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Guest blog - French tax breaks
'Starting a company in France is not that taxing'
Setting up a company in France might not mean the tax burden that you had imagined. Photo: Shutterstock

'Starting a company in France is not that taxing'

Published on: 30 Sep 2014 10:13 CET

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With all the publicity surrounding President François Hollande’s disastrous term in office, France’s reputation as a country that supports hard work and entrepreneurial vision has been taking quite a hammering.

And it’s not hard to see why. France is fighting a battle of the taxes due to having one of the highest corporate tax rates in the EU – a whopping 33% compared to Britain’s 21% or Latvia’s 15%.

And this is not the only tax that companies have to fork out for – on top of corporate tax there is also the “Taxe Foncière” or “Taxe d’Habitation” (Housing Tax, payable if you are renting a place or own your place of business) and the Payroll Tax (national insurance and pensions) which is more than 45%. And with the myth of its notoriously slow administrative procedures it seems that ‘La Belle France’ always manages to stand in the way of entrepreneurs.

But is the situation that bad? And how on earth can such a difficult system produce one of the top five economies in the world? The reason is simple – foreign investment is still strong in France because, like most of the top entrepreneurs in France know already, if you are savvy enough you can get the sticky French system to work for you and perhaps even qualify to halve your tax rates or even reduce them to zero.

A new deal for France

It’s now been more than 10 years since France decided to modernize its administrative system. French company formation, even if it is forced to follow strict rules, can now be done within a week. Registered numbers are usually given by the French version of Companies House (Le Greffe) the same day of the incorporation. The VAT number is given within a week after registration and the VAT number is valid from the stamp date.

All French procedures for tax declarations, payroll declarations and French incorporation are now centralized and can be done on-line. This means that you can get your business up and running as soon as the French company formation process has been completed.

For 95% of businesses, French incorporation is very straight forward and speedy. And the administrative system – far from being a burden – is actually a blessing in disguise. The strict rules governing French businesses mean companies will always be supported. Banks are also highly regulated and therefore can be trusted even in the worst economic climates.

Past governments have always tried to improve this system whilst keeping the regulations in place which is perhaps why La Defense is the biggest business centre in Europe and still attracts hundreds of foreign companies every year.

Tax Breakdown

Officially corporate tax is 33.33% in France. That might seem a lot when you compare it to the average EU figure of 22.74% but if you look at some of the other big economic hitters in the world France doesn’t come out too badly compared to the United States at 40% and the United Arab Emirates at the eye-watering rate of 55%. Plus The French state have found some interesting ways to sweeten the bitter pill of corporate tax for those deciding to start up in France…

The ‘15 % rate’ sweetener

A company can have a 15% corporate tax rate on profit providing they comply with the following conditions:
- the company must be trading
- at least 75% of the capital must be owned by individuals
- share capital must be completely paid
- turnover must be less than €7.6 million 
- profit must be less than €38,120 

The ‘No Tax’ sweetener

Depending on where you set up your company and what type of business you have, you may be liable to pay no tax at all! This system, created in the 1990′s to help fight unemployment in urban areas, is called “Zone Franche Urbaine” (Urban Free Zone). In these tax-free zones, companies that are trading have no corporate tax and in some case no professional tax and reduced payroll taxes for the first five years. There are more than 60 zones like this in France. Plus, depending on the business, some regions in France are also giving incentives to new start-up companies. No tax and lots of incentives – what’s not to like?

Taxe Professionelle (1975-2010)

In 2010 the French government abolished the Professional Tax. It is costing the state €8 billion but the tax burden on French companies feels significantly lighter.

So all in all, the future is not quite as bleak as people like to make out – with the smooth admin systems and the government’s plans to attract more and more companies to France, there may be some nice surprises in store for companies that choose to incorporate in France.

Katya Puyraud, runs the Paris-based Euro Start Entreprises, which offers advice for setting up companies in France and in numerous other countries. Visit www.eurostartentreprises.com. You can also email katya@eurostartentreprises.com

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