Are you considering entering the French market and wondering about the taxes you might be liable for? Corporate tax (IS) is the most common tax, levied as a percentage of a company’s annual profits. But does this apply to foreign companies, especially those without an establishment in France?
Taxation on Profits Earned in France
In principle, a foreign company is subject to corporate tax (IS) in France if it carries out regular commercial activities in the country. It will then be taxed on the profits earned across the entire French territory.
The determining factor is the place where the business operates. In theory, profits made outside of France are not taxable under corporate tax, unless an international double taxation agreement grants France the right to tax certain profits.
What is the Corporate Tax Rate?
Unless specific provisions apply, the corporate tax rate is 15% or 25% depending on the turnover and profit brackets:
- For profits between €0 and €42,500:
- 15% if the company’s turnover is €10 million or less.
- 25% if the turnover exceeds €10 million.
- For profits above €42,500: 25%
The Status of a Company Without an Establishment in France (ESEF)
The Company Without an Establishment in France (ESEF) status is designed for foreign companies wishing to employ staff in France without having a permanent establishment. This status offers several advantages:
- Simplified management: No need to create a subsidiary or branch, significantly reducing accounting and administrative obligations. The company only needs to declare its employees in France and pay social security contributions to URSSAF, as well as certain taxes (income tax withholding for employees, corporate tax).
- Ease of operation: This status allows companies to test the French market without committing too quickly or taking excessive risks. A company without an establishment in France can hire staff, assess demand for its products or services, and generate revenue in France without setting up a permanent establishment.
- Reduced costs: Without a permanent establishment, foreign companies avoid certain expenses (notary fees, registration formalities, some taxes).
The ESEF status is an attractive solution for foreign companies looking to operate in France (mainly for marketing, market research, or back-office functions without decision-making power) without becoming tax residents. It enables a commercial presence in France while benefiting from reduced administrative burdens. However, it is crucial to fully understand the obligations related to this status and seek expert advice to avoid mistakes and ensure compliance.
Do not hesitate to contact us for personalized support to fully benefit from the ESEF status!
