A subsidiary established in France
has its own legal personality and a big part of the capital owned by the foreign company. The foreign company cannot be considered responsible for the French company
’s actions and its assets are fully protected in case of liquidation of the subsidiary
The advantages of opening a subsidiary in France in 2021
The advantages of owning a subsidiary in France
are numerous, for example, the support of the France government is granted in case of expansion. Also, the system of taxes
is very advantageous. Usually, a subsidiary must pay all the taxes and VAT like a regular company, but due to the many treaties signed by France, many exemptions are granted.
In the previous law, withholding taxes for dividends paid to a company situated in an EU country are exempt if the company owns at least 10% of the subsidiary’s capital. However, if you have to pay the withholding tax on dividends in 2021, the tax exemption is applicable if the recipient is represented by a EU based company which owns at least 5% of the shares of the French legal entity, for a period of minimum two years.
In case the company is located outside the EU, the withholding tax on dividends used to be set up at a rate of 25%
, but exemptions or lower taxes
may be granted due to the vast network of double tax treaties signed by France all over the years. Currently, in 2021, the withholding tax on dividends is charged at a rate of 12.8% in the case in which the recipient is a non-resident individual, and a rate of 28% was charged in the case of non-resident companies up until the end of 2020. Starting with 1st of January 2021, the latter tax was reduced to 26.5%.
Types of French subsidiaries
There are two forms of business that a subsidiary may take: private limited liability company or joint stock company.
A private limited liability company
is specially used by the small and medium businesses and doesn’t require a minimum share capital. The maximum number of shareholders cannot exceed 100.
A joint stock company can be formed by at least seven founders with a share capital of at least 37,000 EUR and it is especially used by large corporations.
A subsidiary is considered fully separated from its parent company only after the registration in the “Registre du Commerce et des societes”.
French company formation requirements for a subsidiary in 2021
As mentioned earlier, the subsidiary company can take the form of a limited liability company which can be private or public. The requirements for opening a subsidiary company under a private limited liability company will imply:
- the minimum share capital of 1 euro, according to the Company Law in France, however, the foreign company must decide on the specific amount needed;
- at least one director who needs not be a French resident must be appointed in the subsidiary company;
- the director can be a corporate body, meaning the parent company can become a director in its subsidiary;
- the subsidiary does not need a company secretary in France, which is a great advantage;
- the French subsidiary must have a corporate bank account set up in this country, unlike the branch office which does not need one.
When it comes to public companies
, the subsidiary
can be established as a simplified joint stock company
(SAS) as it benefits from the same relaxed requirements as a private company (SARL).
With respect to the joint stock company, the requirements are more complex in terms of shareholding and management structure, which is why it is the least employed business form for opening a subsidiary in France.
We have also created a scheme showing the advantages of a subsidiary in France:
How to open a subsidiary in France
The first step that must be taken when trying to establish a subsidiary in France
is drafting the articles of association
in front of a notary from the foreign country. The articles must state the reason for opening a subsidiary
, the manager’s responsibilities, the name and the address of the subsidiary and other provisions.
If the future manager is not a French resident or from EEA, he must receive a residence permit (skills, expertise, and business activity) and a long stay visa.
Another requirement that must be accomplished before incorporation is checking the desired name in the French Patent and Trademark Office.
A bank account
must be opened, and the minimum share capital must be deposited (37,000 EUR in case of a joint stock company and any amount for a limited liability company).
The registration of the French subsidiary must be published in the Official Gazette. After this, the company must file all the necessary documents at the Centre de Formalites des Enterprise.
The last step of setting up a subsidiary in France is buying the company books and stamp them at the clerk of the Commercial Court.
After approximately one week from checking the name and depositing all the necessary documents at the competent authorities, the French subsidiary may begin the commercial activities.
Documents needed to set up a subsidiary in France
- - information about the parent company issued by the Trade Register in its home country;
- - the articles of association of the company to be registered in France;
- - the rental agreement which indicates the legal address of the French subsidiary;
- - information about the parent company’s representative in France and the letter of their appointment.
These will be filed with the Companies Registrar which will issue the subsidiary’s certificate of incorporation.
The uses of a subsidiary company in France
One of the advantages of establishing a subsidiary company in France is that it can be used for various purposes. Among the most common uses of a subsidiary in France are:
- - it can be used when creating a holding company for owning shares – the subsidiary will be coordinated by the parent company;
- - it can be used in numerous industries, among which agriculture, information technology, research and development;
- - it can undertake other activities than its parent company, compared to the branch office which is limited from this point of view;
- - the subsidiary company can also take the form of a joint venture entering in partnership with a local company;
- - both local and foreign companies are allowed to open subsidiaries in France.
The subsidiary is a preferred business form by foreign companies because it is treated as a local company.
Hiring employees for a subsidiary in France
Foreign companies opening subsidiaries in France
have the right to hire local employees, hiring foreign employees
or detaching their own workers in France
. The requirements are different when it comes to using the local workforce and hiring/detaching foreign employees. In the case of the latter, residence and work permits are required.
No matter the types of workers assigned to complete various tasks, the subsidiary must enroll with the social security system in France and must pay the necessary taxes related to employment. Among these, the subsidiary must contribute to the pension, healthcare and work injury funds as an employer.
Our company formation specialists in France can offer more information on the regulations related to hiring employees for a subsidiary.
Reasons for opening a French subsidiary
is often compared to the branch office
when it comes to setting up a structure in France
. Even if the costs associated with the registration of a subsidiary are often higher, the subsidiary
is more flexible when it comes to the operations which can be completed by the parent company.
Considering the subsidiary is registered as any other local business, it is easier to do business with French companies thanks to the high degree of confidence.
From a taxation point of view, the subsidiary can access incentives, grants and all sorts of tax rebates with French authorities.
Another important advantage of the parent company of a subsidiary is the limited liability related to the obligation of the foreign business, as it will be liable to the extent of its contribution to the subsidiary. The subsidiary company
is independent of the parent company and can take its own decisions with respects to investment strategies
FAQ on subsidiaries in France
1. How long does it take to register a subsidiary in France?
The registration process of the subsidiary can take up to 6 weeks, as the opening of the bank account takes around 4 weeks.
2. Can the subsidiary be registered remotely?
Yes, it is possible for a subsidiary company to be registered remotely.
3. Are there any special requirements related to the subsidiary’s directors?
There are no such requirements. As a matter of fact, the French subsidiary
is allowed to have a foreign director.
4. Does the subsidiary need a company secretary?
No, there are no such requisites when opening a subsidiary in France.
5. What is the corporate tax rate applicable to subsidiaries in France?
French subsidiaries will be imposed with the standard corporate tax rate which is 33%.
6. How many directors must a subsidiary appoint?
The minimum number of directors in the case of a subsidiary is one.
7. Must the annual financial statements of a subsidiary be audited?
Yes, French subsidiaries are subject to audit requirements.
8. Can a subsidiary own real estate in France?
Yes, foreign companies can acquire various types of properties in France through subsidiaries.