FranceSETTING UP IN...

FACTS & FIGURES

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Services provided by members firms include:

3 Advice on requirements for doing business 3 Entity registration3 Human resources and payroll3 Accounting, bank accounts, monthly reporting3 Year-end compliance and reporting3 Taxation3 US GAAP and IFRS3 Mergers and acquisitions

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NIS Global is an international group of independent accounting and advisory firms set up to provide mutual clients with support as they establish and maintain operations outside their home country.

03corporate income taxes

GENERAL TAX RATES FOR 2016

STANDARD RATE 33.33%

REDUCED RATE 15%* *Applies to small and medium sized companies (SMEs). SMEs are defined as having a turnover < €7,630,000, being at least 75% owned by individuals or companies qualifying as small and medium size companies and having fully paid up share capital. The first €38,120 of profit is taxed at 15% and the balance of profit at 33.33%.

FRENCH ACCOUNTING ENTRY FILE (AEF) From January 1st, 2014, French companies have to issue each year an Accounting Entry File.

Accounting entries concerned:

1. The file must include all book-entries in all of the ledgers (detail of accounting entries), and not the aggregate entries in the general ledger. The file must comply with French GAAP.

2. Book-entries must be sorted by chronological order.

3. The file includes carry-forward entries and contains for each entry all accounting data included in the electronic accounting system.

Non-compliance with this rule may imply a e5,000 penalty or, in case of tax adjustment, 10% of that tax adjustment if the amount is > e5,000.

SOCIAL CONTRIBUTION FOR MEDIUM-SIZE COMPANIES A 3.3% social contribution (CSB) is levied on CIT of companies whose turnover exceeds e7.63 million and whose corporate income tax exceeds e763,000.

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TAX LOSS CARRY FORWARD Tax losses can be carried forward indefinitely but may only be offset against the taxable income for a given period to the extent of e1 million plus 50% of the taxable income for that period.

LOCAL ECONOMIC CONTRIBUTION TAX (CET) CET is composed of two elements: 1. Corporate property contribution (CFE), based on the value of real estate and 2. Contribution on value added of companies (CVAE). CET is capped at 3% of a company’s value added. Some exemptions are available.

TAX INCENTIVES R&D. Credits of 30% are given on qualifying expenditure up to e100 million and 5% on any excess. The credit can be carried forward for 3 years and if not fully used within those 3 years then the company can receive a tax refund.

Innovation Tax Credit. SMEs (companies < 250 employees and sales < e50 million) qualify for an innovation tax credit, calculated at 20% of qualified expenses and capped at e400,000.

Patent Box. Income derived from patents or patentable rights may benefit from a reduced 15% tax rate. Capital gains realized on patents or patentable rights held for at least 2 years may also be eligible to this reduced rate.

Payroll-related incentives. A payroll tax credit (CICE) based on the wages of employees earning < 2.5 times the minimum wage, i.e. earning < e43,998 per year, is calculated at 6%.

Regional tax incentives. Tax exemptions and rebates are available to businesses establishing or expanding in specific locations.

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COMPANY CAR TAX (TVS) Company car tax is due quarterly for any car owned or rent for more than 30 days in the quarter. The tax is payable annually (the considered period is October 1st, N to September 30th, N+1) and ranges from e770 to e5,100 depending on the vehicle. The tax is not deductible for corporate tax computations.

TAX FILING AND PAYMENT DEADLINES Companies subject to French Corporate Income tax (CIT) must file an annual CIT return. The return includes balance sheet information as well as a P&L statement. The return must be filed within three months after the end of the financial year. Four installments are payable during the financial year, except the first year for newly created or newly subject to CIT companies. The final CIT payment must be made by the 15th of the fourth month following the end of the fiscal year.

Failure to comply triggers a 5% to 10% penalty (depending on the tax). Late payment interest of 0.40% per month may also apply.

06value added tax (VAT)

VAT IS A TAX ON supplies of GOODS OR SERVICES (in France only, specific rates for Corsica and the Overseas departments and territories of France)

Standard rate on most goods and services 20%

Intermediate rate (includes restaurants, passenger transport and other items) 10%

Reduced rate (applies to supplies relating to basic necessities) 5.5%

Lowest rate (applies to shows ticketing, social security reimbursable medicines) 2.1%

Businesses must register and charge VAT on sales. However, exports of goods outside the EU are completely exempt from VAT.

VAT is normally a neutral tax for businesses and is ultimately borne by end user consumers. Businesses merely collect VAT on their sales and deduct the VAT which they have paid on purchases. If companies have paid more VAT than they have collected, the difference is refunded on request.

VAT returns are usually filed and paid monthly or quarterly between the 15th and 23rd of the following month.

EU Sales Lists are required detailing cross border supplies of goods between registered EU businesses within the EU. Further monthly analysis of Sales (Dispatches) and Purchases (Acquisitions) is required under the Intrastat System. The Annual threshold for Acquisitions is e460K but there is no threshold for Dispatches.

07personal income tax

local and council tax

INCOME TAX IS A PERSONAL TAX PAID BY RESIDENTS ON BUSINESS PROFITS, PAYROLL INCOME AND OTHER INCOME

Income tax is based on family income, and ranges from 0 to 45%.

An exceptional contribution tax applies at a rate of 3% on income between e250K and e500K and at 4% on income above e500K (the above bands refer to a single taxpayer, doubled bands apply to married couples).

There is currently no income tax withholding on payroll income. Income tax returns are filed within five months after the calendar year end.

Income tax is paid either monthly or by installments (February, 15 and May, 17). Each installment equals to 1/3 of the previous year’s tax. The balance has to be paid on September, 15. Monthly installments equal to 1/10 of previous year’s tax. Balance is paid in the last months of the calendar year.

An annual wealth tax applies to individuals with a net worth over e1.3 million. Taxable wealth from e800,000 is taxed from 0.50% to 1.5%.

The maximum overall annual tax liability for income, wealth and local taxes cannot exceed 75% of that year’s income.

Owners must pay a local tax based on the assessed rental value of their dwellings as at 1st of January each year. Occupants must also pay a dwellings tax based on a deemed rental value. Amounts due can differ significantly between localities.

07 08payroll tax

EMPLOYERS DEDUCT SOCIAL SECURITY FROM SALARY AND MAKE PAYMENTS TO THE SOCIAL SECURITY OFFICES

Social security charges are levied on both employer and employee. Employers are responsible for deducting the employee contribution from gross salaries.

* Includes Social Security (including maternity benefit, unemployment, main and complementary pension). ** Individual types of deduction may be assessed on different bases and may or may not be capped. Health insurance (including occupational injury fee) is at variable rates (fees are between about 50 to 300 euros per month per employee) and is not included in the above grid.

Other minor employer contributions may apply including those for transport, accommodation and training and depending on the number of employees (> 11 employees, > 20 employees)...

Social security contribution is payable to the authorities by the 5th of the following month if > 10 employees. If < 10 employees, contribution is paid quarterly by the 15th of the following month. From January 1, 2016, all payroll taxes are reported on a monthly basis, whatever the number of employees and the payment terms.

RATES FOR 2016

Non executive Executive

Employee Employer Employee Employer

Charges* with salary < e38,616 22.30% 41.37% 22.45% 43.12%

Charges* with salary > e38,616 20.50% 40.32% 20.35% 41.17%

08 09accounts filing

COMPANIES There are three main forms of company: Public Limited Company (SA), Simplified Public Limited Company (SAS) and Private Limited Company (SARL). The SARL is the most common form of international subsidiary.

Annual financial statements include a balance sheet, income statement and annual notes, and must be prepared within three months following the year end. The General Shareholders’ Meeting for approval of the accounts must take place within six months following the year end of the company. Accounts are filed within 30 calendar days from the date of their approval.

Filing deadline: PREPARATION, ADOPTION, AUDIT, DISCLOSURE (assuming December 31st year end):

Corporate Income tax return: April 30th (within 3 months for non-calendar financial years)

General Meeting: June 30th + 6 months

Filing with the Trade Register: July 30th + 7 months

AUDITSome company structures (SA and SAS belonging to a group) always require statutory auditors.

SARLs are usually exempt from audit if two of the following three criteria are met:

Turnover €3.1 million

Balance Sheet €1.55 million

Employees 50

10subsidiaryFRENCH SET UP OPTIONS

SUBSIDIARY COMPANY

Status • Separate French legal entity • A French branch is normally a permanent establishment in France and has its own decision making powers

Ownership • Overseas parent can own directly • No independent legal status. A branch is part of the parent company or indirectly through holding company

Control • Controlled by its board of directors • Part of the overseas company

Scope of activities • Defined in the company’s articles • A branch may carry out all the operations mandated by its overseas parent company

Corporate Liability • Limited to value of paid-up share capital • A branch does not have limited liability protection. Therefore the parent company is fully liable

Entity • Establish a registered office Incorporation • Check the company name for availability and validity • Obtain long stay visas and residence permits for non EEA directors • Open a bank account and deposit the required share capital • Issue shares • Appoint legal representative and, if necessary, auditors • Complete application form M0 and prepare associated documentation • File a request for company registration with the Centre de Formalités

des Entreprises (CFE) • Publish a notification of incorporation in a legal gazette • Purchase special accounting books from the Commercial Court

or authorized shops • Register with an employee retirement plan or Registration

On-going • Maintain accounts and recordsobligations • Filings and registrations relating to changes to constitution, directors,

shareholders etc. • Accounts approval by shareholder meeting within six months after year end

• Filing of financial statements and tax returns and payment of corporate and other taxes

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BRANCH OFFICE

Status • Separate French legal entity • A French branch is normally a permanent establishment in France and has its own decision making powers

Ownership • Overseas parent can own directly • No independent legal status. A branch is part of the parent company or indirectly through holding company

Control • Controlled by its board of directors • Part of the overseas company

Scope of activities • Defined in the company’s articles • A branch may carry out all the operations mandated by its overseas parent company

Corporate Liability • Limited to value of paid-up share capital • A branch does not have limited liability protection. Therefore the parent company is fully liable

Entity • Establish a registered office Incorporation • Check the company name for availability and validity • Obtain long stay visas and residence permits for non EEA directors • Open a bank account and deposit the required share capital • Issue shares • Appoint legal representative and, if necessary, auditors • Complete application form M0 and prepare associated documentation • File a request for company registration with the Centre de Formalités

des Entreprises (CFE) • Publish a notification of incorporation in a legal gazette • Purchase special accounting books from the Commercial Court

or authorized shops • Register with an employee retirement plan or Registration

On-going • Maintain accounts and recordsobligations • Filings and registrations relating to changes to constitution, directors,

shareholders etc. • Accounts approval by shareholder meeting within six months after year end

• Filing of financial statements and tax returns and payment of corporate and other taxes

• Establish a registered office • Appoint a representative with power of attorney to represent & manage the Branch• Prepare/collect the documentation required for Branch registration• File a request for foreign company (branch) registration with the CFE. Including application

M0 form (or E0 form when no permanent establishment in France but with French employees) • File a declaration with the tax authorities if the investment is over EUR 1.5 million and provide

a statement certifying that no criminal convictions are held & an affiliation certificate if the parent is from a non-EU country

• Purchase special accounting books from the Commercial Court or authorized shops. • Register with an employee retirement plan

• Maintain branch accounts and records • File its foreign parent company’s annual accounts & a French translation with the Companies

Register each year

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LIAISON OFFICE STANDALONE REP Status • A liaison office is not a separate

legal entity and has no permanent establishment in France

Ownership • Part of the overseas company

Control • Controlled by overseas Head Office

Corporate • Employers are liable for the paymentLiability of social charges

Scope • Liaison offices can only conduct of activities non-commercial preparatory or

auxiliary operations such as market research, advertising and storing merchandise. They cannot carry out commercial activities

• A branch may carry out all the operations mandated by its overseas parent company

Entity • Company registration is automatic Incorporation with the social registration • Social Security registration required • Form M0 needed + original employment

contract signed (preferably in French). • Maintain accounts and records • Filings and registrations relating to

changes to constitution, directors, shareholders etc.

• Accounts approval by shareholder meeting within six months after year end

• Filing of financial statements and tax returns and payment of corporate and other taxes

On-going • Payment of payroll related contributionsobligations and other relevant taxes

• No legal status and no permanent establishment in France

• Part of the overseas company

• Is controlled by overseas Head Office

• Employees are personally liable for the payment of social charges

• Standalone can only conduct non-commercial preparatory or auxiliary operations such as market research, advertising and storing merchandise. They cannot carry out commercial activities non-commercial preparatory or auxiliary operations such as market research, advertising and storing merchandise. They cannot carry out commercial activities

• A branch may carry out all the operations mandated by its overseas parent company

Company registration is automatic with the social registration • Social Security registration required • Form M0 needed + original employment

contract signed (preferably in French). • Filings and registrations relating to changes

to constitution, directors, shareholders etc. • Accounts approval by shareholder meeting

within six months after year end • Filing of financial statements and tax returns

and payment of corporate and other taxes

• Payment of payroll related contributions and other relevant taxes

12 13french employment lawLEGAL CONSIDERATIONS

Work and residence permits

Employment contract

Labour regulations

Minimum wage

Legal working hours

Legal minimum vacation

Employee representation

Nationals of all EU/EEA States and Switzerland can work without restriction in France. For all other nationalities a full work and residence permit must be acquired.

There are 3 contract types: CDI (unlimited term), CDD (fixed term) & Part Time CDI. A written job contract is strongly recommended, preferably in French.

Based on employment contracts, legislation and collective agreements

e9.67 per hour

Standard 35 hours per week. The working day cannot exceed 10 hours but may be extended to 12 hours under a collective agreement. Managerial staff classified as “autonomous” can work more than 35 hours a week, but are given extra holidays

Two-and-a half working days’ leave for each month worked, i.e. five weeks of paid leave per year worked

Companies with at least 11 employees must have elected employee representatives. Companies with 50 or more employees must also have an elected works council.

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New employees

Terminationcontract

The hiring of any employee must be declared to the local Social Security Authorities within the 8 days preceding the start of the employment. Probationary periods are permitted, the length of which depends on the seniority of the role. (3 months max., renewable once).

Cases of termination: dismissal (only if real and serious case), mutual agreement, resignation. If dismissal, compensation due = 1/5th of the monthly salary is due per year of seniority. Collective bargaining agreement might state better allowance. In any case, a notice period has to be respected, depending on the CBA.

STOCK OPTIONS TAXATION Upon the grant of an ESO, a tax of 7.5% of the real price of the shares is charged to the company.Upon exercise, in case of a price cut >5%, the price cut is considered as a salary, and subject to social charges and income taxes.Options vested on year Y have to be declared to Social Security and to the employee before March 1st Y+1, to allow him/her to include the “salary” in his/her individual income tax return.Payroll obligations: at grant, no obligation. At exercise, payroll charges apply on the price cut if > 5%.Subsequent sale of shares is managed directly by the employee through his/her personal income tax return. The taxable gain is equal to sell price minus acquisition price.If SOP is not qualifi ed, gains on exercise are considered as salary, and subject to social charges and income tax.

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3 Currency: Euro (EUR - e)

3 $ to e exchange rate as early January 2016: $1 buys e0.9193

3 Time zone: Central European Time Zone

3 Time differential: San Francisco -9 hours, Austin Texas -7 hours, New York -6 hours, UK -1 hour, India + 4.5 hours, China +6 hours

3 International dialing code: +33

3 Population: 66 million

KEY COUNTRY DATA

NIS Global Head office Highlands HouseBasingstoke RoadSpencers Wood - ReadingBerkshire, RG7 1 NT United Kingdom +44 (0)118 976 8980

US OFFICE 303 Twin Dolphin Drive6th FloorRedwood CityCalifornia, 94065USA +1 650-632-4577

DISCLAIMER: This booklet is intended for general guidance only. It cannot cover every situation and should not be used for decision making without professional advice. The authors accept no responsi-bility for loss arising from any action taken or not taken by anyone using this publication.

www.nisglobal.com

Spicofi, France Member of NIS Global 47 boulevard Georges Clemenceau 92415 Courbevoie Cedex France

For further information, please contact Francoise Spiri: +33 1 41 16 35 30 - e: frs@spicofi.comor Joelle Leloup: +33 1 41 16 35 68 - e: jol@spicofi.com

www.spicofi.com

For further information, please contact Pete Doyle at our UK Head Office e: p.doyle@nisglobal.com

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