The Regulatory Environment: A Crucial Step for the Creation of Foreign Companies
The French market is dynamic and attractive, but its legal and tax framework can be complex for non-resident entities. When planning to establish a foreign company in France—whether as a subsidiary, a branch, or a simple permanent establishment—it is imperative to master the rules of French accounting. Proper management of reporting obligations, particularly regarding intra-community VAT, is essential for compliance and long-term success.
Fundamental Obligations of French Accounting
Any entity carrying out business in France is subject to the rules of the Plan Comptable Général (PCG). Obligations vary slightly depending on the chosen legal structure (SARL, SAS, EURL, etc.).
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Keeping accounting books: The Commercial Code requires the maintenance of a journal, a general ledger, and an inventory book. These documents must be kept for 10 years.
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Preparation of annual accounts: Each fiscal year must end with the preparation of annual accounts, consisting of a balance sheet, income statement, and notes. These documents must provide a true and fair view of the entity’s assets, financial situation, and results.
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Filing of accounts: Annual accounts must be filed with the Commercial Court registry within one month (or two months in case of electronic filing) after approval by shareholders or partners.
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Language: French accounting must be kept in French and in euros.
Intra-Community VAT and Reporting Obligations
Value Added Tax (VAT) often represents the first complexity for foreign companies.
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Intra-community VAT number: This number is mandatory for any company engaging in trade (sales or purchases) of goods or services with other EU member states. It is assigned at the time of company creation or VAT registration.
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Declarations of Exchange of Goods (DEB) / Declarations of Services (DES): These statistical and tax declarations are mandatory for intra-community operations and must be submitted monthly.
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Specific requirements: Managing VAT rates (standard 20%, reduced or intermediate) and applying the reverse charge mechanism for intra-community VAT require constant vigilance.
Direct Taxation: Corporate Income Tax (IS)
The tax treatment of a foreign company depends on the qualification of its presence in France:
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Subsidiary (Resident company): The subsidiary is a distinct French legal entity, subject to Corporate Income Tax (IS) in France on all its profits.
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Branch or Permanent Establishment: If the presence is considered a permanent establishment (fixed place of business or significant activity), only the portion of profits attributable to it is subject to IS in France. The existence of a permanent establishment is a critical point often analyzed in detail, particularly to avoid double taxation through tax treaties.
Conclusion: Relying on Professionals for the Creation of Foreign Companies
For a successful establishment, it is strongly recommended to engage an expert-comptable (chartered accountant) or a specialized French tax advisor. This professional will be your ally in ensuring compliance with French accounting, optimizing your tax burden, and managing the specificities related to intra-community VAT.