Articles
Establish a Subsidiary in France
Updated on Wednesday 05th July 2023 Rate this article
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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.
Below, our company formation agents in France explain how to open a subsidiary in this country.
| Quick Facts | |
|---|---|
| Applicable legislation (home country/foreign country) | French Commercial Law |
| Best used for | - banking, - insurance, - automotive, - trading |
| Minimum share capital | Yes |
| Time frame for the incorporation (approx.) | Around 3 weeks |
| Management (local/foreign) | Local |
| Local bank account | Yes |
| Independence from the parent company | Yes |
| Liability of the parent company | No, the subsidiary is fully liable |
| Corporate tax rate | 33% |
| Possibility of hiring local staff | Yes |
The advantages of opening a subsidiary in France in 2023
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, 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.
A subsidiary in France can also be established as a commercial partnership, also known as Societe en Nom Collectif. Such a business structure requires at least 2 partners with liabilities to the extent of the personal assets. There is no need for minimum share capital in this sense. Moreover, commercial activities must be done under the trade name of the company. Our agents can offer more details about opening a company in France.
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”.
On the other hand, if you open a company in this country, we recommend you use the services offered by our accountants in France. Payroll services involve the calculation and distribution of salaries in the company, not before the payment of taxes. As for bookkeeping, all financial transactions in the company will be recorded. You will also need audits, and here we are at your disposal with complete information. We invite you to contact us and find out everything that interests you about the services we can offer.
A resident permit is needed for foreigners interested in establishing a subsidiary in France. On the other hand, a work or business visa is also a valid option for entrepreneurs from abroad, looking for business in France.
French company formation requirements for a subsidiary in 2023
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 in 2023:
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
The following documents are necessary for the registration of 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.
Our company registration consultants in France can offer more information on the uses of a subsidiary 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
The 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.
One should note that the corporate tax is levied on the total income of the subsidiary. If such a structure is based on a limited liability company, the minimum amount is EUR 3,000, while EUR 1,750 is imposed on joint-stock companies.
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.
For more details about setting up a subsidiary in France in 2023, you may contact our company formation agents.
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Call us now at +33 9 73 22 01 51 to set up an appointment with our lawyers in Paris, France. Alternatively you can incorporate your company without traveling to France.
As a BridgeWest client, you will beneficiate from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in France.
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