We describe in detail what constitutes a branch in France and explain its economic and commercial use. All responses to your questions on the the creation of a branch in France are in this article!
Establishing your branch in France with alf is particularly interesting for non-EU entrepreneurs who sell their products in France via online marketplaces like eBay, Amazon and Alibaba. These sellers are subject to VAT in the countries where the goods are sold and the existence of a branch will allow you to be in conformity with the applicable tax rules.
A branch is a relatively stable establishment, created by the parent company. In international commerce, the parent company will usually be a foreign-owned company. The branch enjoys a certain degree of autonomy with regard to the parent company, without being a separate legal entity. In effect, the branch has no corporate existence in itself. The branch may be seen as an economic extension of the parent company; as a secondary establishment, the branch must adopt the same activities as the parent company.
There are, of course, several indicators to distinguish the parent company from a branch apart from the geographical differences:
The question of a distinct legal personality is what primarily separates the branch from subsidiary (the subsidiary being a separate legal entity). With the subsidiary, it is a matter of economic control, as more than 50% of the capital is held by the parent company.
According to the strategic presence of the decision-making centre of the foreign company and the nature of your company’s activity abroad, the registration of a branch in France can be a good means of breaching the French economy and, by extension, the rest of the European market! It is therefore a way of stimulating and developing your business by creating a stable presence in another country, without the complexities of a more formal, permanent move. With your branch in France, your distribution network will be significantly improved: it will now be possible to reach clients far away from your headquarters, with little to no effort!
The branch manager usually enjoys a certain level of independence, despite being an employee of the parent company: in most cases, the manager is an expatriate and is subject to the employment law provisions of the parent company’s country. According to its needs, the agency can hire employees, who will be subject to French law (i.e. the country where the branch is located).
The formalities relating to the establishment of a branch a less complicated and long than for the incorporation of a standard company. However, the requirements are more burdensome when compared to the declaration of the representative office.
The timely establishment of a branch requires vigilance and a good understanding of the functioning of the competent administrative bodies.
It is for this reason that alf proposes a complete service, free from hidden fees, to discover on our website: our legal experts complete the necessary formalities, accompanying you along the way and responding to all your question, including those which may arise following the registration of the branch. By placing your trust in alf, you join a community of several hundred entrepreneurs and directors of French and foreign startups that we’ve assisted since our creation.
Our clients respond to an intelligent questionnaire, which only requests the information necessary to generate the relevant legal documents. Your file is carefully verified by our team of legal experts in order to avoid any refusals. alf then files the application with the competent Tribunal and makes the relevant publications. Our experts take the time to discuss your project with you, recommending, should they see fit, our partners specialised in legal or tax guidance. Further, you are notified of the evolution of your application at each step.
The Greffe’s decision to incorporate the branch will be given within 15 days following the application. This delay is greater than for the initial incorporation of a company: however, please note that alf will do its best to shorten any wait.
We advise the legal representative of the parent company or the person responsible for the opening of the French branch, duly appointed by the parent company, to discuss this with their counsel.
For information purposes, the manager of the branch must demonstrate his/her right to carry out a commercial activity in France, and the right to stay in France. He must therefore:
The profits of the branch are taxed in France: the branch is an establishment for tax reasons, unless it is wholly dependent on its parent company. The branch is therefore subject to fiscal rules of the country where is it resident. We therefore advise that you discuss this in detail with your tax counsel should you have any further questions.
The branch resident in France is subject to the Contribution Economique Territoriale (CET), composed of the cotisation foncière des entreprises (CFE) and the cotisation sur la valeur ajoutée des entreprises (CVAE). It will be subject to VAT imposition, including services provided by the parent company if it is autonomous and assumes the economic risks of the business.
Please note that a branch is not a resident in the country where it is physically located; this explains the reason why potentially discriminatory fiscal regulations will apply to them.
In order to avoid double-taxation in the state where the parent company is located, France has signed several bilateral treaties.
Let’s take for example the taxation treaty signed with China in 2013:
The branch is considered to be a “stable establishment”; as such, the profits from a Chinese company which performs carries out certain activities in France via a branch will be taxed in France. The profits linked to the branch are those which the branch could have made if it were a distinct entity from the parent company exercising the same activities under the same conditions. The branch’s profits are deducted from the expenses incurred in the operation of this secondary establishment. This will include managerial expenses and general administrative expenses in France or aboard. However, no deductions will be attributed to the branch if it has simply bought merchandise for the company.
Double taxation is eliminated when the Chinese company removes its revenue from France via the branch: the amount of taxes paid in France is deductible from the Chinese tax.
France has similar agreements with other world powers: Brazil (1971), Mexico (1991), India (1992), USA (1994), Israel (1995), Hong Kong (2010), Singapore (2015) etc.
For more information on the services offered by alf for VAT registration and the creation of your branch in France, please consult our website. Our experts are ready to help you and respond to your questions and refer you, if necessary, to our legal, financial and fiscal partners.