Business Operations in France (Portfolio 961)

Tax Management Portfolio, Business Operations in France, contains information designed to enable U.S. and other foreign investors to understand the commercial and tax law likely to be of concern to them in their business dealings with France.

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This Portfolio is part of the Premier International Tax Library, a comprehensive resource including nearly 100 international tax Portfolios, practice tools, primary sources and timely news.



The Portfolio provides an overview of the principal problems confronting foreign businesses conducting operations in France. It examines the taxation of domestic and foreign corporations, partnerships, other business entities, resident individuals, and nonresident aliens. It also discusses the net wealth tax, inheritance and gift taxes, registration duties, local taxes, and the value added tax.
Rates of local taxes may vary considerably according to the location and their level may be an important consideration when evaluating an investment proposal in France. The various taxes in this category and the value added tax, the single biggest revenue raiser, are discussed in detail. Finally, chapters are devoted to French anti-avoidance measures and to the application of tax treaties, with particular emphasis on the France-United States tax treaty.
The Portfolio also analyzes the various forms of doing business in France, investment incentives, exchange controls, distribution networks, labor and social security laws, and restrictive trade practices.

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Business Operations in France was authored by the following experts.
Edouard Milhac graduated from the University of Paris-Dauphine (Masters in Business Administration in 1988 and post-graduate degree in Taxation in 1999). He was seconded to the New York office of CMS BFL from 1994 to 2000; partner, CMS BFL, France.

Annabelle Bailleul-Mirabaud graduated from the HEC business school (2001). She also holds a postgraduate degree in business law (University of Paris XI, 2001). She has been an associate with CMS Bureau Francis Lefebvre since 2003.


Detailed Analysis

I. General Background

Introductory Material

A. Governmental Organization

1. Central Government

2. Local Government

a. Municipalities (Communes)

b. Départements

c. Régions

B. Legal System

1. Sources of Law

a. Domestic and European Legislation: Code, Laws, Decrees, Orders, European Treaties and Regulations

b. Pre-legislative Debate (Travaux Préparatoires)

c. Case Law (Jurisprudence)

d. Learned Commentary (Doctrine)

e. Ministerial Replies (Réponses Ministérielles)

2. Court System

a. Administrative Jurisdiction

b. Judicial Jurisdiction

(1) General Jurisdiction

(2) Special Jurisdiction

(a) Commercial Courts (Tribunaux de Commerce)

(b) Labor Courts (Conseils de Prud'hommes)

(c) Other Courts

(d) Jurisdictional Conflicts

3. Members of the Legal Profession

a. Magistrature

b. Avocats

c. Avoués

d. Avocats aux Conseils

e. Huissiers (Bailiffs)

f. Notaires (Notaries)

II. Operating a Business in France

A. Foreign Investment Regulations

1. Currency

2. Foreign Investment Controls

3. Exchange Controls

a. General Scope of Governmental Control

b. Definitions of “Resident” and “France”

c. Scope of Regulations

(1) Declaration for Statistical Purposes to the Banque de France

(2) Filing with the Customs Service

d. Penalties

e. Enforcement

4. Restrictions Based on Nationality

a. Visa

b. Residence Permits

c. Work Permits

d. Foreign Trader's Card

e. Special Legislation regarding European Union Member States

B. Trade and Commerce Regulations

1. Regulation of Business and Competition

a. Agreements and Concerted Practices

(1) Scope

(2) Exemption

(3) Enforcement

b. Merger Control

(1) Scope of Regulation

(2) Consequences of Application of French Merger Control Law

(3) Sanctions

2. Patents and Copyrights

a. Patents

(1) French Patents

(2) European Patents

(3) European Union Patents

b. Trademarks, Trade Names, Copyrights and Software

(1) Trademarks

(a) French Trademarks

(b) European Union Trademarks

(2) Trade Names

(3) Special Filing Requirements for Transactions with Non-French Residents

(4) Copyrights, Software

(a) Assignable Rights

(b) “Moral” Rights

(c) Designs and Models

(d) European Designs and Models

(e) Semi-conductors

3. Business and Trading Partners: Sales Representatives

a. Traders

(1) Distributors

(2) Courtiers (Brokers)

(3) Commissionnaires (Commission Agents)

b. Agents Commerciaux (Commercial Agents)

c. Salaried Salesmen (Voyageurs, Représentants, Placiers)

C. Labor Law and Social Security

1. Labor Law

a. Sources of Law

b. Scope of the Law: Position of Foreigners in France

c. Individual Employment Contracts

(1) Definition

(2) Forms of Employment Contracts

(3) Formation of an Employment Contract

(4) Contents of Contract

(5) Termination of Employment Contracts

(a) Termination Relating to the Individual

(b) Termination for Economic Reasons

(6) Paid Vacations

(7) Normal Hours

d. Employees’ Representation

(1) Representative Institutions with Elected Members

(a) Workers’ Council

(b) Personnel Delegates (Delegués du Personnel)

(c) Hygiene, Safety and Working Conditions Committee

(d) Group Committee

(2) Representative Institutions with Appointed Members

(a) Union Delegate (Delegué Syndical)

(b) Union Representation on the Workers’ Council

(3) Protection

2. Social Security

a. General Social Security System Applicable to Employees

(1) Health Insurance

(a) Entitlement

(b) Nature of Benefits

(2) Family Allowances

(3) Retirement Benefits - General System

b. Employee's Complementary Retirement Scheme

c. Unemployment Insurance Scheme

d. Independent Workers

(1) Family Allowances

(2) Health Insurance

(3) Retirement Benefits

III. Forms of Doing Business in France

Introductory Material

A. Limited Liability Company (Société Responsabilité Limitée and Entreprise Unipersonnelle Responsabilité Limitée)

1. Formation

a. Corporate Purpose

b. Corporate Name

c. Founding Members

d. Capital

e. Registration

f. Withdrawal of Share Capital

2. Operations

a. Amendment of By-Laws

b. Increases and Reductions of Capital

(1) Capital Increase

(2) Capital Reduction

(3) Publication Formalities

c. Transfers of Shares

d. Management

(1) Appointment/Termination

(2) Authority

(3) Contracts Between the Company, Managers and Shareholders

(4) Prohibited Operations

(5) Remuneration

(6) Employment Contract

(7) Liability

(8) Publication Formalities

e. Statutory Auditor (Commissaire aux Comptes)

f. Shareholders’ Meetings

(1) Meeting or Written Consent

(2) Ordinary and Extraordinary Decisions

g. Books and Records

h. Financial Statements

i. Dividends and Other Distributions

j. Reserves

3. Dissolution and Liquidation

a. Dissolution

b. Liquidation

B. Joint Stock Company (Société Anonyme)

1. Formation

a. Purpose Clause

b. Corporate Name

c. Founding Members

d. Capital

e. Registration

2. Operation

a. Amendment of By-Laws

b. Increase and Reduction of Capital

(1) Capital Increase

(2) Capital Reduction

(3) Reimbursement of Capital

(4) Publication Requirements

c. Transfers

d. Management

(1) Société Anonyme Managed by a Board of Directors

(a) Directors

(b) Chairman of the Board of Directors

(c) Executive Management

(d) Directors’ Meetings

(2) Société Anonyme Managed by a Directorate and Supervisory Council

(a) Directorate

(b) Supervisory Council

e. Statutory Auditors

(1) Appointment

(2) Duties

(3) Liability

f. Shareholders’ Meetings

(1) Convening

(2) Agenda

(3) Voting Right and Proxies

(4) Attendance

g. Books and Records

h. Financial Statements

i. Dividends and Other Distributions

j. Reserves

k. Dissolution and Liquidation

C. Société par Actions Simplifiée

1. Formation

2. Operation

D. European Company or Societas Europaea

E. Société en Nom Collectif

F. Société en Commandite Simple, Société en Commandite par Actions

1. Société en Commandite Simple

2. Société en Commandite par Actions

G. Branch of a Foreign Corporation

1. Registration Formalities

2. Applicable Law

3. Books and Records

4. Financial Statements

H. Economic Interest Group (Groupement d'Interêt Economique)

1. French Groupement d'Interêt Economique

2. European Union Groupement d'Interêt Economique

IV. Fiscal Law

A. Sources of Fiscal Law

1. Domestic Sources

2. International Sources

a. International Treaties

b. European Union

B. Organization of the Tax Department

1. Tax Centers (Centres des Impôts): Assessment and Verification

2. Tax Collection

a. Direction Générale des Impôts

b. Public Accounting Department (Trésor Public)

c. Other Sections

3. National and International Audit Department (Direction des Vérification Nationales et Internationales)

4. National Investigation Department (Direction Nationale d'Enquêtes Fiscales)

5. Service for Fiscal Legislation (Service de la Législation Fiscale)

6. Judicial Organization

a. Jurisdiction of Judicial Courts

b. Administrative Jurisdiction

V. Principal Taxes

A. Corporate Income Tax and Annual Flat Tax on Corporations

B. Income Tax

C. Net Wealth Tax

D. Registration Duties: Inheritance, Gift, Corporate

E. Local Taxes

F. Direct Taxes on Salaries

G. Value Added Tax

H. Other Indirect Taxes

VI. Taxation of Domestic Corporations

Introductory Material

A. French Entities Subject to Corporate income tax

1. Corporate Income Tax Liability Resulting from Corporate Form

2. Corporate Income Tax Liability Resulting from Corporate Purpose

3. Election to be Subject to Corporate Income Tax

4. Special Rules Applicable to Sociétés en Commandite Simple, Sociétés en Participation and Sociétés de Co-Proprietaires de Navires

5. Noncorporate Entities

6. Entities Exempt from Corporate Income Tax

B. Practical Application of Corporate Income Tax

1. Taxation of Income

a. Separate Taxation of “Capital” Companies

b. All Categories of Income Liable to Tax

c. Territoriality

d. Exceptions to Territorial Principle and Distinct Taxation of Separate Companies

(1) Anti-Avoidance Measures

(a) Assets Transferred Abroad

(b) Profits from Companies Organized in a Jurisdiction Deemed to Have a Privileged Tax Status

(2) Consolidated Profits (Régime du Bénéfice Consolidé)

(3) Worldwide Profits

e. Tax Consolidation Regime

f. Exceptions to Principle of Including All Categories of Income in Tax Base

2. Accounting

a. Commercial Code (Code de Commerce)

b. Commercial Company Law

c. The General Accounting Plan (Plan Comptable Général)

d. French Tax Code (Code Général des Impôts)

e. Special Requirements

f. Accounting Period

g. Calculation of Taxable Income

h. Inventories

i. Reserves

3. Calculation of Gross Income

a. General

(1) Assessment Period

(2) Determination of Taxable Income

b. Capital Gains

(1) Short-Term and Long-Term Capital Gains

(2) Tax Treatment of Short-Term Capital Gains and Losses

(3) Tax Treatment of Long-Term Capital Gains and Losses

c. Dividend Income

(1) General

(2) Tax Credit with Respect to Foreign Source Securities Income

(3) Tax Treatment of Parent and Subsidiary

(a) Form and Nationality of the Companies

(b) Nature of the Shareholding

(c) Amount of the Shareholding

d. Income from Foreign Sources

e. Accessory Items (Produits Accessoires)

(1) Real Estate Income

(2) Agricultural and Noncommercial Profits

(3) Royalties

f. Interest

g. Subsidies and Waived Claims

h. Exclusions from Gross Income

(1) Dividends

(2) Subsidies

4. Business Expenses

a. General

(1) Deductible Expenses

(2) Exclusions

(3) Other Deductible Expenses

b. Organizational Expenses

c. Travel and Entertainment Expenses

d. Interest

(1) Loan Interest (Thin Capitalization Rules)

(2) Interest on Capital

e. Royalties

f. Taxes, Fines and Penalties

g. Depreciation and Amortization

(1) General

(2) Declining-Balance Method

(3) Declining-Balance Method Rates

(4) Additional Depreciation Allowances

(a) Fiscal Investment Incentive 1983–1985

(b) Film and Audiovisual Productions

(c) Departments d'Outre Mer/Territories d'Outre Mer Investments

(d) Computer Programs

(e) Real Estate Investment for Research and Technology

(f) Premises Built in Connection with Approved Operations

(g) Anti-Pollution Campaign and Environmental Investments

(h) Development of Industry, Commerce, and Agriculture

(i) Shares in Approved Research Companies and “Financial Innovation Companies”

(j) Equipment Premiums

(k) Obsolete Equipment

h. Charitable Contributions

i. Capital Losses

j. Reserve Accounts

k. Bad Debts

l. Inventory Write-Downs

(1) Provisions for Price Increases

(2) Provisions for Price Variations

m. Rents and Outside Services

(1) Rental of Business Premises

(2) Upkeep and Repair Expenses

(3) Supplies and Equipment of Nominal Value

(4) Scientific Research Program Operating Expenses

n. Commissions and Fees

o. Insurance Premiums

p. Transportation and Travel Expenses

q. Wages and Salaries

(1) General Principles

(2) Allowances and Lump Sum Reimbursement of Expenses

r. Social Welfare and Other Expenses

s. Expenses Incurred in the Interest of Personnel

t. Pension and Retirement Benefits

(1) General

(2) Charity Payments

u. Purchases

v. Profit-Sharing Plans

(1) Special Reserve Fund for Profit-Sharing Plans

(2) Provision for Investment

w. Payments to Foreign Residents in Privileged Tax Jurisdictions

x. Difference Between Accounting and Fiscal Treatment of Certain Expenses

y. Waived Claims

5. Capital Expenditure

a. General

b. Incentives

6. Loss Carryovers and Carry backs

7. Tax Credits

a. Foreign Tax Credits

(1) Taxation of Worldwide Profits

(2) Consolidated Returns

(3) Subsidiaries in “Tax Havens”

b. Investment Tax Credits

(1) Tax Credit for Expenses Relating to Information Technology Equipment

(2) Tax Credit for Foreign Client Research Costs

c. Research and Development Tax Credit

d. Training Tax Credit

e. Dividend Tax Credit (Avoir Fiscal)

f. Relocation Tax Credit

g. Other Credits

(1) Credit for the Transitional Distribution Surtax

(2) Annual Flat Tax on Corporations

(3) Apprentice Tax Credit

(4) Family Tax Credit

8. Tax Rates and Calculation of Taxable Income

9. Assessment and Filing

a. Filing of Tax Returns

b. Payment of Tax

c. Calculation and Payment of Balance

10. Incentives

a. Reduced Rates

b. Special Relief on Taxable Income

(1) New Businesses Created from January 1, 1995 to December 31, 2009

(2) Free Urban Zones

(3) Corsica

(4) Financially Troubled Businesses

(5) Privileged Investment Zones

(6) Enterprise Zones

(7) Overseas Departments

(8) Venture Capital Companies

(9) Innovative Young Business

11. Tax Treatment of Reorganizations

a. General

b. Liquidation of a Corporation

(1) Reorganization Resulting in a New Fiscal Entity

(2) Conversion of a “Capital” Company into a “Personal” Company

(3) Conversion of a “Personal” Company into a “Capital” Company

c. Special Regime Applicable to Mergers, Splits and Contributions of Assets

(1) Mergers and Takeovers

(a) Tax Incentives in the Case of Mergers

(b) Obligations of Absorbing Company

(c) Transfer of Absorbed Company's Tax Losses

(2) Company Splits and Partial Contributions of Assets

C. Taxation of Dividends

1. Definition of Dividends

2. Taxation of Corporate Shareholders

a. Company Holding Less Than 5% of Shares

b. Parent-Subsidiary Regime

3. Former Dividend Tax Credit (Avoir Fiscal)

4. Transitional Distribution Surtax

5. Prelevy (Précompte)

6. Withholding Tax on Dividends (Retenue la Source)

D. Miscellaneous Taxes

1. Tax on Salaries (Taxe sur les Salaires)

2. Continuing Professional Training

3. Construction of Principal Residences

4. Apprenticeship Tax

5. Tax on Buildings

6. Other Taxes

VII. Taxation of Foreign Corporations

A. General

B. Taxation of a Branch

1. Definition of Taxable Establishment

2. Determination of Taxable Income

3. Method of Taxation

4. Subsidiary vs. Branch

a. General

b. Related Costs and Formalities

c. Criteria for Choosing Branch or Subsidiary

(1) Fiscal Criteria

(2) Other Criteria

C. Taxation of a Foreign Corporation without a Branch

1. Definition of Entities Subject to French Tax

2. Determination of Taxable Income

a. Ratio Method

b. Comparison Method

c. Commission Method

D. Foreign Companies with Real Property in France

1. Liability for the Payment of the Tax

2. Exemptions

E. European Headquarters of Foreign Companies

1. Definition of Headquarters

2. Taxation of Headquarters in France

VIII. Taxation of Partnerships

A. General Principles

B. Election for Corporate Income Tax

IX. Taxation of Other Business Entities

A. Family Corporations

B. Real Property Corporations

1. Co-Ownership Corporations

2. “Multi-Ownership” Companies

C. Real Estate Development Companies

D. Finance Corporations and Mutual Funds

1. Real Property Companies for Commerce and Industry

2. Investment Companies with Variable Capital

E. Nonprofit Associations

X. Taxation of Individuals - Residents

A. Scope of Taxation

1. Definition of “Taxpayer” for Income Tax Purposes

2. Definition of “Tax Domicile”

3. General Definition of Taxable Income

B. Types of Income

1. General

2. Determination of Net Income in Each Category

a. Real Property Income (Revenus Fonciers)

(1) Taxable Income

(2) Assessment and Filing

b. Industrial and Commercial Profits (Bénéfices Industriels et Commerciaux)

(1) Definition of “Bénéfices Industriels et Commerciaux”

(2) Assessment Period

(3) Determination of Tax Base - Filing

(a) Actual Income (Bénéfice Réel)

(b) Micro-Business Assessment

(c) Members of Approved Management Centers

(d) Filing and Summary of Regimes

c. Remuneration Received by Certain Corporate Officers

d. Agricultural Profits

e. Income from Salaries, Wages, Pensions and Annuities

(1) Assessment of Salaries and Other Taxable Income Treated as Salary

(2) Social Welfare Contributions

(3) Pensions and Annuities

(4) Salary Substitutes

(5) Company Savings Schemes (Plan d'Épargne d'Enterprise)

(6) Employee Shareholding Schemes

(a) Prior Conditions for a Capital Increase and a Purchase of Shares

(b) Tax and Social Security Treatment

(7) Stock Option Plans

(a) Qualifying Conditions

(b) Tax and Social Security Treatment

(8) Distribution of Free Shares

(a) Qualifying Conditions

(b) Tax and Social Security Treatment

(9) Deductions and Allowances

(10) Declaration and Filing

f. Noncommercial Profits (Bénéfices Non Commerciaux)

(1) Assessment of Noncommercial Profits Category Income

(a) Assessment: “Micro BNC”

(b) Assessment: Actual Basis

(c) Assessment: Special Basis

(2) Capital Gains in the Noncommercial Profits Category

(a) Small Businesses

(b) Normal Regime

(3) Returns

g. Securities Income

(1) Dividends and Deemed Distributions

(a) Dividends Received on or after January 1, 2005

(b) Dividends Received Before January 1, 2005

(2) Fixed Income Debt Securities

(3) Insurance or Other Contracts Giving Rise to a Capital Sum

h. Capital Gains Realized by Individuals

(1) Real Property Transactions

(a) Transactions to which the Rules Apply

(b) Calculation of Taxable Gain

(c) Relief Based on Period of Ownership

(d) Other Relief Provisions

(e) Disposition of Principal Residence Exemption

(f) First Disposition of a Dwelling Exemption (up to December 31, 2003)

(g) Nonresident French Nationals and Nonresident Nationals of European Union Member States Exemption

(h) Other Exemptions

(i) Tax Returns

(j) Calculation and Payment of Tax

(2) Securities Transactions

(a) Unified Regime for Capital Gains or Losses from Securities Transactions

(b) Share Savings Account Scheme

(c) Tax Basis

(d) Rates of Tax

(e) Returns and Filing

(3) Dispositions of Personal Property

(a) General Principle

(b) Exemptions

C. Assessment Based on “External Signs of Wealth”

1. Calculation of Deemed Income

a. Place of Residence

b. Secondary Residence

c. Household Servants

d. Private Automobiles Less Than Ten Years Old

e. Motorcycles with a Capacity in Excess of 450 cc

f. Yachts and Pleasure Craft

g. Touring Aircraft

h. Race Horses

i. Riding Horses

j. Shooting Rights

k. Golf Club Membership

l. Additional Charges

2. Example of Deemed Income on the Basis of Exterior Signs of Wealth

3. Conditions Precedent to the Application of Article 168

D. Unilateral Assessment on the Initiative of the Tax Authorities

1. Returns Filed Late or Not Filed

2. Failure to Provide Information or Supporting Evidence at the Request of the Administration

3. Failure to Appoint a Representative in France

E. Determination of Gross Taxable Income

1. Computation of Taxable Income

2. Allowances and Deductions from Gross Income

a. Support and Alimony Payments

b. Social Security Contributions

c. Assistance to the Elderly

d. Investment in Film Financing Companies

e. Special Relief for Low-Income Elderly Persons and Invalids

f. Other Specific Allowances and Deductions

g. Capital Subscriptions in Small Business Companies

h. Family Quotient

(1) Calculating Number of Deductible “Parts”

(2) Dependents

3. Credits Allowable Against Gross Tax

a. Credits for Real Property

(1) Rental Property Tax Credit

(2) Home Maintenance Credit

(3) Major Equipment Credit

(a) Tax Credit Before Finance Act 2005

(b) Tax Credits Introduced by Finance Act 2005

(4) Forest Credit

(5) Tax Credit for Loan to Purchase or Build Principal Residence

b. Premiums Paid on Certain Life Assurance Policies

c. Contributions to Charitable or Other Public Interest Institutions and Political Parties

d. Tax Credit for Home Help

e. Credit for Hospitalization Expenses

f. Subscription to the Capital of New Small Business Companies

g. Miscellaneous Tax Credits

F. Rates and Calculation of Taxable Income

1. Rates of Tax

2. Tax Credits

3. Filing and Collection

G. Taxation of Expatriate Employees

H. Elective Regimes for Certain Kinds of Income

1. Debt Securities Income

2. Election for Certain Noncommercial Profits to Be Taxed as Salary Income

3. Capital Gains on Disposal of Personal Property Other than Securities

XI. Taxation of Nonresidents

A. General Principle

1. Tax Treatment of Nonresident with French-Source Income

a. Income Arising from Activity or Asset Located in France

b. Income Derived from a Debtor Domiciled in France

2. Attributed Income Resulting from Availability of Dwelling in France

a. General Principle

b. Exemptions

3. Nonresident with Both French-Source Income and Dwelling in France

B. Method of Taxation

1. Principles of French-Source Income

2. Calculation of Tax Due

a. French-Source Income

b. Deemed French-Source Income

3. Withholding Taxes

a. Salaries, Pensions, Life Annuities

b. Nonsalary Income

c. Dividend Income

d. Fixed Rate Securities Income

e. Capital Gains

(1) Stock Dispositions

(2) French Real Property Dispositions

f. Professional Real Property Trading Profits

C. Payment of Tax by Nonresidents

XII. Net Wealth Tax

Introductory Material

A. Persons Subject to the Tax

B. Calculation of Taxable Assets

1. “Nonbusiness” Assets

2. “Business” Assets (Biens Professionels)

3. Rates of Taxation

C. Assessment and Filing

XIII. Inheritance and Gift Taxes

Introductory Material

A. Inheritance Tax

1. Territorial Scope

2. Assets Declaration

3. Exemptions

4. Valuation of the Estate

a. Listed Securities

b. Furniture

c. Jewelry, Precious Stones and Art Objects

d. Monetary Debts Denominated in Foreign Currency

e. Usufructs and Bare Titles

f. Deductions

5. Calculation of Tax

6. Rate of Duty

a. Spouses

b. Lineal Descendants

c. Collateral Relatives and Distant or Unrelated Parties

d. Partners bound by a Pacte Civil de Solidarité

7. Payment of Duty

B. Gift Tax

XIV. Registration Duties

Introductory Material

A. Sale of a Going Concern (Fonds de Commerce)

1. Definition of a Going Concern (Fonds de Commerce)

a. Rate of Tax

b. Principal Exceptions

c. Payment

2. Transaction Treated as Sale of Fonds de Commerce

B. Real Property Sales

1. Normal Rates of Tax

2. Reduced Rates of Tax

a. Various Sales Subject to Reduced Rate

b. Professional Real Property Dealer Acquisitions

3. Sales Not Subject to Registration Duty but Subject to Value Added Tax

a. Building Land and Adjacent Property

b. Sales During Construction and Improved Property Sales

C. Corporate Transactions

1. Formation of a Corporation

a. Nature of Founder's Claim

b. Nature of Asset Contributed

2. Dissolution of a Corporation

a. Dissolved Companies Not Liable to Corporate Income Tax

b. Dissolved Companies Liable to Corporate Income Tax

3. Changes in a Company's Structure

a. Capital Increases

b. Capital Reductions

4. Dispositions of Certain Corporate Interests

XV. Local Taxes

A. Business Tax

1. Scope of the Business Tax

a. Persons Subject to the Tax

b. Territorial Application

2. Exempted Persons and Activities

a. Regional Planning (Aménagement du Territoire)

(1) Automatic Exemption

(2) Exemption Based on Prior Ministerial Approval

b. Temporary Exemption for New Firms

c. Other Exemptions

3. Tax Base

4. Rate of Tax

a. Minimum Payment

b. Special Compensating Levy

c. Ceiling Provisions Depending on Value Added

d. Tax Relief and Tax Credits

5. Filing and Payment of Tax

B. Real Property Tax

1. Unimproved Land

a. Permanent Exemptions

b. Temporary Exemptions

c. Tax Base

d. Rate of Tax

e. Payment of Tax

2. Improved Land

a. Land Subject to Tax

b. Temporary Exemptions

(1) New Buildings Exemption

(2) Other Exemptions

c. Tax Base

d. Rate of Tax

e. Returns and Payment of Tax

3. Provisions Common to Improved and Unimproved Land Taxes

C. Dwelling Tax (Taxe d'Habitation)

1. Liability for Tax

2. Tax Base

3. Rate of Taxation

4. Payment of Tax

D. Other Taxes

XVI. Value Added Tax

A. General Principles

B. Taxable Transactions

1. Delivery of Goods and Supply of Services

2. Economic Activity

3. Consideration

4. Persons within the Value Added Tax Framework: Assujetti

5. Exemptions

a. Exports and Related Transactions

b. Certain Imports

c. Certain Professions

d. Education

e. Certain Banking and Financial Operations

f. Insurance and Reinsurance Operations

g. Certain Real Property Rentals

h. Certain Real Property Transactions

i. Reimbursement of Expenses by the Members of Certain Forms of Association

j. Multi-Ownership Companies

k. Nonprofit Organizations

l. Transfer of Business

m. Miscellaneous

C. Territorial Application of Value Added Tax

1. Intra-European Union Transactions

2. Imports from Non-European Union Member States

3. Exports from the European Union to Third Party Countries

4. Suspension of Value Added Tax

5. Services Relating to International Commerce

6. Annual Exemptions

7. Place of Delivery

a. French Territory

b. Relevance of the Place of Delivery: Goods

(1) General Principle

(2) Delivery of Goods After Assembly or Installation

c. Place of Taxation of Services - General Principle

d. Exceptions

(1) Services Which Can Be Physically Localized

(a) Leased Chattels

(b) Real Property Services

(c) Transport and Associated Services

(d) Cultural, Artistic, Educational, Scientific, or Athletic Services

(2) Intangible Property and Related Services

e. Subcontracted Consultancy Services

f. Temporary Personnel Used Abroad

g. Personnel Training for Foreign Entity

D. Tax Base

1. General Rules

2. Exceptions

E. Value Added Tax Due Date

1. Sale of Tangible Goods

2. Supply of Services

3. Works Related to Real Property

4. Self-Delivery (Livraison Soi-même)

5. Building Operations

6. Change of Value Added Tax Due Date

F. Rates of Value Added Tax

1. Reduced Rate–Products Concerned

2. Lodging Establishments

3. Meals Served in a Company's Restaurant

4. Catering Services

5. Rental of Zoned Camping-Caravan Parks

6. Entertainment

7. Transportation of Travelers

8. Medicines

9. Books

10. Newspapers and Other News or Political Periodicals

G. Input Credits

1. General Principles

2. Availability of Input Credit Rights

a. Qualifying Requirements

b. Time at which Input Tax May Be Credited

c. Ownership and Use of Goods Requirements

d. Exclusions or Special Restrictions

3. Taxpayers Partially Liable to Value Added Tax

a. Recovery of Input Tax on Fixed Assets

b. Recovery of Input Tax on Services and Goods Other Than Fixed Assets

4. Methods of Recovering Input Tax

a. Deductions

b. Reimbursement of Nonutilized Credit Balance

c. Specific Reimbursement Procedure for Foreign Companies

H. Taxpayers’ Obligations

1. Administrative Obligations and Formalities

2. Accounting Obligations

3. Invoice-Related Obligations

4. Appointment of a Tax Representative

I. Collection and Recovery

1. Declaration of Turnover and Payment of Tax

2. Penalties

XVII. Other Taxes

A. Parafiscal Taxes

1. Tax on Mineral Waters

2. Animal Slaughter House Tax

B. Other Taxes

1. Publishing Tax

2. Tax on Copying Machines

3. Company Social Solidarity Contribution and Additional Company Social Solidarity Contribution

4. Tax on Insurance Contracts

5. Tax on Currency Transactions

XVIII. Special Provisions Relating to Multinational Corporations: Anti-Tax Avoidance Measures

A. Inter-Company Pricing

1. Control Test

a. Legal Control

b. De Facto Control

2. Transfer of Profits to Nonresidents

a. Inflated or Reduced Purchase or Sales Prices

b. Payment of Excessive or Unjustified Royalties

c. Preferential Loans and the Waiver of Claims to Interest or Principal

d. Participation in the Expenses of Jointly Held Foreign Subsidiary

3. Administration's Burden of Proof

4. Taxpayer's Burden of Proof

5. Mutual Agreement procedures

B. Tax Havens

C. Anti-Tax Avoidance Measures

1. Payments to a Tax Haven: Article 238 A

2. Profits Deriving from a Tax Haven: Articles 209 B and 123 Bis

a. Article 209 B

(1) French Entities to Which Article 209 B Applies

(2) French Taxation of the Foreign Entity's Profits

(3) Exemption from Taxation under Article 209 B

(4) Methods of Avoiding Double Taxation

(a) Foreign Entity's Profits Subject to Corporate income tax

(b) Foreign Entity's Distribution of Profits to French Company

(5) Returns and Filing

b. Article 123 Bis

3. Payments Abroad in Consideration of Services Rendered by a French Resident Person or Entity: Article 155 A

4. Transfer of Assets Abroad

5. Declaration of Monetary and Other Transfers and Accounts Abroad

6. Declaration of Certain Insurance Policies

7. Requirement to Make Certain Payments by Check, Bank Draft or Credit Card

8. Transfer of Tax Domicile Abroad

XIX. Avoidance of Double Taxation

A. French Tax Law

1. Income Tax

2. Corporate Income Tax

3. Inheritance and Gift Taxes

B. Double Taxation Agreements

1. In General

a. Double Taxation Agreements with Respect to Taxes on Income

b. Double Taxation Agreements with Respect to Inheritance and Gift Taxes

c. Treaties on Other Matters

2. Double Taxation Agreements with Developed Countries

a. Individuals Able to Benefit from a Double Taxation Agreement

b. Corporations Able to Benefit from a Double Taxation Agreement

c. Permanent Establishment

d. Industrial and Commercial Profits

e. Dividends

(1) French-Source Dividends

(2) Foreign-Source Dividends

f. Interest

g. Royalties

h. Immovable Property Income

i. Techniques Employed to Eliminate Double Taxation

(1) Exemption of Given Category

(2) Tax Credits

3. Principal Differences Encountered in Double Taxation Agreements with Developing Countries

a. Corporations

b. Tax Sparing and Matching Credit

4. Tax Planning

C. Double Taxation Agreements with the United States

1. The 1994 France-United States Tax Treaty

a. Scope of Application

(1) French Resident

(2) United States Resident

(3) Dual Residence

b. Geographical Scope of Treaty

c. Business Profits

d. Calculation of Profits

e. Dividends

f. Interest

g. Royalties

h. Capital Gains

i. Independent Personal Services

j. Private Salaries and Remuneration

k. Artists and Athletes

l. Pensions

m. Public Body and Political Subdivision Salaries, Wages and Pensions

n. Teachers and Researchers

o. Students and Trainees

p. Net Wealth Tax

q. Relief from Double Taxation

r. Nondiscrimination

s. Mutual Agreement Procedure

t. Exchange of Information

u. Assistance in Collection

v. Limitation on Benefits (Anti-Abuse Provisions)

w. 2004 Protocol to 1994 France-United States Tax Treaty

2. The 1978 France-United States Estate and Gift Tax Treaty

a. Scope of the 1978 France-United States Estate and Gift Tax Treaty

(1) Taxes Covered

(2) Estates and Gifts

b. Domicile

c. Allocation of Taxing Rights

(1) Real Property

(2) Permanent Establishment

(3) Movable Property

d. Exemptions and Deductions for Gifts and Legacies to Charitable Organizations

e. Methods for the Avoidance of Double Taxation

(1) France

(2) United States

(3) Procedure

f. Miscellaneous Provisions


Working Papers

Table of Worksheets

Worksheet 1 Form 49, Reporting Form Concerning Direct Foreign Investment in France

Worksheet 2 Form 53, Declaration of Liquidation of Investment in France

Worksheet 3 INPI Declaration of a Contract Concluded with a Foreign Resident Regarding Industrial Property Rights

Worksheet 4 Form Mo, Declaration of the Establishment of a Corporate Entity

Worksheet 5 Form Po, Declaration of the Establishment of a Personal Business Activity

Worksheet 6 SA Articles of Association

Worksheet 7 SARL Articles of Association

Worksheet 8 SA Share Transfer Form

Worksheet 9 Form 2065 and Attachments, Corporate Income Tax Return

Worksheet 10 Form 2090, Nonresidents Capital Gains Return

Worksheet 11 Form 3005, Nonresidents Real Property Profits Return

Worksheet 12 Form 1003, Business Tax Return

Worksheet 13 Form 3310, Turnover and VAT Declaration

Worksheet 14 Taxation in France of Sums Received by a Nonresident “Employer” for Services Rendered by a French Resident Employee (Article 155A, CGI)

Worksheet 15 1994 France-United States Income and Capital Tax Treaty (In force)

Worksheet 16 2004 Protocol to 1994 France-United States Income and Capital Tax Treaty

Worksheet 17 1978 France-United States Estate and Gift Tax Treaty (In force)

Worksheet 18 2004 Protocol to 1978 France-United States Estate and Gift Tax Treaty

Worksheet 19 List of Comprehensive Double Taxation Agreements and Related Protocols Signed by France as of December 1, 2007

Worksheet 20 Tax Treaties Signed by France that Contain Administrative Assistance Provisions

Worksheet 21 IRS News Release on United States-France Agreement on Taxation of French Social Security




Books and Treatises: