development strategy is, are not as common as they a state-dominated structure you will find in France an Business Etiquette used to be. If invited to one, to a privately-owned one. France has been very IP protection regime appropriate legal structure it is always polite to accept. successful in developing for the kind of business In French business culture it Why it is a good place dynamic telecommunications, French law provides for you wish to set up. Investors is customary to only use first Do try to learn a few basic to do business? aerospace, and weapons trademark protection of IP, can set up a permanent names when invited to do so. French phrases and use them sectors. With virtually no including words, names, letters, or temporary structure and Sometimes the French will whenever possible. Your efforts France is the world’s fifth largest domestic oil production, numerals, labels, designs, enjoy full legal peace of mind; introduce themselves by saying will not go unnoticed. economy. Its Gross Domestic France has relied heavily on sounds and musical phrases. they are then free to drive their their surname first, followed by Product (GDP) is over €2 trillion the development of nuclear project forward in a simple their Christian name. and the WTO (World Trade power, which now accounts and inexpensive environment. Organization) reports that in for about 80% of the country’s A business meeting should 2010 France was the sixth electricity production. Upon completion of the begin and end with a brisk largest exporter of goods as The main industry players operate investment, foreign investors handshake accompanied by well as the sixth largest importer in the following areas: aircraft, are only required to submit: an appropriate greeting and the of goods. It has substantial electronics, transportation, exchanging of business cards. agricultural resources, a large textiles, clothing, food processing, s A NOTIlCATION TO THE &RENCH industrial base, and a highly chemicals, machinery and steel. Tax Authorities (the FTA) skilled work force. A dynamic The principal service areas in (i.e. the Direction du Trésor) services sector accounts for France are services to companies in certain cases; and an increasingly large share and individuals, financial and real of economic activity and is estate services, tourism and s A STATISTICAL DECLARATION transportation. for transactions exceeding a threshold of €15million.
8 Conducting business in France Forms of business Setting up a business
Choosing a business structure If you wish to develop Small companies often Companies can set up a establishments with regard The subsidiary becomes in France depends on the a commercial activity: prefer to use sales agents branch or a subsidiary to to tax laws and must pay a separate legal entity as from investor’s strategy and the sales agents as a flexible and inexpensive conduct manufacturing or corporate tax and VAT. The the date when it is registered degree of independence that means of introducing their sales operations in France subsequent conversion of with the trade registry (Registre the French operations need to Foreign companies may products to foreign markets, through a permanent principal a branch into a separate du Commerce et des Sociétés - have from the parent company. use the services of a French rather than establishing a or secondary establishment. incorporated subsidiary is RCS) as stated on its certificate sales agent for the marketing French based activity, such possible, but must comply of incorporation. The founders Reducing administrative of their products and/or services as a branch or a subsidiary. A branch with rules governing the sale are personally liable for legal procedures on the French market. The sales and transfer of business, and commitments entered into agent would normally act in their Branches enable foreign is subject to taxation (under during the incorporation phase A foreign company that wishes own name and on their behalf companies to establish a certain conditions, those (such as hiring personnel, signing to prospect for business in as intermediary between the physical presence in France operations can benefit from a lease agreement, signing France can do so by opening foreign companies and for a commercial activity. a deferred tax regime). utilities agreements, etc.), a liaison office. This option the French market. and these may be further taken involves a specific tax and The branch may carry out all A subsidiary over by the newly incorporated company status. Agents are responsible for the operations implemented company subject to specific legal negotiating and may also be by the foreign company, as it is Creating a subsidiary company conditions being complied with. Liaison offices: empowered to sign contracts the foreign company itself that incorporated under French law, representation without for sales, purchases, leases is registered in France with the offers certain advantages: Timeframe for setting up commercial activity and for the provision of services trade registry where its branch your business in France in the name and on behalf is located. Indeed, a branch s SEGREGATION OF SUBSIDIARIES A foreign company may recruit of their principals (i.e. not in is not a legal entity separated assets from the parent The timeframe required to or send an employee to France their own and behalf). They from the foreign company that company’s assets – this set up a company in France to represent it through a local may work for one or more established it. concept means that foreign has been simplified over liaison or representative office. companies, and in most cases companies do not bear recent years, and occurs are responsible for a defined Foreign companies may wish unlimited liability for the shortly after the date when Liaison offices can only conduct geographical area and/or to limit the powers of the debts of their French structures. the file, containing all required a very limited type of non- sector of activity. They are paid French branch representative; On the other hand, subsidiaries’ documents, is ready for filing. commercial operations, such in part or in full by commission however, it is important to losses cannot be offset against as prospecting, advertising, on completed transactions. note that such limitation of the parent company’s profits; A one-stop shop: Business providing information, storing powers cannot be imposed Formality Centre (the BFC) merchandise, or other Since sales agents are on third parties, in general. s SUBSIDIARIES MAY APPLY FOR operations of a preparatory external suppliers and not The branch representative is government support when All the formalities for setting or auxiliary nature, and cannot salaried employees, specific empowered to represent the starting up or expanding; up a new company can be operate a commercial activity. rules apply when agreements foreign company vis-à-vis third dealt with in a single place: A liaison office is not a separate with them are terminated. parties and is deemed to be s SUBSIDIARIES CAN ENTER INTO Business Formality Centre legal entity. Invoices must be Except in cases of professional empowered to act in the name agreements on sales and (the BFC). The BFC handles issued by the foreign company, misconduct, the agent is and on behalf of the foreign technical assistance with the all the documents required which must also directly sign entitled to compensation company for all operations foreign parent company and to set up, change or close any contract with French based on commissions carried out through the branch. may pay or receive royalties, down companies and the BFC customers, as the liaison office received (in principle, this Branches are permanent commissions, management delivers them to the relevant must refrain from entering into will be the equivalent of fees, etc. authorities, including: commercial agreements with two years of the same). third parties.
10 Société à responsabilité Société anonyme (SA) Société par actions limitée (SARL) with a board of directors simplifiée (SAS) Key Easy to set up and operate. Structured for ‘monitored Convenient for subsidiaries advantages delegation’. More and more in a group of companies fitted for listed companies and for joint ventures, as or for shareholders that it allows the shareholder(s) do wish to benefit from to freely determine a legal form whose rules the nature, power and are strictly fixed by the functioning of the corporate commercial code. bodies as well as their decision-making process, with minimal constraints.
Number of 1 or more individuals 7 shareholders at least. 1 shareholder at least. shareholders or legal entities. A EURL (i.e. a SARL with s THE &RENCH /FlCE FOR Choice of legal structures The three main types of a sole shareholder, individual National Statistics (INSEE) limited liability companies or legal entity) may not which allocates the various Choosing a legal structure be the sole shareholder codes corresponding to the will affect the company’s legal The most popular company of another EURL. company and to its activity, status, tax position, assets forms are the société in particular the company and employment relations. anonyme (SA), the société à registration number; responsabilité limitée (SARL) Statutory 1 office holder and 1 Statutory auditors SAS which controls one Limited liability companies and the société par actions auditors deputy holder are required must always be appointed. or more entities or which s THE &4! AND THE SOCIAL SECURITY simplifiée (SAS). only if 2 of the following is controlled by another agencies, including URSSAF, Limited liability companies are 3 criteria are exceeded: Term of office: entity must appoint which collects social security the most common structure in SASs and SARLs can be 6 financial years. statutory auditors. contributions; and France. The financial liability of formed with a single partner - turnover (excl. tax): their shareholders is limited to (named ‘SAS Unipersonnelle’ €3,100,000, Term of office: s THE TRADE REGISTRY OF THE the amount of their contribution. (SASU) or single-shareholder - total of the balance 6 financial years. commercial Court, which will limited liability company sheet: €1,550,000, issue a ‘K-bis’ registration The rules governing companies (EURL), whereas seven - average number SAS which does not control certificate at the end of the have become much more partners are required for of employees: 50. one or more entities or setting up process. flexible, with the introduction an SA. The SA is the most which is not controlled of simplified stock companies sophisticated type of French Term of office: by another entity must Intellectual property rights (‘SAS’), which have greater company and is able to launch 6 financial years. have 1 office holder and freedom to draft their articles a public offering (whereas 1 deputy holder only if 2 French industrial property laws of association with respect SASs and SARLs cannot). of the following 3 criteria provide effective protection to internal organisation and are met: for patents, trademarks, models decision-making process. The SAS or SASU is the and designs. The competent The elimination of the most recent form of French - turnover (excl. tax): French administration, named minimum capital requirement company and is well suited to €2,000,000; ‘INPI’, is the core of the French for SARLs and SASs has also holding companies and foreign - total of the balance sheet: protection system, and filings resulted in greater flexibility. companies wishing to maintain €1,000,000; with it are the starting point 100% control over their French - average number of for patent and trademark By the same token, French subsidiaries, with sufficient employees: 20. protection. Industrial property company law has kept in step flexibility to comply with rights entitle patent holders with modern technology: board investors’ objectives in terms Share capital €1 minimum. €37,000 minimum. €1 minimum. to a monopoly on use for of directors’ meetings and of internal organisation, control 20 years. Trademarks are supervisory boards may now over the transfer of the SAS At least 20% to be paid At least 50% to be paid At least 50% to be paid valid for 10 years and can be be held remotely (by video- shares, etc. up on subscription for up on subscription for up on subscription for renewed indefinitely. Models conference or other means) contributions made in contributions made in cash, contributions made in cash, and designs are protected except as otherwise provided The main characteristics cash, and the balance and the balance within and the balance within for 25 years. for in the company’s articles of these three types of legal within 5 years. 5 years. 5 years. of association or where annual forms are summarised in Company names, trade names or consolidated financial the template opposite. No public issue of shares Public issue of shares No public issue of shares and logos are also protected statements and management allowed. allowed. allowed. and can be cited in unfair reports are to be approved. competition lawsuits. Contribution in kind is Contribution in kind is Contribution in kind is possible. possible. possible.
12 Société à responsabilité Société anonyme (SA) Société par actions Société à responsabilité Société anonyme (SA) Société par actions limitée (SARL) with a board of directors simplifiée (SAS) limitée (SARL) with a board of directors simplifiée (SAS) Liability of Limited to contributions. Same as SARL. Same as SARL. Shareholders’ The commercial code The commercial code The articles of association shareholders collective sets out specific quorum sets out specific quorum may freely fix the SAS decisions / majority rules for certain / majority rules for certain corporate bodies and their decisions, and occasionally decisions, and occasionally decision-making process. Incorporation Signature of articles of Same as SARL. Same as SARL. allows that more stringent allows that more stringent The minimum corporate association and registration rules be fixed in the articles rules may be fixed in the bodies of a SAS are: i) with the trade registry. of association. articles of association. a sole shareholder, ii) a Chairman who is the SAS Shareholders’ decision Shareholders’ decision is legal representative. Management One or more individual(s) The CEO (directeur The nature, power and may be made by written made at either ordinary body(ies) may be appointed as general), the deputy CEOs decision-making process consultation except for (OGM) or extraordinary A shareholder resolution is managing directors (gérant). (directeurs généraux of management bodies is approval of the financial general meetings (EGM) of required for the following A gérant is not necessarily délégués – 5 maximum) freely fixed by the articles statements which must be shareholders. EGMs mainly matters: increase, a shareholder of the SARL. and the Chairman of the of association. The SAS decided at a shareholders’ state on the amendment amortisation or decrease of board are necessarily must have at least a meeting (compulsory of the SA articles of the share capital, merger, Appointment conditions individuals. The Chairman Chairman (président), physical meeting of the association, whereas OGM winding-up, spin-off, and powers are fixed by the of the board may be who is entitled to validly shareholders). state on all other issues conversion into another commercial code. entrusted with the duties commit the company that are of the competence legal form, appointment of CEO. vis-à-vis third parties. of the shareholders (e.g. of auditors, approval of approval of yearly financial accounts and allocation of Between 3-18 members The Chairman may be an statements). the result. Other decisions of the board of directors, individual or a legal entity. may be taken by the which may be individuals or shareholders or by other legal entities. Appointment corporate bodies (the conditions and powers are Chairman, a committee etc.). fixed by the commercial code. Transfer of The transfer of shares is In non-listed SAs, the Freely fixed in the shares subject to the prior approval articles of association may articles of association. of other shareholders, at include a clause stating Foreign Any managing director (for SARL) CEO or deputy CEO (for SA and SAS) or Chairman a specific majority fixed that the transfer of shares The articles of association individuals (for SAS) who is not a national from the EEA must obtain a specific authorisation or by the commercial code is subject to the approval may provide that a transfer not being EEA implement specific formalities. The same is applicable to the permanent representative (unless the articles of of a corporate body. No of shares is always subject nationals of a Chairman being a legal entity. association provide for a specific majority is fixed to the approval of the more stringent majority). by the commercial code shareholders, that the Limit on the Not applicable. 2 mandates as CEOs and 5 Not applicable. for the approval of the shares are blocked for number of as members of the board. This approval may also envisaged transfer. a maximum of ten years, corporate be applicable to transfer that a shareholder may office positions of shares between be obliged to transfer held in French shareholders, if the articles its shares in specific companies by of association so provide. circumstances. members of the Yearly management Financial statements must Same as for SARL, Same as for SARL. approval body(ies) be established and approved being specified that of financial within six months after the the statutory auditors’ statements financial year end. The filing report is compulsory Convening of Notice systematically Notice issued by letter. Freely fixed by the and accounts of annual accounts along with and must be filed. shareholders’ issued by registered letter. Convening period: articles of association. disclosure the yearly statutory auditors’ meetings Convening period: 15 days minimum. report – if any – is compulsory. 15 days minimum.
14 Taxation in France Corporation Income Tax (CIT)
Scope and Rates result. Therefore taxable income derived from IT rights held for of a company is computed based more than 2 years: The French Corporate Income Tax on its accounting result and (herein after the ‘CIT’) is, as a adjusted by taking into account s GAINS EARNED ON QUOTED REAL matter of principle, payable by any additional income not taken into estate companies benefit from company operating within the account in the computation of a 19% taxation rate; French territory. However, based accounting result, non-taxable on the territoriality principle, French income, non-deductible s INCOME DERIVED FROM THE LICENSING corporations are not taxed on their expenses, allowable provisions or the sale of certain IP rights foreign source income. Accordingly, and expenses carried forward. (patents and patentable rights) French corporations are not benefit from a 15% taxation rate; and taxed on their foreign permanent Dividend taxation establishment (PE) income. s THE PARTICIPATION EXEMPTION Under French tax law, the PE Dividends are in principle subject regime is applicable to the concept refers to a fixed place of to CIT at the standard rate. so-called ‘titres de participation’ business, a business agent or the Companies receiving eligible held by a French tax resident operation of a full production cycle. dividends may however benefit for at least two years. In from the so called ‘parent and substance, a company that CIT Rates subsidiary’ exemption regime. holds at least 5% of the share This regime may apply where the capital of a subsidiary for at The CIT tax rate is currently at parent company owns 5% or more least two years benefits from a 33.33%. As of 1 January 2010, of the distributing company’s share 90% exemption on the gain a 3.3% additional contribution capital for more than two years thus realised. The effective rate (Cotisation Sociale sur les Bénéfices (or undertakes to keep its shares of taxation would therefore be so called CSB) is payable by any for more than two years) regardless reduced to 3.44%. companies whose income tax of its residence country. liability exceeds €763,000. Deductions As a consequence, companies Where applicable, the parent and with taxable profits exceeding subsidiary regime enables the Deductible expenses are those €2,289,000 are taxed at 34.43%. French tax resident corporation incurred in the course and for Article 30 of the fourth amended receiving the dividend payment the purpose of the company’s Finance Bill for 2011 introduced a to benefit from a 95% exemption business, e.g. depreciations and new CIT surcharge of 5%. This of the gross dividend received. amortizations of the production tax is applicable to companies equipments, provisions, rents that have a turnover higher than Capital Gain taxation for buildings and equipments, 250 million Euros. This temporary royalties paid for licensing of tax is applicable to fiscal years Capital gains are likewise included patents, salaries, social security ending on or after 31 December in the CIT basis. However, specific contributions etc. Conversely, 2011 and will be in place until provisions are applicable for expenses which are not incurred 30 December 2013. long-term capital gains. Capital in the taxpayer’s interest cannot gains are those realised on certain be deductible, i.e. a company CIT Basis assets sold after a two-year might not be entitled to deduct holding period. The long-term a subsidy paid to a related company Except as otherwise provided regime provides for a reduced rate if it does not have any interest under French tax law, the taxable of taxation for certain eligible (commercial/financial) to do so. result is based on the accounting shares and for income/gain 16 Certain expenses cannot be the taxable results of its Those tests are computed assets exceeding €400 million, EU legislation applicable to in the basis for computation deducted, such as ‘sumptuary’ subsidiaries, a parent company slightly differently within French subsidiaries owned payments of intra-group on the tax credit up to 100% expenses, which broadly speaking must own directly or indirectly a tax consolidated group. more than 50% by French or interest and dividends. of that amount. are expenses which are not 95% of each subsidiary to be foreign entities meeting the required for the purpose of the included in the tax group. Loans granted by third €400 million criteria, French Increased withholding tax Moreover, the 30% ‘standard’ company’s activity, i.e. hunting and This parent company must not parties parent companies that directly rates may however apply to rate is increased to 40% and yachting expenses. As a result, be owned by more than 95% by In the specific case where the or indirectly own 50% or more payments (55% for dividends, 35% for the first and the second whilst no general prohibition exists another French company subject repayment of a loan granted by of companies meeting the 50% for interest and gains) year, respectively, during which as to the deduction of fees paid to to CIT. All companies in the group a third party (including banks) €400 million criteria and made in an account located in the company incurs eligible related parties (abroad or not) it must have the same financial year. is guaranteed by a related French tax consolidated group non-cooperative countries.1 R&D expenses, or after the is nevertheless required that fees party or by a third party whose (with at least one tax expiration of a period of five paid to related parties be determined Thin capitalisation rules commitment is itself secured consolidated entity meeting the Tax incentive toward IP consecutive years during which under arm’s length conditions. by a related party, then the €400 million criteria within the development – Research the company did not benefit Under certain conditions, the proportion of interest that is perimeter). Tax Credit from the tax credit, provided, in Use of losses deduction of interest could payable on that part of the both cases, that the concerned be limited if the borrower and loan that is secured in this Transfer pricing documentation The French Research Tax Credit company is not affiliated with Losses can be carried forward the lender are related parties. way is potentially subject includes general information offers a CIT relief for R&D another company which except in the case of a change to thin capitalisation rules. about the group and its expenses spent in France benefited from the R&D tax credit of the company’s business Interest rate limitation subsidiaries and detailed regardless of the taxpayer’s within the same time period. (the change of control of First, the deduction of interest Taxation of permanent information of the transfer sector of activities. Eligible R&D the company does not itself is capped at a statutory rate establishments pricing policy set up within the projects include all activities Operating costs are taken into jeopardise the carrying forward determined by reference to the French audited entity. This aimed at achieving technological account by retaining 50% of the of the tax losses). Losses are annual average rate applied by French permanent establishments documentation must be kept up or scientific progress. The tax research and development staff available to carry forward within credit institutions for variable of foreign companies are taxed to date. This documentation credit is based on the amount of costs plus 75% of the the limit of 1 million Euros interest rate loans. This rate is on their French source income. should, amongst other things, expenses spent on R&D depreciation on the assets of taxable profit plus 60% of regularly published by the FTA. Branch’s profits may, subject provide satisfactory justifications projects. The eligible expenses allocated to the research. Also, taxable profits in excess of this. For the accounting year ending to applicable Double Tax Treaty for the choice of the transfer include personnel costs, sub- spending on outsourcing to Losses can also be carried back on 31 December 2011, the (hereinafter the ‘DTT’) or other pricing methods used and their contracted R&D to an approved private research organisations to the fiscal year immediately maximum rate was 3.99%. non-discrimination agreements, arm’s length nature. organisation in France or the is included in the limit of three preceding that in which the be subject to a 30% withholding European Union, depreciation of times the total amount of other losses arise and up to a Debt to equity ratios tax. From a practical standpoint Withholding tax rates infrastructure and equipment, research expenses qualifying for maximum of 1 million Euros. In addition, the amount of however, the branch tax is very spending on technology etc. the tax credit and cannot exceed As a result, the carry back deductible interest determined rarely levied. Those withholding tax rates 10 million Euros if the private receivable may either be after application of the interest do not take into account the Currently, the R&D credit equals research organisation is not a used in order to pay taxes rate limitation, could also be Transfer pricing rules wide French DTT network 30% of the R&D eligible related party (limited to 2 million (CIT, VAT) or be reimbursed capped if the interest payments (around 108 DTT have been expenses incurred during the Euros in the contrary case). after a five-year period. exceed the following three tests: Transfer pricing rules apply to signed). In that respect, most year, up to 100 million Euros in A company can use its tax credit payments made between treaties provide for a reduced eligible R&D expenses, and 5% to pay its CIT or may claim a Tax Consolidation regime s A DEBT TO EQUITY RATIO related parties. In substance, withholding rate of between beyond this amount. In addition, refund of the tax credit three of the paying company; the French transfer pricing 0% and 15%. Those rates also eligible R&D expenses incurred years after the booking of the This regime allows companies policy follows the OECD do not take into account either by the company can be included tax credit receivable. liable for CIT to create a tax s OF THE PAYING COMPANYS recommendations. Since 1 consolidated group. Under the tax adjusted operating profits January 2010, transfer pricing Income Rate Applied 1. Non-cooperative countries are those consolidation regime the legal (before tax); and documentation requirements mentioned on a list issued by the Branch’s profit 30% entities’ taxable results can be have been enacted. A specific Ministry of Foreign Affairs which is revised annually. For tax year offset against each other. The s THE AMOUNT OF INTEREST RECEIVED set of documents is required Dividend 30% 2012, includes Guatemala, Niue, relevant taxpayer is the parent from other related parties. from French companies with a Royalties 33.33% Brunei, Marshall Islands, Philippines, 18 company. In order to consolidate gross annual turnover or gross Montserrat, Nauru and Botswana. Personal Income Tax (PIT) VAT
CIT Tax Administration Who is the PIT taxpayer? Tax administration and The assessment of the taxable Value-added tax (VAT) is VAT registration declaration requirements profit of each type of income applicable in France as well Companies are free to have a fiscal PIT is a general and is done by the application as all over the European Union. At the beginning of their year different from the calendar progressive tax based The taxable period is the of a set of rules specific The main rules are based on activities, new businesses year. Companies subject to French on the tax household’s calendar year. Both residents to each category of income, the 2006-112-EC directive. must declare their existence CIT have to file a CIT return each overall income. Broadly and non-residents need to e.g. deduction of interest to the FTA. This declaration year, indicating their income as well speaking, a tax household file a tax return. Generally, for the calculation of the VAT is a tax applicable must be renewed if a as the tax adjustments needed. The is: a single person, a couple the deadline for filing PIT commercial income is to the consumption of goods substantial change in the CIT return includes extracts of its (married or into a contract return is the end of May. broadly allowed whereas and services. This tax is borne taxpayer activity occurs. company’s assets and liabilities as of civil union) or a family. such a deduction is allowed by the final consumer of goods The relevant office is the BFC. well as a P&L statement. Payments in a very narrow frame for the and services. This tax is only The tax burden of all individuals calculation of the real estate collected by entities which VAT tax return The taxable result must be included in the tax household PIT is generally paid in three income. The determination conduct taxable activities. declared three months after the is globally determined. instalments (March, June of the net employment income This tax is in principle, neutral A VAT taxpayer must file a end of the considered financial The household tax burden and September). On a is often limited to a 10% lump for the companies subject VAT return (CA3) on a monthly year and four instalments are could be mitigated depending voluntary basis, the payment sum deducted from the overall to it as they can deduct from basis. This CA3 return has payable during the financial year on the composition of the can however be done wages received. the amount of VAT collected to be sent to the Tax desk (15th of March, 15th of June, 15th household (single, couple, by monthly instalments. on their sales, the amount where the entity files its CIT of September and the 15th of children etc). Computation of PIT of VAT they paid on operating return. A unique VAT number December). The final CIT payment The PIT scope expenses. However, in is attributed to all VAT taxpayers. must be made by the 15th of the A tax borne by both The overall income of a the financial sector, VAT This identification number fourth month following the end of residents and non-residents As mentioned above the PIT taxpayer is subject to tax could represent a significant is referred to on any invoices the fiscal year, i.e. the 15th of April scope is the overall income at a progressive rate which tax charge if not properly as well as on all the different for a company with a financial year PIT may potentially apply of the tax household. This ranges from 5.5% to 41%. monitored. administrative documents which matches the calendar year. to non-French residents. general income is divided into relevant for VAT purposes. Although French tax residents seven categories depending IR’s Incentive schemes The difference between Failure to comply with these are taxed on their worldwide on the nature of the income. output and input VAT is either requirements triggers a 10% to income, non-French residents Several systems of incentives paid to the FTA or, if negative, 40% penalty. Moreover, late are only taxed on their French exist. They grant tax credits entitles the taxpayer to a tax payment interest of 0.40% per source income, subject to the or tax reductions based on credit that could be used to month may also apply. application of DTT. some household expenses offset VAT payable or refunded. such as: investment in non- Tax audits Income Band Income Tax Rate listed companies, childcare Exports of goods outside the expenses at home, elderly European Union are VAT exempt. The FTA are, as a matter of From €0 to €5,963 0% care expenses, ecological principle, allowed to audit tax acquisitions etc. France’s standard VAT From €5,963 to €11,896 5.5% returns, accounting books and rate on sales of goods and supporting documents (such From €11,896 to €26,420 14% Tax audit services is 19.6% (increased as depreciation tables, provision From €26,420 to €70,830 30% to 21.2% starting from assessments, invoices) up to The FTA is allowed 1 October 2012). Reduced three years after the relevant Above €70,830 41% to examine a taxpayer’s rates are applicable on food accounting period. After a tax personal situation up to and certain agricultural audit, the FTA may either request three years retrospectively products (5.5%), books, additional information or issue a during a tax audit. public transport, newspaper tax reassessment notice that the and magazines (7%). taxpayer is entitled to challenge 20 before the Court. Audit and accountancy Other taxes
The CET (Contribution The CVAE A tax based on the lands The Auditor’s appointment The appointment of auditors Corporations and businesses Economique Territoriale): and properties’ rental value in public companies whose with a turnover above €763,000 Local Business Tax The CVAE is only payable by The appointment of an auditor shares are traded on a (selling activity) or above entities with an annual pre-tax This tax is based on the land (Commissaire aux comptes) regulated market is subject €230,000 (other activity) are The CET has been established turnover exceeding €500,000. registry rental value minus could be statutory or voluntary. to the AMF (Regulated Market bound to maintain full accounts. by the Finance Act for The CVAE’s scope is the a standard 50% rebate for The appointment of an auditor Control Authority) supervision. Other businesses bear less 2010. This act repealed the added value generated buildings or 20% rebate for is compulsory in an SA and in This authority must be given binding obligations. Broadly previous local business tax by the taxpayer’s business. land. The amount of tax paid a Société en commandite par at least fifteen days before speaking, businesses must (Taxe Professionnelle). The is equal to this base multiplied actions (SCA). The appointment the appointment. The AMF register chronologically all CET is borne by any person Calculation of the by the rates voted by local of an auditor is also compulsory gives its opinion on the movements influencing their that operates a business or Added Value authorities (cities, departments in a Société en Nom Collectif auditors chosen. assets and liabilities. They must a professional activity with The Added Value corresponds and regions). (SNC), a SARL, a SAS and also provide annual inventory turnover exceeding €152,500. to the difference between a Groupement d’Intérêt Auditors are chosen for six figures, a balance sheet, a P&L the turnover increased by some The method used to determine Economiques (GIE) if one of financial years. The appointment statement and an appendix The CET consists of 2 elements: other items, such as incomes the rental value of real estate the following criteria is met: of an auditor is subject to detailing additional information the CFE (Cotisation Foncière not included in the turnover fixed assets varies depending specific disclosure formalities. and accounting methods used. des Entreprises – Corporate and positive inventory changes, on their type: s THE TURNOVER PRODUCED BY THE The auditor’s term ends after Property Contribution) and the with the different expenses activity is over €3,100,000; the Annual General Meeting Accounting standards used CVAE (Cotisation sur la Valeur borne by the taxpayer. The s )NDUSTRIAL BUILDINGS RENTAL VALUE approving the sixth financial Ajoutée des Entreprises – turnover is reduced by the is always equal to 8% of the s THE TOTAL ASSETS year’s accounts. Public companies whose shares Contribution based on the value purchases of stored raw and considered fixed asset’s value; exceed €1,550,000; are traded on regulated markets added produced). other supplies, negative Requirement to maintain have to publish their accounts inventory changes, the taxes s #OMMERCIAL OR ADMINISTRATIVE s MORE THAN WORKERS accounts and disclosure using the IFRS GAAP. The CFE on the turnover and similar premises’ rental value is are employed. Conversely, published accounts taxes, the depreciation. determined either by reference All individuals and legal entities must be registered in local The CFE’s scope is the rental to the rent (if the asset is rented Who are the auditors? that carry out an economic GAAP which follows specific value of the company’s real CVAE rate under arm’s length conditions) activity are required to file principles whilst tending to be estate assets. The rental The CVAE rate is 1.5%. or by comparison with the rental The auditor can be any person accounts. The final accounts more and more in line with the value of industrial fixed assets If the entity’s pre-tax turnover value of similar premises. (i.e. individual or company), of the year under review IFRS’s principles. is reduced by 30%. The CFE’s is lower than €50 million, but where the auditor chosen (known as comptes de rates are decided by the local those entities would be Some buildings are exempt is a company, a responsible synthèses) must be filed at All these documents must be City Councils. A minimum subject to a lower CVAE rate. from this local property tax, i.e. individual must be appointed. the Commercial court registry. complete, without any blanks amount of CFE is always due The CET (both CFE and CVAE) newly erected buildings, fixed This individual signs all the Foreign companies which or corrections. All accounting by taxpayers. This minimum is capped at 3% of the assets used for the production reports and bears the have branches in France are documents and invoices amount is also decided by the business’s added value. of photovoltaic electricity, responsibility for the activity. also required to file accounts. must be kept for ten years. local city council and cannot buildings located in specific Both the auditor and his deputy These accounts are publicly be lower than €206 or higher The Local Property Tax locations (urban policies). are appointed at the same time. available as well as the auditor’s than €2,065 regarding 2012. (Taxe Foncière) report and the minutes of the The choice of the auditor is annual general assembly of French taxpayers are also subject entirely up to the controlled members. Filing fees are to a property tax on the rental entity. However, the auditor between €45.65 and value of land and buildings owned must be empowered to €96.66 (includes consolidated as of 1st of January of each year. complete the work, i.e. account registration). he must have been enlisted by the company.
22 There are no accounting Key principles of statements which state where French accounting the books and records must be kept. However, a tax provision Accounts must give a regular, states that accounting documents sincere and faithful picture of must be accessible to the FTA the business’s financial position. at the main establishment or at Those three criteria are key the head office location. principles of French accounting rules. The first one refers to the Accounts must be kept in French regularity principle. It means that and must be in line with the PCG accounts must meet the different (Plan Comptable Général) rules and proceedings enforceable regulation. This act specifies the at the time of their establishment. numbering method for business If no specific rules are in force, accounts. This obligation to general agreed principles must maintain local accounts simplifies be applied. many of the tax reporting requirements. The FTA’s guidance The second one refers to the could refer to the number of sincerity principle. It means a particular account, making it that the person in charge of easy to identify. keeping the accounts must express in those accounts the Mandatory documents relative importance of the to be maintained different information registered. The sincerity implies a correct There are three legally required valuation of the different debts, ledgers: the day book (le livre- risks and depreciations journal), the inventory ledger registered. It could be (le livre d’inventaire) and the described as the reality of general ledger (le grand livre). the business‘s accountant. The first one keeps a record of every movement, the second The third one refers to the faithful one is a list of all assets owned principle. This third criteria implies by the entity and a valuation a subjective approach. The faithful of these assets and the third principle is used to bring shades one is a synthetic presentation of meaning when the first two of the general ledger. principles cannot bring a real picture of the situation described. Failure to comply with Once the different rules have accounting provisions is been applied, the faithful principle an offence. Offenders risk implies that the application of a penalty up to €45,000 and the rules does not distort reality five years of imprisonment. and does not misinform the user of the accounts.
24 Human Resources and Employment Law
Determination of the providence schemes, paid leave, Absence of discrimination applicable employment working time, termination, etc. No individual can be rejected legal framework Employees must be informed of from the recruitment process the applicable CBA (if any) by for a discriminatory reason Doing business in France, from writing and the employer must (such as national origin, gender, an employment law standpoint, comply with the provisions thereof. race, political opinions, employee initially requires determination representative office, religious of the legal framework which Thus, when starting business convictions, sexual orientation, will govern the relationships in France, the first requirement etc.). Candidates may only be between the employer and from an employment standpoint, requested to provide information its employee(s). would consist of carrying out that has a ‘direct and necessary’ an analysis in order to determine link with the proposed job, the Other sources of law itself, other the compulsory collective knowledge of which being sources of law may provide the bargaining agreement, which may justified and proportionate with employee(s) with particular apply to the work relationship regard to the aim pursued by entitlements and, and to the between the employer and the the employer (i.e. to be same extent, the employer employee, bearing in mind the analyzed for each situation). with (i) obligations, which, main activities of the employer most usually, exceed its working in France within, or Employment contract obligations as defined by law outside of, a legal entity. By default, employment but also (ii) opportunities such contracts under French law as greater flexibility in terms Overview of hiring rules are for an open-ended period. of employees’ working time. It is generally in writing, Amongst these sources, the Principle although French law does not collective bargaining agreement Subject to the restrictions require that the open-ended (also referred to, hereafter, provided by the immigration employment contract is in as ‘CBA’) is the most important rules (see next section), a writing (unless the employee to determine. foreign company can freely, requires so). In any event, the hire employee(s), even though employer must provide some Indeed, there are tens of CBAs, it has not set up a legal structure basic information related to which are signed at a national in France (as such structure the employment relationship or local level between Employee may not have been set up, given by writing (e.g. name of the Unions and Employer the low number of employees employer, date of hiring, job Organisations in the various or the temporary nature of the title, status, remuneration, sectors of activity. CBAs operational presence in France, working time, etc.), the list of generally cover many matters i.e. where the activity performed which is provided by the law. in connection with employment: in France does not characterise hiring, definition of the job a PE in France). classification, retirement and
26 In strictly limited cases registration/affiliation with of the European Union (‘EU’), Employees’ main Payment of salary/ s WITHHOLDING THE MANDATORY (e.g. replacement of an absent occupational medical services except Bulgarian and Romanian work conditions minimum wage social security contributions, employee, exceptional increase (‘Service medical du travail’) nationals; and/or of the European The employer is free to decide the rates of which amount, of activity, etc.), employment and the unemployment fund Economic Area (‘EEA’) or Swiss Trial period on the level and structure of the approximately, to 45% for the contracts may be for a fixed (‘Pôle emploi’) and (ii) nationals, a work permit is not A trial period may be stipulated employee’s remuneration, subject employer and 22% for the period. The fixed-term contracts organisation of the first required. The employee must in the employment contract. to the following principles: employee. In other words, must be written and include mandatory medical examination. only produce a document (i.e. For an unlimited contract, the when an employee’s gross specific details (e.g. reason passport, national identity card) legal trial period is two (2) s PAYING THE EMPLOYEES MONTHLY salary is 100, he/she gets 78, for using a fixed-term contract), The employer is also required which justifies that he/she is a months for workers (‘ouvriers’), in net (before personal income failing which the contract would to affiliate the employee to (i) national of the EU and/or of the three (3) months for technicians s PAYING A SALARY AT LEAST EQUAL tax – in principle not withheld be recognised as an open-ended the mandatory complementary EEA countries or of Switzerland. and supervisors (‘agents de to (i) the statutory minimum by the employer in France) employment contract. retirement funds, determined in maîtrise’) and four (4) months wage provided by the law for and the corresponding cost consideration of the employee’s s IN THE CASE THAT AN EMPLOYEE for executives (‘cadres’). It may all kinds of employees (named for the employer is around 145; When written, the employment status (i.e. non-executive: is a non-EU national or a be renewed once, for the same in short ‘SMIC’) and, possibly, contract must be in French and ‘non-cadre’ or executive: Bulgarian/Romanian national, duration, with the written if more favourable, to (ii) a s PROVIDING THE EMPLOYEES WITH its main terms (e.g. related to ‘cadre’) and (ii) welfare plans. he/she must have a permit consent of each party. Thus, conventional minimum wage pay slips showing, amongst remuneration, working time, authorising him/her to work it cannot be the employer’s (i.e. provided by the applicable other mandatory details etc.) cannot, in principle, be Beyond a headcount of 50 in France i.e. either, a resident unilateral decision. CBA) as per the classification (see paragraph ‘Employment amended without the employee’s employees, the employer is permit (valid for 10 years and set up by such CBA and on the contract’ above), the various express consent. required to file and send to the renewable and authorising for For fixed-term contracts, the employee’s status (e.g. ‘cadre’) elements of their remuneration departmental director of labour, working without limitation) or trial period may not exceed: and level. In 2012, the monthly as well as the social security Declaration of employment within the first eight days of a work / residence permit minimum wage equals, contributions withheld from and relation affiliations each month, a declaration of (valid for, at the most, 3 years). s ONE DAY PER WEEK WITHIN in gross, to €1,397.29 on the such remuneration. Any hiring of an employee all the employment contracts The permit must expressly the limit of two weeks, for an basis of the legal working time requires that the employer concluded and/or terminated mention the status and initial term contract of (i.e. 35 hours per week). Working time declares him/her to the local during the preceding month. conditions under which the maximum six (6) months; By default, the full working competent Social Security foreigner will work in France. In practice, determining the time is 35 hours per week. Authorities (named in short Medical examination s ONE MONTH FOR A lXED TERM employee’s salary can give rise ‘URSSAF’) office, within the Each new employee must In any event, the employer must, contract of, at least, six (6) months. to a prior negotiation between This number of hours serves 8-day period preceding the undergo a medical examination before hiring (i) verify that the During the trial period, each the parties, in consideration, as a reference basis, beyond starting of the employee’s work, before his/her hiring, or, at least, immigration rules are followed, party may, in principle, terminate notably, of the level of salaries which overtime is calculated. by the way of a declaration of before the end of the trial period. i.e. that either the employee is the contract at any time, without paid for the same level of position The hourly rate of each hour employment (i.e. ‘Déclaration an EU, EEA or Swiss national referring to real and serious and seniority, within the sector of overtime performed during unique d’embauche’ also referred Overview of the (excluding Romania and reasons and without following of activity/geographic area where the week is increased by 25% to as the ‘DUE’). URSSAF is the immigration rules Bulgaria), or that he/she has a specific procedure. the employer performs its activity; for the first 8 hours and by authority which receives the a valid work permit authorising 50% beyond. Total or part social security mandatory Hiring foreigners in France the contemplated professional The above rules may need s PAYING POSSIBLE ADDITIONAL of the payment of the overtime contributions, paid by the entails special rules, which activity and (ii) proceeds to the to be combined with the premiums (e.g. based on years can be replaced by rest in lieu employer and the employee, may be summarised under relevant declaration formalities provisions of the applicable of service) that may result from under specific conditions. aiming at covering the following two main situations: (if applicable). Indeed, hiring CBA, if any. the applicable CBA; risks: illness, maternity, a foreigner in violation of the invalidity, unemployment, s in the case that a foreign above rules may lead to criminal old age (i.e. retirement). employee comes from a sanctions for the employer The DUE also enables the (i) country which is a member and also badly impact the image of the company.
28 Under specific conditions, In addition to paid vacation, usages (such as additional working time can be organised the employee(s) may benefit pension scheme/health on another basis than weekly, from additional days off, such insurance/paid vacation, etc.). e.g. on a monthly or yearly as bank holidays (11 or less basis. In such cases, overtime depending on the calendar/ In companies having 50 may be calculated differently the CBA/the company policy/ employees or more, the than above. the sector of activity), possible employer must implement RTT days (depending on the a profit sharing plan, in In addition, for certain categories working time system in force), application of which a reserve of employees (i.e. mainly leave linked to private events is (i) calculated yearly as per executives), if expressly allowed (such as births, marriages, a legal formula provided by by the CBA (if any) or a company bereavements, etc.) and/or the law or by the plan itself agreement, the parties may agree additional leave (e.g. based (if more favourable) for the that the employee will work on on years of service) possibly employees and (ii) shared the basis of a maximum number provided by the CBA, if any. between the employees. of days per year (218 or less). The advantage of this system Employees’ main benefits Employees’ representation is that employees may work ‘long days’ without generating By law, the employees are When certain headcount overtime. However, to balance entitled to various statutory thresholds are reached (during such long days and as a result rights and benefits: 12 months, consecutive or not, of the maximum number of over a 3-year period), the working days per year, the Social security mandatory employer has the obligation employees are granted scheme coverage to organise elections aiming additional rest days (often The payment of mandatory at putting in place employee referred to as ‘RTT’ days). social security contributions representatives: from the employee and the a) when a company has been Whatever the working time employer, withheld, monthly, employing 11 employees system, the employer and the from the employee’s pay slip, or more, the employer must employees are deemed to allows the employee to benefit organise elections of staff comply with the working hours from a minimum coverage for delegates (i.e. ‘délégués limitations, i.e. 10 hours per the following risks: sickness, du personnel’); day, 48 hours per week and maternity, welfare (i.e. b) when a company has been 44 hours in average over a invalidity and incapacity), employing 50 employees 12-week period (subject to unemployment, retirement or more, the employer more restrictive limitations and complementary retirement. must organise elections provided in the CBA). of a works council (i.e. Other rights and benefits ‘Comité d’entreprise’). Paid leave Employees benefit from other By law, the employees in France rights resulting from the law are entitled to five (5) weeks (such as training) or from company of paid leave. agreements or customs and These elections must be Finally, companies with over To date, to benefit from Termination on reorganised every 4 years. 50 employees must set up a retirement pension at a the employee’s a Health and Safety Committee full rate, employees must initiative: resignation In the companies referred (i.e. ‘Comité d’hygiène, de contribute to the statutory An employee can always to in b) above, the Unions sécurité et des conditions retirement scheme for a resign without providing that are considered as de travail’), the members minimum of 40 years (i.e. either explanation or indemnity, representative within the of which are appointed by 160 quarters) or, for people provided that he/she respects a sector of activity of the the works council members born after 1955, for a minimum notice period either determined company (in accordance and the staff delegates. The of 41.5 years (i.e. 166 quarters). by the applicable CBA or, if not, with specific criteria), may Heath and Safety Committee’s by the customs in force in appoint Union delegates assignment consists of By exception, employees the profession/sector of (i.e. ‘délégués syndicaux’); involving the employees in retiring at 65 (67 by 2023) activity. Such notice periods are training and other initiatives to are automatically eligible usually between 1 to 3 months. The role of these various prevent occupational risks and to the full rate, whatever employee representative to improve working conditions. the number of years they Termination on the bodies is different. In worked (even though the employer’s initiative: summary (as the roles may The employee representatives duration of their working dismissal/redundancy interact or vary depending benefit from (i) a certain period is taken into account The employer may terminate on the circumstances): number of hours per month to determine the amount of an open-ended employment (considered and paid as normal the pension allowance). contract for personal s THE STAFF DELEGATES REPRESENT working time by the employer) (i.e. linked to the employee’s the employees regarding their to carry out their responsibilities In principle, employees cannot behaviour or performance) day-to-day claims and requests and, also (ii) specific protection be forced by their employer or economic reasons (e.g. work conditions, health against discriminatory measures to retire before they are 70. (‘redundancy’/‘collective and safety, etc); from the employer (also refer To date, for employees aged lay-offs’). to the paragraph below, related 65 years old, the employer s THE WORKS COUNCIL SHOULD to termination). can only offer retirement once In both cases, except during be informed and/or consulted a year. If the employee wishes the trial period, the employer about all the decisions Termination of the to do so, the employer must must (i) provide genuine and impacting (i) the work employment contract obtain his/her formal approval. serious reasons to dismiss conditions, (ii) the company’s the employee and (ii) comply organisational structure and/or An employment contract may In the case of forced with a procedure and related (iii) the headcount. The works end in various ways: retirement, the employer timetable, which varies council’s role is particularly key resignation, mutual agreement, has to respect a notice depending on the interaction during significant undertakings dismissal (for personal or period and pay an indemnity of various criteria, such as such as acquisitions or economic reasons), retirement to the employee (equal to the reason for the dismissal, restructurings, in particular or end of a fixed-term contract. the minimum legal severance the number of employees (but not only) when they payment or, if provided concerned (in the case of a directly impact employees; Termination in by the CBA and if more dismissal for economic reason), consideration of the favourable, equal to the the employee’s status (i.e. s THE 5NION DELEGATES ARE employee’s age: retirement dismissal indemnity executive or not executive), permitted to negotiate The legal age of retirement is provided by the CBA). the company’s headcount the employees’ collective 60. Such age will progressively and the presence of employee rights and to conclude be increased to 62 until 2017. representatives (in particular, the related company a works council). collective agreements. 32 In any event, a dismissal for Except in case of gross Terminati on on both parties’ In cases of litigation, whatever economic reasons leads to misconduct (‘faute grave’): initiative: termination by the ground of the dismissal specific obligations for the mutual agreement (personal or economic), employer in terms of procedure: s THE EMPLOYER MUST ALSO RESPECT In the case the employer and dismissal recognised as unfair e.g. determination of an order a notice period, the duration the employee both wish/agree gives rise to the payment of of dismissal to identify the of which depends on the to terminate the employment damages, the amount of which employees to be kept in priority, employee’s seniority, under contract, they may conclude an corresponds to the wrong research of redeployment the law and most usually, on amicable termination agreement. suffered by the employee. opportunities within the group, the employee’s status, seniority In most cases, they will use For employees with 2 years proposition of a mandatory and/or age under a CBA; a specific procedure (lasting of service or more in a redeployment programme/ approximately 6/7 weeks), company of eleven employees leave (the nature and extent s EMPLOYEES DISMISSED HAVING under which they meet or more, the damages cannot of which will mainly depend at least 1 year of service are (to discuss the termination be less than 6 months of salary. on the company’s size), etc. entitled to a severance payment conditions), fulfil and sign Litigation may be stopped equal by law to 1/5 of monthly a formal form (as issued by the or avoided by the signature In case of collective lay-offs salary per year of service for French Labour Authorities) and of a settlement agreement within companies having a the first 10 years and 1/3 of submit it to the relevant labour with the employee, under works council, the procedure monthly salary per year beyond authorities for ratification. which the employer would may lead to extensive 10 years of seniority. contractually grant damages. negotiations with the employee Under this specific procedure, representatives and the It must be noted that certain the employee is not entitled financing of various measures categories of employees to a notice period, but receives aiming at mitigating the adverse benefit from a specific an indemnity allowance, which effects of the terminations. protection against the amounts, at least, to the legal This particularly applies when dismissal, such as employee (or conventional if more the employer is required to representatives (extensively favourable) severance payment implement a social plan called defined), pregnant women, that would be due in case ‘Plan de Sauvegarde de l’Emploi’, women in maternity leave, of dismissal. i.e. when the collective lay-offs employees absent for (i) impact, at least, ten employees professional injury or further Litigation within a same time-period of a work accident. The employee has five years 30 days and (ii) occur within a to sue his/her employer if company having, at least, 50 he/she considers that he/she employees. In such case, the was dismissed in violation measures referred to above of the French labour law rules may consist in payment of (unfair reason, violation of the substantial indemnities, financing procedure, violation of his/her of training programmes, aids to specific protection, etc), except creation of company, actions to in one case where the employee develop the employment area has only twelve months for where the company performs its suing his/her employer (i.e. activity in coordination with the action leading to cancelling the local administrative authorities dismissals on the basis of the (in the worst cases), etc. recognition of the absence or insufficiency of a social plan). Trade Competition issues
In order to set up a business - mergers between two One must always check in France, a company must previously independent prior to notification to the abide by mandatory undertakings or; French competition authorities competition regulations. - acquisitions by one or more whether the operation has Prior to any operations in persons (already holding control a Communautary dimension France, companies must of at least one undertaking) of since European concentration notify all potential operations control of all or part of one or control is exclusive of national carried out in France to the more other undertakings, merger control, that is to say French competition authority directly or indirectly, whether that the operation must when certain turnover by the acquisition of a holding be notified to the European thresholds are reached in the capital or by purchasing Commission when the (A). Furthermore, once assets, through the signing of operation reaches the the business is set up a contract or any other means; Communautary thresholds and operating in France, - creation of a joint venture, or if the notification must the company must respect performing on a lasting basis all be made in at least three regulations in relation notably the functions of an autonomous member States. to anticompetitive practices economic entity. (B). Infringements of both What is the content of sets of regulations are s WHERE SUCH OPERATIONS ARE the obligation to notify? heavily sanctioned. concerned, it must be verified When the above mentioned whether the merger thresholds thresholds are reached, the Merger Control provided for in article L.430-2 operation must be notified to of the French commercial code the French competition When is a company required are reached, that is to say: authority prior to its acquisition to notify operations to the - a combined aggregate by the purchaser or by the French competition authority? worldwide turnover before founding companies in tax of all the undertakings the case of a joint venture. In the case of operations concerned greater than carried out in France by €150 million; The notification takes the French or foreign companies, - an aggregate turnover before tax form of a file containing it must be ensured that these achieved in France by at least information pertaining notably operations are notified to the two of the undertakings to the operation (economic French competition authority. concerned greater than purpose, financial and legal Such is the case when the €50 million. details etc), to the concerned purported operations are companies (financial data, past ‘concentrations’ reaching the Lower thresholds are provided investments and mergers etc) French legal turnover thresholds. for in the retail distribution and to the relevant or affected industry as well as for markets which must be s THE NOTION OF @CONCENTRATION operations carried out in the defined under competition covers under French law French non-metropolitan law (including the various cases and notably: departments and territories. communication of the market shares of the parties and competitors on all relevant market segments).
36 The notification may be If doubts persist after this first Anticompetitive practices It must be noted that horizontal It must be noted that the s INFRACTIONS TO PRICE TRANSPARENCY made whenever the concerned analysis, the French competition collusive practices (between French competition authority (obligation to communicate parties are in a position to authority may set up a second Once set up in France, undertakings actually or also sanctions cases of abuse standard terms and conditions, present a sufficiently advanced phase and render its decision companies must ensure not potentially competing on of a collective dominant obligation to conclude a yearly project in order to allow the within 65 more business days, to commit anticompetitive the same type of product position, when several agreement between suppliers instruction of the file by the to which must be added: practices, that is mainly: or service) which must be companies have, notably in and distributors, obligations French competition authority differentiated from vertical reason of a strong correlation related to the issuance of and notably when the parties s BUSINESS DAYS FROM THE DATE s CONCERTED PRACTICES collusive practices (for operators between themselves, the an invoice bearing mandatory have concluded an agreement of reception of the commitments acting at different levels of possibility to adopt a common mentions, prohibition of the in principle, signed a letter of taken by the parties at least 20 s ABUSES OF A DOMINANT POSITION the economic chain, such as line of conduct on the market payment of a fee when no intention or from the business day before the end of producers and distributors) are and to act independently from effective service has been announcement of a public offer. the second phase; They must also refrain from the more heavily sanctioned. other competitors or from provided or of the payment committing any one of the consumers. The abuse of such of a fee not proportionate It is recommended to prepare s MORE BUSINESS DAYS diverse restrictive practices. Abuses of a dominant position collective dominant position to the provision of service); for such notification well where the Minister in charge Article L.420-2 of the French does not need to be the act in advance as the preparation of the economy can decide Anticompetitive commercial code (as well of all companies holding the s INFRACTIONS TO THE MAXIMUM of a notification file is usually on the case for the protection collusive practices as article 82 of the EC Treaty) collective dominant position. legal terms of payment long and one must take into of the general interest. Article L.420-1 of the French prohibits abuses of a dominant (45 days from the end of the account the fact that the commercial code (as well as position by undertakings. Financial sanction of month or 60 days from the French competition authority In all cases, the French article 81 of the European treaty) Contrarily to collusive anticompetitive practices date of invoice); may take several months competition authority will either prohibits collusive practices practices which are bilateral The sanction incurred for before considering that the allow the operation without where several operators decide or multilateral, abuses of such practice is a penalty s PRACTICE OR ADVERTISEMENT OF file is complete. conditions or under commitments to act in common to adjust a dominant position are in of up to 10% of the worldwide a resale of products at a loss; or more exceptionally, forbid it. their behaviour, instead general set up by an operator turnover of the group to which From the moment where of commercially acting using its dominant position the company belongs. It s ABUSIVE BREACH OF AN ESTABLISHED the French competition What sanctions are incurred? independently. Such behaviours on a market to lock the market, may vary in relation with the commercial relationship. authority considers that Should the parties fail to notify (actions, agreements, express push competitors out of the gravity of the practice, the the file is complete, the the operation prior to its realisation, or tacit undertakings or market or impeach new effective damage done to the French competition authority the French competition authority coalitions) are prohibited operators to enter the market. concerned industry or sector, will render its decision within may force the persons on whom when they have the aim The concept of abuse covers the situation of the concerned 25 business days for operations the responsibility for notification or may have the effect of different types of situations company and the cases of presenting no major risk is incumbent to notify under preventing, restricting or such as notably predatory subsequent offences. of damage to competition, threat of penalty or return to distorting the free play of prices, refusal to sell, loyalty to which must be added: the state of affairs prior to the competition in a market, are discounts, tied selling/bundling Last, companies operating non-notified operation. notably prohibited behaviours or breach of established in France must keep in s lFTEEN BUSINESS DAYS limiting access to the market commercial relationships. mind the existence of if commitments are Furthermore, the person who or the free exercise of restrictive practices which received by the French failed to notify incurs a financial competition by other may also be sanctioned under competition authority; penalty whose maximum amount undertakings, preventing price French competition regulations, is, for legal persons, 5% of their fixing by the free play of the among which notably: s lVE BUSINESS DAYS FROM pre-tax turnover made in France market, limiting or controlling the decision during which during the last closed financial production, opportunities, the Minister in charge of year, plus, if applicable, the turnover investments or technical the economy may decide which the acquired party made in progress and sharing out the of a second phase. France during the same period, and, markets or sources of supply. for natural persons, €1.5 million. 38 Banking in France
Types of bank accounts Ease of setting up a 3) other documents on a case Ability to access Anti-fraud and anti-money The anti-money laundering bank account or issues by case basis (proof of identity local financing laundering regulations and regulations require that banks s 0AYMENT ACCOUNT @COMPTE to be aware of of individuals having the associated ‘Know Your identify the effective recipient de paiement’) is an account authority to act on the Foreign investors can freely Customer’ rules require the of a credit transfer when the held in the name of one or Foreign investors are free account of the company, apply for loans with French bank to identify their customers transaction for all cross-border more payment service users to open one or several bank letter of comfort of the mother banks. There are no legal by gathering information on transactions. More generally, which is used for the execution accounts for their company company etc) which, in fact, are restrictions on this type of the company’s activity, its customers’ orders relating of payment transactions, (branch or subsidiary) requested by the bank as part banking transactions. turnover, the reasons for to funds transfer may be put as collection and withdraw established in France. of the bank’s ‘KYC’ procedure. opening of the account and on a hold in certain cases cash, execution of credit There are no restrictions Loans are freely negotiated the way it is expected to be by the bank where there is transfers, direct debits or on this banking operation. Foreign traders are also free between the bank and the used and as the case maybe a strong reason to believe payment transactions through to open bank accounts for company’s legal representatives. the origin and destination the transaction is fraudulent. a payment card. For example, To open an account a number a commercial activity. In this Banks will generally require the of funds, the estimated value current accounts (‘comptes of documents are required by case, the bank must check investors to provide guarantees, of forthcoming transactions courants’) and deposit accounts the bank and you will need the the regularity of this activity. although to a lesser degree, (in order to identify ‘suspicious (‘comptes de dépôt’) whose following to attest your capacity It must insist on verifying that if the bank is the one in which transactions’), and if available account agreements usually to contract with the bank: the non-resident foreign trader the investor accounts have or relevant, major customers cover the provision of payment has initially obtained the prior been opened. and suppliers, and as the instruments (debit card, s A PROOF OF VALID REGISTRATION consent of the Prefect of the case may be, information transfer, but also cheque) of the company; Department for the conduct Administrative issues on major shareholders. and payment accounts. of his business (art. L.122-1 s A POWER OF ATTORNEY OF THE of the French Commercial A temporary restriction for To transfer funds abroad, s 4IME DEPOSIT ACCOUNT @COMPTE company’s representatives Code). As regards the resident opening an account could you must be aware of the à terme’) is held by private empowered to deal with foreign trader, the bank must be encountered as regards possible delays that may apply. individuals and companies. the bank, a certified copy check that he was granted a the delay relating to the The holder cannot use the of the company’s Articles residence permit authorising compulsory registration with In general, French banks funds deposited until a of Association and amending the exercise of a professional the French trade and companies offer 2 types of transfers: predetermined expiration supplements detailing any activity (art. L.313-10 of the register (RCS). date. The account earns legal changes. Code on Entry and Stay of s 4RANSFER TO A RECIPIENT WHOSE interest at a fixed or variable Foreigners and Asylum in When the Company is being account is held in a SEPA rate. Notwithstanding, banks Other documents may France). EU nationals, EEA formed, the identity and address country (EU countries plus, nowadays offer, in principal, be required by the bank: nationals, and Swiss nationals of the incorporators are checked Norway, Liechtenstein, Monaco to private individuals so-called 1) for Anti-Money Laundering are exempted from these in cases where the corporate Iceland and Switzerland): savings accounts from which purposes (see below), administrative obligations. body does not exist yet. 1 Business day provided cash can be in fact withdrawn 2) where security accounts are that the transfer is in Euros; at any time. opened, in order to comply Banks only agree to open a with EU MIFID Directive Company’s bank account at s )NTERNATIONAL TRANSFER OUTSIDE s 3ECURITY AND ASSOCIATED requirements relating to the request of the persons duly EEA and SEPA countries: cash account may also client acceptance. Information authorised to do so. Thus, banks timelines vary from country be opened in the name would then cover customers’ require a power of attorney of to country. Generally, an of the company which investment experience and the company’s representatives Urgent Currency/International invests in security and which objectives for the purpose of and the signatures of the Payment option is offered it manages itself or entrusts suitability/ appropriateness test, persons having a mandate by the bank to the customer to a third-party manager on the account to assess their to reduce undue delay. (which can be the bank). ability to open the account and to operate into it. 40 HSBC in France Overview
HSBC France, formerly Credit Awards for Excellence s 7E APPLY CLEAR POLICIES AND Milestones Commercial de France (CCF) processes to manage potential founded in 1894, became a s (3"# &RANCE BEST 1UALITY OF social and environmental risk in 1890 subsidiary of the HSBC Group offered service for employees our lending and other financial Credit Commercial de France in 2000 and changed its of international company by activities in sensitive sectors. (now HSBC France), was created name to HSBC France in Cercle Magellan 2010. November 2005. s 7E HELP OUR CLIENTS TO SEIZE THE 2000 s (3"# 0RIVATE "ANK &RANCE opportunities presented by the On 1 April 2000, HSBC launched HSBC France is a universal best capital Eurassur on 3 shift to a low carbon economy. a friendly takeover bid on Credit bank serving both personal and and 5 years, category actions, Commercial de France (CCF) business customers, capitalising sector Bank by Lipper Fund s 7E TRY TO REDUCE OUR OWN on the HSBC Group’s first-class Awards France 2010. environmental footprint and share 2003 international presence, financial good practice on this with our CCF’s four private banking robustness, and banking and s (3"# 'LOBAL !SSET clients and other stakeholders. subsidiaries (HSBC Republic, technological innovations. Management, best range CCF Banque Privée of international shares within s 7E FOCUS OUR COMMUNITY Internationale, Banque Eurofin HSBC France’s strategy is to the local banking network, investment (philanthropic and Banque du Louvre) merged have its retail banking branches by Le Revenu 2010. activities) on education and in October 2003 to become specialised by customer the environment. HSBC Private Bank France segment, through the creation s (3"# )NVOICE "EST &ACTORING of branches reserved for Institution in June by Trade Our education programmes 2006 businesses and branches Finance 2009. help to lift people out of Twenty Centres solely for personal customers. poverty, build financial literacy Premier opened s (3"# 'LOBAL "ANK OF THE 9EAR and promote environmental Network 2011 – The Banker. awareness. In France, more 2008 than 9,000 children of 70 HSBC France completed the s 7ITH AROUND OUTLETS s (3"# "EST #ORPORATE n associations have been granted sale of seven of their French HSBC is rolling out its range Institutional Internet Bank financial support from the regional banks of retail banking products and Global Finance. HSBC foundation and 265 services across the length HSBC employees have helped 2010 and breadth of France through s (3"# 'LOBAL "EST #ASH those children since 2005. HSBC Advance launched branches dedicated to personal Management Bank in France an offering targeting the customers, HSBC Premier 2012 – Euromoney. The environmental sponsorship 'emerging affluent' segment Centres, Commercial Banking, policy of HSBC in France is Entrepreneurs Centres and s (3"# "EST #ASH focused on 3 targets: educate HSBC Asso Direct launched: Corporate Banking Centres. Management Bank in France children in environmental online proposition for Personal Financial Services 2012 – Euromoney. protection with, for example, the associations supported by its increasingly the Maud Fontenoy foundation, strong brand recognition since Corporate Sustainability raise employees awareness HSBC Business the 2005 rebranding. of ecological issues, and support proposition launched For HSBC, Corporate climatic alterations research Sustainability is about bringing of financial industry, like the 2012 social and environmental Corporate Social Responsibility HSBC Equipment Finance: issues together with financial chair, and the financial carbon Leasing activity launched performance to maintain and chair of Paris institute Europlace. grow a successful business for HSBC Factoring France: 42 the benefit of our stakeholders. ISO 9001 Certification Country overview
Capital city Paris
Area and population2 Area of 632,800,000 sq km and population size of 63.8 million
Language French
Currency Euro
International dialling code +33
National Holidays Scheduled Public Holidays for 2013
New Year’s Day 1 January Easter Sunday 31 March Easter Monday 1 April Labour Day 1 May 1945 Victory Day 8 May Ascension 9 May Pentecost Monday 20 May Bastille Day 14 July Assumption 15 August All Saints Day 1 November Remembrance Day 11 November Christmas Day 25 December
Business and banking hours 10am to 5pm
Stock exchanges Paris Stock Exchange
Political structure Republic
44 Contacts
Virginie Louvel-Loréal Tax Partner
Telephone: +33 1 56 57 40 80
Email: [email protected]
http://www.pwc.com/gx/en/ worldwide-tax-summaries
Website: www.hsbc.fr
Phone: +33 1 40 70 70 40
Head Office: Head Office, 103 Avenue des Champs-Elysees, 75419 PARIS, cedex 08
3rd Edition: October 2012
Copyright
Copyright 2012. All rights reserved.
‘PwC’ and ‘PricewaterhouseCoopers’ refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.
46 141TP_France_100712_3