Expanding into France: consider tax before your first local contract

Your company has identified an opportunity in France. You may be considering a local subsidiary, a small sales team or an initial phase managed from abroad.

Before operations begin, it is worth establishing which French tax obligations your business model may create. Incorporation is one part of that assessment; how the business actually operates is equally important.

A French subsidiary is not the only possible taxable presence

An overseas company may become liable to French corporate income tax without having incorporated a French company.

Where an applicable tax treaty exists, the concept of a “permanent establishment” is central to this analysis. Depending on the treaty and the circumstances, a fixed place of business or the activities of a dependent agent may create a taxable presence.

The role of local personnel, their authority and the way contracts are negotiated and concluded therefore deserve attention. The absence of a registered French branch does not, by itself, settle the question.

VAT requires a separate review

A foreign company may have French VAT obligations even without a permanent establishment for corporate income tax purposes.

The treatment depends on the transactions: goods or services, business or private customers, the location of stock and cross-border movements may all affect the answer.

In some circumstances, the customer accounts for VAT under the reverse-charge mechanism. In others, the supplier may need French VAT registration and must meet local reporting obligations. A single invoicing rule should not be applied automatically to every French customer.

Make the arrangements work in practice

Before issuing the first invoices, review who contracts with customers, which entity supplies the goods or services, and how the operational arrangements match the contractual documents.

An early review can help identify registration requirements, establish appropriate invoicing procedures and reduce the risk of corrections after trading has begun.

NAS Avocat advises foreign companies on the French tax aspects of establishing and developing their business in France, and assists them in dealings and disputes with the French tax authorities. Advice and ongoing communication are available in English.