SETTING UP A BUSINESS IN FRANCE:
1 MIN 30 TO BETTER UNDERSTAND
Your Tutorials to help you implement your business in France.
Which legal entity to create in France?
In other words, how to decline strategic and operational goals in legal structures?
You need to wonder, first of all, what you your forecast sales are in France and hence, which resources in terms of premises people, you need to achieve them. And given the answer to these queries, we will provide you with the appropriate structure.
If you just want to collect data from future clients which entails just hiring an employee working from home which says about so-call he has an office, hence the Siret number only is needed.
If you want to sell on the French market in the short run, which entails adding a warehouse, an office and/or service persons with a limited power of decision or if you want to set up a customer call centre which entails having a postal address, official address or if you want to collect data from French client which entails having a bank account thus a branch is needed.
Finally, if you project strong sales, implying large warehouses, offices and numerous people with an extended power of decision, thus a subsidiary has to be considered.
You want to have any further information and how to set up a business in France do not hesitate to contact us.
French entities tax satuts
The liaison office which means having answered its number only means no touch jurisdiction in France, hence and what cost are deducted in the country of origin (USA, Germany…).
If you have a subsidiary, it means always a tax jurisdiction in France and hence he subjects to both French Corporation tax and French VAT.
As for the branch if you have a warehouse, premises, salespersons, thus your branch will have a tax jurisdiction in France.
If your presence in France boils down to having an official address and we have a bank account hence, your branch doesn’t have any tax jurisdiction in France.
But for the branch, what if your situation doesn’t match the three aforementioned ones?
The solution, then, lies in filing a prior notice request, by which the company describes the operational situations and states its position (no tax jurisdiction) in France in this case and forwards it to the taxed French tax administration: if the answer is yes, it protects the branch in case of change in opinion from the tax administration.
You want to know more about the tax status of each French entity do not hesitate to contact us: we look forward to see you soon.
The corporate tax and the VAT in France?
How cooperation tax and VAT rules apply in France?
First of all, you need to distinguish the small businesses whose consolidated turnover cop wide is lower than 7.6 million euros from those larger or big businesses was considered turnover is above this threshold.
If your corporation is a big business or large business, hence the first tax band up to 500 000 € arose that would apply in 2018 is 28%. Above it threshold is 33% percent.
In 2019, the 33% tax bill will decrease to 31%. In 2020, any white tax ban would apply: 28%.
In 2021, it will decrease to 26.5% and it will wane in 2022 to 25% that means a sharp decrease in tax ranged over the four years to come.
Now if your cooperation is a small business the same rule as before will apply except that the first tax band is 15% only up to 38 000 €.
Now, VAT and it rates in front well four rates further which is the 20% rate, the normal rate that applies to all goods and services if no exceptions: there are 3 exceptions.
First of which are the median rate, 10%; that applies to restaurants, hotels, public transportation services.
Then comes the 5.5% rate, the reduce rate, that applies to food and related services.
Finally, we have the 2.1% rate, the special rate, that applies to newspapers magazines and drugs.
Want to know more about the rate and cooperation that right don’t hesitate to reach out to us looking forward to reading soon.
How to terminate work contracts in France?
Thus, three ways to terminate the unfixed term work contracts.
First, there is the lay-off for individual reasons, second there is the mutual termination agreement call “rupture conventionnelle” and then you get the individual lay-off call in French “licenciement économique” because the business has been operating poorly.
Now, the individual lay-off for personal reasons: its stems from the employee misconducting towards employers, employees or bad performances. In other words, the reason is to be grounded and evidenced by supporting documentation.
This is the reason why you may prefer the MTA, the “rupture conventionnelle” in French.
If the company and its employees cannot get along with each other, they can negotiate an agreement to stop the relationship. Once the agreement has been signed, it is forwarded to the “inspection du travail” in other words the labor authorities to secure the process because it needs to be approved by this work authorities: this procedure has been heavily used by all stakeholders to stop relationships since it has been unacted beginning of 2010.
Then comes the lay-off for economical reason: before launching it, employer has to ensure there is no similar vacant job within the company and the economical motive of the lay-off has to be substantiated. There is a process to abide by epecially if there is an accord of branch and other words a sector while bargaining by an agreement and this makes it very time-consuming.
If a lay-off for full individual reasons, there is no severance. In case of bad performance, a severance. In case of a “rupture conventionnelle” or mutual termination agreement, there is a severance as well and in case of economical reasons there is a severance as well too.
And an allowance for damages can be allotted to employees if the reasons for laying-off people are overruled by labor courts.
So severance, how much?
By Labor Code, the rule is ¼ of a month per year of seniority which means if the employee has 1 year of seniority, the compensation amounts for 1/4 months.
If 5 years old seniority, the compensation is lifted up to 1.25 months. And if 10 years old seniority, it is lifted to 2.5 months.
Now if the “accord de branche” or the sector-wide agreement applies, the maximum is 2/5 of a month per year of seniority which means if the employee has 1 year of seniority, the compensation amounts to 40% of a month maximum. If 5 years of seniority, it’s lifted up to 2 months maximum and if the employee has 10 years of seniority, it is lifted up to 4 months maximum.
Now the type of allowance for damages: once again, because the reasons for laying off employees have overruled by Labor Code. If misconduct or bad performance or in case of MTA or economical lay-off then well regardless of the reasons for any of people, the seniority, if the person has 1 year of seniority the average amount to 1.5 months. If 5 years of seniority, it is lifted up to 4.5 months. And if 10 years old seniority, it is lifted up to 6.5 months.
But if there is procedure order defect which is elected by Labor Code, in this case, regardless although economical or jury said the reason for any of people, the compensation amounts to 1 months only.
Want to know more about on how to hire people or lay-off people, don’t hesitate to reach out to us looking forward to reading you.
How the CIR (research tax credit in France) does it work?
To begin with who can benefit from the CIR ?
All companies, big or small, which issue a corporate tax return in France.
Now, what is the R&D?
R&D is an increase in knowledge, in fundamental research, in applied research, in experimental development. Practically it means having identified goals, but uncertainty on how to achieve them.
Now, how to calculate the CIR?
CIR is made up of two components: first of which is for all expenses that means salaries, social taxes time 150% to take into consideration over hands and other side, subcontracting.
Altogether, they are multiplied by 30% to give the CIR.
Now, what are the economical fallouts of the CIR? First, payroll expenses: it means a decrease in 45% and the subcontracting, it means he decrease of 30%.
Now how he does the repayment of the CIR?
If you are a SME (Small and medium enterprises: definition of the European Union), the repayment takes place immediately. If you are a big business or a larger business, repayment takes place after 1, 2 or 3 years if the CIR has not been applied to the Corporate Tax Expense in the meantime.
Now, how to secure the CIR?
Two ways, first to reach by signing a prior notice request and afterwards after performing and reading issue in your write-up: the project is requested the goal of it is to answer to the queries “are all my projects eligible to the CIR? “
To do so, you received a prior notice request and you forward it to the French tax administration. If the answer is yes to this query, this is protected the company in case of change in the opinion of the tax administration.
Now, the write-up: the write-up needs to be laid out as such: first of all, you need to lay-out the objectives relative to the R&D. Second, you need to discuss the state of the art, that means existing knowledge on the related objective. Third, you need, of course, to disclose the work performed and finally disclose difficulties and hazard encountered, deadlock lifted.
Grants and subsidies in France
The principles, first of all, there are three rules.
First, the bigger the enterprises are, the lower the economic impact will be and vice-versa.
Second, the percentage of funding which ranges from 20 to 70% and finally the aid is always capped to the total equity of the recipient.
Now the type of grants:
To first of all you get subsidies really dedicated to small businesses up to 100 000€, never reimbursement.
Second, you get reimbursable advances dedicated to small and medium enterprises (SME) ranging to 100 000 to 250 000€, never reclaimable if the project fails but reclaimable if the project succeeds.
And finally, you get free interest loans ranging from 1 million to 3 million euros and we always a mandatory reimbursement.
Now, the chart of the different grants and subsidies in France starting from less innovative to more innovative.
For the very small enterprises, you get first of all, Innov’up, up to 30 000€.
Second, you get TP’up, up to 55 000 €. Then, you get PM’up, up to 250 000€. Then you get a special subsidy for foreign company, small and business foreign companies, up to 250 000€ called Starter Pack.
Then you get, always for SME, Innov’Up consisting in subsidies and reimbursable advance up to 1million euros. Protoype, Innov’up and experimentation up to 1 million euros as well.
And then for very large enterprises, you get Innov ‘Up project consisting in free interest loans up to 3 million euros.
Want to know more about grants in France don’t hesitate to reach out to us.
How to hire people in France?
To begin with you need to understand your hierarchy of regulation so principle is as follows.
First, you get the Labor Code which is a background of the regulation.
Then comes the sector-wide bargaining agreement signed between employee’s trade-unions and employer’s trade-unions.
Finally, you have the company wide bargaining agreement: please not that agreement remained is optional, most of the time.
Now, apply to employees: the Labor Code is less favourable than the sector by bundling agreement which it itself less favourable than the company-wide bargaining agreement, but as for employees resulting to the sector one parkouring agreement sales cost most of the time.
Now, apply to work contracts: references to the Labor Code is needed if no SBA applies, but most of the time reference to the SBA will be needed.
Now, how to secure the work contract: reach an agreement before starting to work is needed to secure the action between the employer and the employee: no written agreement means no securisation and in this case the sector wide-bargaining agreement and/or the Labor code will apply to the employer in its least favourable terms.
Now the type of work contracts: first, you have the unfixed term contracts which stands for 80% of your contracts in France.
Second, you get the fixed term contract which duration is never over 18 months renewal included.
Finally, you get project contracts only if allowed by the SBA but mostly use in the IT sector.
Now the trial period for the unfixed term contract: if a blue-collar worker the initial period is 2 months could be extended to 4 months. As for clerks is also two months could be extended to 4 months as well.
Then for foremen, three months could be extended to 6 months renewable included.
Finally, for executives, 4 months could be extended to 8 months renewable included.
Now the trial period how to stop it?
It’s actually possible to terminate the trial period which it’s called in France “rupture anticipée”.
Per Labor code, if the duration of employment is lower than 8 days, the notice for both employer and employee is 24 hours.
If duration of employment is between 8 days and 1 month, the notice for the employer and for the employee is lifted to 48 hours.
If the duration of the employment is comprised between 1 month and 3 months the notice for the employer is lifted to 2 weeks but remains 48 hours for the employee.
If the duration of the employment is over 3 months the notice for the employer is lifted to 1 month but remains 48 hours for the employee.
And no motive is needed to terminate the trial period.
How does payroll work in France?
First of all, paying salaries.
Pay stubs are handed out to employees for regardless of the status: blue-collar worker, clerks, executive, on the monthly basis.
Now, social taxes: from the gross salary is retained employee’s taxes. Difference stands for the net pay which due date is not later that the end of the month.
On the other side, the employer’s pays taxes also: all these taxes are collected by social bodies.
Now, the social bodies: what are these social bodies and what do they provide?
First of all, you get URSSAF, which provides healthcare, retirement benefits, unemployment benefits.
Then, you get Humanis and Klesia which provide complementary retirement benefits.
Finally, you get private insurance companies which provide supplementary healthcare and contingency fund.
Now, paying social taxes
If the company has less than 10 employees, regardless of the social bodies, URSSAF, Private insurance companies or Klesia the payment takes place quarterly using direct debit.
If the company has more than 10 employees, regardless of the social bodies, the due date is monthly and it is also a direct debit
You want to know more about payroll, don’t hesitate to reach out to us.