French special economic zone company with 0% corporate income tax

[JustAnotherNomad]

@SasuT mentioned it here:

France Tax Optimization

Hello everyone, I am French resident with the EU passport currently residing in south of France and intending to stay here due to favourable climate good healthcare and good connections to rest of the Europe. I just moved here a few months ago. A bit about my current work status: my income is...

www.offshorecorptalk.com

There is something called ZFU (zones franches urbaines) where, if you register a company before the end of this year, you will not pay any corporate income tax for 5 years, and after that, you still get high discounts:

Zones franches urbaines, quelles opportunités pour les entreprises ?

Vous êtes une entreprise implantée en zone franche urbaine, ou vous projetez de le faire ? Vous pouvez bénéficier d’avantages fiscaux pendant cinq ans ! Présentation de ce dispositif.

www.economie.gouv.fr

Wouldn't one be able to use this with a nominee director (I think you need a local employee anyway) and then live in Portugal (NHR) or Cyprus and receive dividends free of tax?
Is this the best deal in Europe at the moment or is there a catch?

 

[Marzio]

Is this the best deal in Europe at the moment or is there a catch?

This is the real road blocker.

 

[Don]

This is the real road blocker.

+ The tax relief cannot exceed €50,000 per 12 month period, nor exceed €200,000 over 3 years.

 

[Marzio]

The tax relief cannot exceed €50,000 per 12 month period, nor exceed €200,000 over 3 years.

True but this comes after 5 years of tax exemption so you have at least 5 years of tax free life.

 

[JustAnotherNomad]

This is the real road blocker.

So you have to create 2-3 companies that bill each other? Is that what they're saying?

 

[bartholomeus]

I see there seem to be requirement that 25% of services needs to be preformed in the free zone and a physical office there . Not sure if that in practice means you need to travel and work there 25% of the time of the invoiced hours?

Link 1
Link 2

@SasuT would know more details

If above is true and it is mandatory to have office / I wonder if renting studio is sufficient as there are some interesting areas that belong to ZFU, including coastal parts mainland France and islands like Martinique, Reunion,… where rental would cost around 400-500€ / month. For me thats a bit of a hassle as I already have place outside of the zone, closest one is 36km away in bad area of Nice, so its almost better to rent in old town Toulon or spend couple of months in the carribean.

SIG Politique de la Ville

Système d'Information Géographique de la Politique de la Ville édité par la Secrétariat Général du Comité Interministériel des Villes

sig.ville.gouv.fr

 

[SimpleGuy]

Hi,

Yes exactly it only lasts 5 years, moreover you have conditions, you have to set up in a rotten area, rent a real office there, hire 50% of employees from this rotten area. It's made to energize ghetto areas. However, in some French territories you may have a reduced rate, or even 0% for life.

For example, you can benefit from a tax rebate in Reunion, Mayotte, Martinique, Guadeloupe, French Polynesia, New Caledonia. You will hardly get below 5% depending on the territory.

Alternatively, I would recommend Saint-Barthélémy (also known as St. Barths), taxation is 0% for life, VAT too, and your company will be domiciled in France. However, renting a real office and employing a real employee (not mandatory) can be expensive.

There is also another option, that of Wallis and Futuna. Same, you will be domiciled in France, taxation is 0%, VAT too. Offices there cost less, employees do not have the same minimum wage as in mainland France (€700 compared to €1,200).

I'm French, I know a lot about taxation here, don't hesitate.

Best,

 

[JustAnotherNomad]

Thank. I think we discussed St. Barths here some time ago and it seemed like a company has to be 5 years olds to receive tax benefits, or something like that?

I would guess that none of those places would have access to the French tax treaty? I haven't looked at the treaties, but even if they're formally part of France, I can't imagine that you can enjoy e.g. a lower WHT rate on US dividends? And if you live in Portugal under NHR, then there has to be a tax treaty as well - I doubt that the French tax treaty would cover Wallis and Futuna? Or am I wrong? That would be crazy.

 

[SasuT]

Hi
Yes, it’s very interesting. I did this setup 5 years ago. In general, you need to have a physical office here. But in most of those ZFU, there are some co-working offices really cheap, like 150/200€ a month.

The question about dividends tax free is interesting. In fact, I’m interested to know aswell. Because I’m at the point where I have a big amount of money on my SASU, and it’s my last year of 0% in ZFU. So I want to close the company and pay myself the dividend, which is 30% tax

But I’ll be Dubai fiscal resident in 2024, so if I pay myself a dividend in 2024 after the SASU was closed, would I be exempted from tax? It seems to good to be true. What I found was this :

Mes revenus de capitaux mobiliers sont-ils passibles des prélèvements sociaux et des prélèvements obligatoires ?

www.impots.gouv.fr

Apparently, the flat tax (on dividend) goes from 30% to 12.8% if you are not French fiscal resident.

My only concern is, will they requalify me as French fiscal resident in 2024, even if I closed my company on december 31st 2023, have my new company in Dubai, 183 days in Dubai, and nothing else in France. Will see.


Edit: just to clarify
I’ll close my SASU on december 31st 2023
Dividends will be paid on June 2024~

 

[JustAnotherNomad]

1. How would the company cannot distribute dividends after it is closed?
2. Interestingly, apparently, the treaty WHT rate to the UAE is indeed 0%. I did not expect that.

I would check if you can sell the company to a UAE holding company without tax.
Alternatively, you could look at a cross-border merger, but I believe that is much more complicated. And probably expensive in the UAE - then I would rather try that with Cyprus.

How did you get around the restrictions mentioned by others (cap on tax discount and minimum 25% from ZFU clients)?

 

[SasuT]

1. How would the company cannot distribute dividends after it is closed?
2. Interestingly, apparently, the treaty WHT rate to the UAE is indeed 0%. I did not expect that.

I would check if you can sell the company to a UAE holding company without tax.
Alternatively, you could look at a cross-border merger, but I believe that is much more complicated. And probably expensive in the UAE - then I would rather try that with Cyprus.

How did you get around the restrictions mentioned by others (cap on tax discount and minimum 25% from ZFU clients)?

1. Dividend paid on 2024, after the final audit (of 2023 year).

2. Without all that, what if my company simply pays the dividend to me, as UAE resident ?

About the restrictions, I rent an office here, I work in my office here most of the time so idk if it’s doable from distance. But what I can say is, in my building almost all offices are rented but empty. A lot of people just put their company here for no taxes but never come and just work from home or another country probably.
Never heard of any problems since the 5 years that I’m here.

But I guess that if you have a control someday and they see that your company office is just for the taxes and you never work from here.. rip.

 

[JustAnotherNomad]

You'll want to check about exit tax in France.

 

[SasuT]

You'll want to check about exit tax in France.

It’s not for more than 800k€ ? I’m under that

 

[Marzio]

if they're formally part of France

Those are the overseas departments and regions of France:
French Guiana
Guadeloupe
Martinique
Mayotte
Réunion

Overseas departments and regions of France - Wikipedia

en.wikipedia.org

 

[bartholomeus]

1. Dividend paid on 2024, after the final audit (of 2023 year).

2. Without all that, what if my company simply pays the dividend to me, as UAE resident ?

About the restrictions, I rent an office here, I work in my office here most of the time so idk if it’s doable from distance. But what I can say is, in my building almost all offices are rented but empty. A lot of people just put their company here for no taxes but never come and just work from home or another country probably.
Never heard of any problems since the 5 years that I’m here.

But I guess that if you have a control someday and they see that your company office is just for the taxes and you never work from here.. rip.

Thanks for clarifying this - I have couple of follow up questions:
- someone mentioning you need to employ someone? Is it ok if its one person and than just rent office in that area?
- could you name some areas with coworking spaces? I checked here in the south east and found nothing
- can I rent studio apartment instead?

Hi,

Yes exactly it only lasts 5 years, moreover you have conditions, you have to set up in a rotten area, rent a real office there, hire 50% of employees from this rotten area. It's made to energize ghetto areas. However, in some French territories you may have a reduced rate, or even 0% for life.

For example, you can benefit from a tax rebate in Reunion, Mayotte, Martinique, Guadeloupe, French Polynesia, New Caledonia. You will hardly get below 5% depending on the territory.

Alternatively, I would recommend Saint-Barthélémy (also known as St. Barths), taxation is 0% for life, VAT too, and your company will be domiciled in France. However, renting a real office and employing a real employee (not mandatory) can be expensive.

There is also another option, that of Wallis and Futuna. Same, you will be domiciled in France, taxation is 0%, VAT too. Offices there cost less, employees do not have the same minimum wage as in mainland France (€700 compared to €1,200).

I'm French, I know a lot about taxation here, don't hesitate.

Best,

would that mean that I can still live in south east of France and have just company open on one of the islands with office - or do I need to have address / residence there?

Or could I rent or buy a place on one of the islands for purpose of address and lower taxes but than spend most of the year in south east France?

 

[DBeker]

Just looked at the list of qualifying ZFU's - SIG Politique de la Ville - and there are some decent areas that are not total ghettos. Sure they're not the best parts of town, but there are some on the list that are centrally accessible, and gentrifying. I see some sectors of Bordeaux and Toulon for example on the list. Toulon, for the moment, is still pretty inexpensive compared with other places in the South East of France. Both places have decent infrastructure and if doing something like an Import/Export business, you probably can generate 25% of your turnover by working with local logistics partners for example. You can then diversify your business to provide other services, perhaps digital businesses, consulting etc. to international clients. I think there might be something worth looking at here.

 

[SimpleGuy]

Thank. I think we discussed St. Barths here some time ago and it seemed like a company has to be 5 years olds to receive tax benefits, or something like that?

I would guess that none of those places would have access to the French tax treaty? I haven't looked at the treaties, but even if they're formally part of France, I can't imagine that you can enjoy e.g. a lower WHT rate on US dividends? And if you live in Portugal under NHR, then there has to be a tax treaty as well - I doubt that the French tax treaty would cover Wallis and Futuna? Or am I wrong? That would be crazy.

Yes, you must reside for 5 years to avoid paying taxes. During these 5 years, you pay the same rate as you would pay in France.

For the company not to pay taxes, the company must either have been open for 5 years or have a director who has been a resident of Saint-Barth for 5 years. The biggest problem in St. Barths is the cost. Although it's free to open, and open to everyone, renting an office will cost you no less than 3000€. If you want to hire an employee locally, count 5000€, nobody will accept for less because the cost of living there even exceeds Switzerland.

I went there at the beginning of the year for the holidays. We also visited another island about twenty kilometers away by boat, it's Saint-Martin. You have the Dutch part (I don't know how it works there), and the French part. In the French part it's 20% if you sell locally and 0% if you sell internationally. And 0% on the dividends you pay yourself. The cost of living there is like the "real" French overseas territories, so enormously cheaper than Saint-Barth, but with almost the same advantages.

Just looked at the list of qualifying ZFU's - SIG Politique de la Ville - and there are some decent areas that are not total ghettos. Sure they're not the best parts of town, but there are some on the list that are centrally accessible, and gentrifying. I see some sectors of Bordeaux and Toulon for example on the list. Toulon, for the moment, is still pretty inexpensive compared with other places in the South East of France. Both places have decent infrastructure and if doing something like an Import/Export business, you probably can generate 25% of your turnover by working with local logistics partners for example. You can then diversify your business to provide other services, perhaps digital businesses, consulting etc. to international clients. I think there might be something worth looking at here.

ZFUs are very small, usually the offices are either very expensive or already occupied, but give it a try anyway.

Those are the overseas departments and regions of France:
French Guiana
Guadeloupe
Martinique
Mayotte
Réunion

Overseas departments and regions of France - Wikipedia

en.wikipedia.org

All overseas are part of France. When you invoice a customer, on your billing address you must put "France" and not the name of the territory. However there is a difference between DROM (formerly DOM) and COM (formerly TOM).

DROM (overseas department and region) are governed by Paris, while COM (overseas collectivity) have more freedom, for example they can decide the tax rate themselves. Another example, in a DROM you are considered a French tax resident, but in a COM you are considered a foreign tax resident.

Thanks for clarifying this - I have couple of follow up questions:
- someone mentioning you need to employ someone? Is it ok if its one person and than just rent office in that area?
- could you name some areas with coworking spaces? I checked here in the south east and found nothing
- can I rent studio apartment instead?


would that mean that I can still live in south east of France and have just company open on one of the islands with office - or do I need to have address / residence there?

Or could I rent or buy a place on one of the islands for purpose of address and lower taxes but than spend most of the year in south east France?

Of course, you can have a business in Saint-Barth and not pay taxes with the business, while living in France. However, for the company not to pay taxes, the company must either have been open for 5 years or have a director who has been a resident of Saint-Barth for 5 years.

Source : https://www.comstbarth.fr/in/rest/a...msUpload_a687c0be-3095-4dfc-8921-f4a19be57d68

 

[bartholomeus]

ZFUs are very small, usually the offices are either very expensive or already occupied, but give it a try anyway.

i found that there is coworking in Toulon for 180€ / month and they say on web page that they offer domicile. Woule renting residential studio apartment count as office? Old town toulon seems nice option for second home

Still not sure how that 25% is calculated?anyone know how?

I can try to make an example:
- say one has remote software consulting service
- total revenue €100k / year
- hour rate = €100 / hour
- all the invoices atr for different companies outside of France, no invoice to local company

Would that mean that 25% of the man hours needed to be executed physically sitting in the office in the ZFU area? so in case above one would need to work 250 hours in the office in ZFU area (lets say 30 days)?

 

[JustAnotherNomad]

How is it to get residency in Saint-Martin (or maybe the Dutch side). Can you just move there as an EU citizen and live tax free? You would be French (or Dutch) tax resident, so have full access to tax treaty benefits? Would you be considered an EU resident?

 

[SimpleGuy]

i found that there is coworking in Toulon for 180€ / month and they say on web page that they offer domicile. Woule renting residential studio apartment count as office? Old town toulon seems nice option for second home

Still not sure how that 25% is calculated?anyone know how?

I can try to make an example:
- say one has remote software consulting service
- total revenue €100k / year
- hour rate = €100 / hour
- all the invoices atr for different companies outside of France, no invoice to local company

Would that mean that 25% of the man hours needed to be executed physically sitting in the office in the ZFU area? so in case above one would need to work 250 hours in the office in ZFU area (lets say 30 days)?

Yes, if you rent a residential apartment, you can make it your head office, but you need the owner's consent. Be careful, it is not because Toulon has a ZFU that the office is necessarily in ZFU.

Here is the list: SIG Politique de la Ville click on "Carte" to see the map of the ZFUs of each city, it is extremely delimited. A street may be included in the ZFU, and the street next to it may not be.

You must also respect the quota of 50% of employees who come from the ZFU. This condition applies to the hiring of the 2nd employee. As long as you have 0 or 1 employee, this condition does not apply.

If your activity is not sedentary (which means, if you do not work yourself in the office 100% of your time) you must meet one of the following two conditions:
- you must employ at least one full-time employee who works 100% of his time in your office.
- you must make at least 25% of your turnover from customers located in ZFUs, ie 25% of your sales must come from customers located in the ZFU, so very complicated. I wish you good luck in finding customers located in these areas.

To put it simply, you have to be in the office yourself full-time or have someone working in the office full-time. And I advise you not to cheat with that because you have a 100% chance of having an administration check (France is a shitty country where checks are regular, that's why I left ). If they do the check and nobody's in the office, they'll tax you at the regular rate. France created these ZFUs only to reduce the unemployment rate, nothing else.