France Tax Optimization

[bartholomeus]

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 both full-time contract (80k/ year gross) and freelance work on the side (80k / year gross) I am keeping full time contract for the safety and I am planning to buy apartment here with the bank loan, and I need to decide what to do with my freelance income. Currently all goes over Payoneer but that one is registered with my address here. And I’ve just increased my income rapidly from 20k -80k / year.

My plan now is to scale my consulting / agency business further which I’m already doing by having one full-time freelancer (based in eastern europe) working for me for the past year, and potentially employing another one and finally get rid of full time contract and invoice everything over the company. I’m estimating that is fairly easy to get than to over 200k/ year gross.

So now I need to decide if I should become Self-employed in France for this year as temporary solution, or should I go ahead and open the company like SASU and than another one of the EU countries with favourable tax rate like Hungary or Bulgaria and employ another freelancer to do more work for me and hire directorship services to run the company, and with that step out of the operations and be able to transfer dividends to a French company without tax tax-free . If you want to understand what I mean with this setup - watch the video here

. I talked to a few international tax advisors about this and this seems to be the only way in France to optimise tax.

I am afraid to go in this direction after reading all the articles on this forum how French authorities are so strict going after you, so my question is if anyone has any and type of experiences with that and give me a bit of a better idea if something like this is even achievable without mayor issues or is this just a sales pitch from from tax advisors?

I could also go alternative route and open a Delaware company and invoice my clients from there for the time being. However, I am not entirely sure if there is really that type of privacy or secrecy between USA and France, who owns a company, I don’t I am afraid that might get me into trouble.
I know most of you will say move out of France - which makes a place like Dubai an interesting option but I would want to stay majority of the year here, and prefer if I can find a way where I can long term pay myself a low salary here with social security covered and grow business outside of France.

 

[Mike Forman]

Keep it simple, set up a French corporation or strufutrs and pay the tax in France. Anything else will get you in trouble especially if you are residing in France.

You must report all your income and assets in your personal tax declaration, including foreign bank accounts. Setting up related structures where you are the director and/or UBO will just get you more in trouble as this is a red light and alert them to start an investigation and you are trying to evade taxes

If you don't plan to stay over one year in France you can go that route, take the risk and leave. But if you plan to stay there longer and or come back I wouldn't go that route. Failing to report foreign income or assets will already get you in trouble and in current environment with exchange of data, data leaks and online informations I wouldn't risk it.

Living in the South of France is nice but it will become a hell if they go after you. So stay there and accept you have to pay taxes or leave. Or take the risk and know every day they can go after you and it will cost you much more than the saved taxes on fines, interest and legal fees.

 

[bartholomeus]

Thanks for your answer Mike. I really want to grow the agency and possibly going down the software product route. Wouldnt it be possible to pay taxes on the work I do in France (lets say I use 40 hour / month for running that company in Hungary)Most of the income would stay in Hungary or gets reinvested.

And what about another hypothetical route - what if i move my tax residence outside of France - lets say Dubai, or another EU country like Hungary and keep apartment here which I would rent out to tourists while I’m away. How long could I stay here in France per year without being considered tax resident here?

 

[JustAnotherNomad]

1. No, if you're the owner, then they will (most likely) say that you manage the company from France. What might work is having two companies if you really aren't involved in the foreign company and the director earns a realistic salary etc. But some risk always remains.

2. It would depend on the tax treaty. No idea about France in particular, but typically, if there is a treaty and you spend 183+ days in the other country, that country "wins" and you can spend the rest of the year in the other country, without becoming tax resident. However, they could still say that your company has permanent establishment in France. Also, there is a risk that they won't make it so easy for you, even if, in theory, the treaty should protect you. The best way forward is to really cut all ties with France and move somewhere else.

 

[bartholomeus]

1. what do you mean two companies? Yes one French that owns Hungarian which someone else manages - I could get a partner too.

2. in this option I did meant to close french company and quit french full time contract. In Dubai case - i dont want to be there 186+ days. But i do have 2 other european countries with personal ties and in none of them i stay more than 186 days. I could keep myself out of france more than 186days and stay here april, may, june and than september and october. Winter i can spent in Dubai and travel a bit in warm places and june and july i can spend in other colder EU countries. So there is possibility for nomad lifestyle with 5 month base in France.

 

[JustAnotherNomad]

1. You could have one company in France where you sell the software and another company in Hungary or so that creates the software. The French company could own the company in Hungary, or vice versa. You cannot be involved in the operations of the company in Hungary at all. The French company can resell the services of the Hungarian company. You have to work with very experienced lawyers to make sure this works.
The French company will still have to make a good profit, the Hungarian company cannot charge more than the market rate. You may be able to improve this a bit if your clients pay the Hungarian company instead and you just bill the Hungarian company for marketing services or so - but I'm not sure if it would work. Please only work with lawyers who are experienced with transfer pricing. There is always some risk that you will get audited and that it will cost you more to "defend" your structure before a court than you would save in taxes.

2. No, that probably won't work. France will be your vital center and you will remain tax resident in France. You would have to have closer ties to the other country than to France. If you spend 5 months per year in France and 2 months each in two other countries, and you travel around the remaining time, you will still have the closest ties with France.

 

[SasuT]

The best you can do 100% legally in France is 30% of tax in total.

1. Place your company in a French free-zone (ZFU)

2. You’ll have no corporate tax for 5 years, and reduced rate for the next 5 years after (so 10 years in total)

3. Pay yourself a dividend (not a salary, because it’s expensive on taxes)

4. Choose the flat-tax taxation (PFU) = 30%.

You beed to be with a status like SASU to do this

 

[JustAnotherNomad]

1. Place your company in a French free-zone (ZFU)

2. You’ll have no corporate tax for 5 years, and reduced rate for the next 5 years after (so 10 years in total)

Interesting. There's really no corporate income tax for 5 years? So could you build some substance in France and then live in Portugal and not pay tax for 5 years?
CC: @Marzio

 

[bartholomeus]

The best you can do 100% legally in France is 30% of tax in total.

1. Place your company in a French free-zone (ZFU)

2. You’ll have no corporate tax for 5 years, and reduced rate for the next 5 years after (so 10 years in total)

3. Pay yourself a dividend (not a salary, because it’s expensive on taxes)

4. Choose the flat-tax taxation (PFU) = 30%.

You beed to be with a status like SASU to do this

Thanks for this SasuT! Im reading here Exemptions on profits in the urban free zone-entrepreneurial territory (ZFU-TE)

I dont mind paying 30% on dividends as I think 17% is social security and 13% actual tax that can be deducted further with good planning.

So basically there is no other requirements than registering a company in ZFU area - and I dont have to live there?

 

[JustAnotherNomad]

@bartholomeus I created a separate thread here:

French special economic zone company with 0% corporate income tax

@SasuT mentioned it here: https://www.offshorecorptalk.com/threads/france-tax-optimization.41869/#post-265297 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...

www.offshorecorptalk.com

 

[bartholomeus]

One more thing - I see there seem to be some requirement that 25% of services needs to be preformed in the free zone - and also that I need a physical office there in one of the zones - does that means I need to travel and work there 25% of the time that I invoice the client?

Link 1
Link 2

You mentioned SASU, but it also states somewhere Microentrepeneour - would that mean that all my income is tax free and dont need to pay out dividends

@SasuT

 

[bartholomeus]

@SimpleGuy you mentioned an option here French special economic zone company with 0% corporate income tax

If you have a company providing service from Vanuatu, with Vanuatu employees, to French customers, there is absolutely no reason for this to constitute a full commercial cycle. Beyond the fact that it's legal, it even makes sense.

How would it work if a Vanuatu company provides software creation services to customers outside of France with freelancers from around the world (not Vanuatu, not France) executing the job for Vanuatu company? And can a owner of the company, French resident provide any services to Vanuatu company or that can be executed only by others?

 

[SimpleGuy]

@SimpleGuy you mentioned an option here French special economic zone company with 0% corporate income tax

How would it work if a Vanuatu company provides software creation services to customers outside of France with freelancers from around the world (not Vanuatu, not France) executing the job for Vanuatu company? And can a owner of the company, French resident provide any services to Vanuatu company or that can be executed only by others?

There is no problem with that, but in your situation I would hire someone locally to be able to justify your presence there.

 

[bartholomeus]

yes to hire locally that I understand and it make sense. I'm more interested what i can and what I shouldn't do in order not to get taxed on my worldwide income? As if preform services from France - I will be taxed here.

What is the usual rate to incorporate? does € 4500 sounds normal or is that a high quote?

 

[treasureinyou]

I'm more worried by the fact you've already been earning income in the country without planning. You're going to overpay because of that (unless I misunderstood)

If you're tax resident in France, a foreign company will still link you back to France and be deemed controlled in France.

Without knowing your personal situation (married? children?) it's hard to recommend things.

Keep in mind SASU can be IS (impots society) or IR for 5 years, (impots revenues) keep in mind dividends can ONLY be taken out after one year, and after that can only be taken out annually....

As for impots revenus keep in mind you can only wipe out 10000 euro per year (France needs your money to finance le 'vivre ensemble')

If you can, stay 'mobile' rent a nice place etc, politics in France are on a volcano and the next president might not be to your liking...

 

[bartholomeus]

@treasureinyou I think for this year Micro entrepeneour could also be option and keep it under 72k - seems like its about 20% effective tax and money is clean on my account - for this amount thats pretty good deal.

On other hand it seems also I can fairly simply open office in ZFU area and pay for office space there, still not clear if manageable for me to go there every day or ok to go 25% of the time. In any case that for this year might not be need but should be opened by the end of the year.

Do you know accountant that might be able to help with ZFU free zone information

 

[treasureinyou]

https://mon-entreprise.urssaf.fr/simulateurs/auto-entrepreneur can help you, I don't know any accountants in Fr.
I'm guessing you're either in Alpes Maritimes or Var. Seriously if you can avoid ZFU... You don't want to have people breaking the office or whatever because you didn't pay protection money or didn't employ his cousin... What looks good on paper might not be worth the hassles

For auto entrepreneur don't use your address (it's public on societe . com for example) it's worth using a business address as you'll also owe CFE (cotisation fonciere enterprise)

Auto-entrepreneur : comment choisir votre adresse de domiciliation ?

Le choix de l'adresse de domiciliation est stratégique et obligatoire pour un auto-entrepreneur (micro-entrepreneur), découvrez pourquoi !

sedomicilier.fr

72K isn't for 'services' it's more like under 40Kand revenues are pro rated on the year. There is tolerance in year 1, but beware. The state is NOT your friend.


There's nothing stopping you being an auto entrepreneur & having SASU, as long as activities are distinct. Running the same activity and even worse with same clients will create issues.

Check:

Captain Contrat - Création de société - Formalités juridiques

they have a 'comparateur de structure'

Check out also Fiscalité SASU

IMO and I legally cannot provide advice, but it is what I would have done is run in // auto entrepreneur and SASU in year one, to make enough income to then be able onwards to use SASU dividends. Even better if you can run SASU on IR (impots revenus)
and have wife/kids you'd only pay less than 17% charges sociales.

Bonne Chance!

 

[bartholomeus]

https://mon-entreprise.urssaf.fr/simulateurs/auto-entrepreneur can help you, I don't know any accountants in Fr.
I'm guessing you're either in Alpes Maritimes or Var. Seriously if you can avoid ZFU... You don't want to have people breaking the office or whatever because you didn't pay protection money or didn't employ his cousin... What looks good on paper might not be worth the hassles

For auto entrepreneur don't use your address (it's public on societe . com for example) it's worth using a business address as you'll also owe CFE (cotisation fonciere enterprise)

Auto-entrepreneur : comment choisir votre adresse de domiciliation ?

Le choix de l'adresse de domiciliation est stratégique et obligatoire pour un auto-entrepreneur (micro-entrepreneur), découvrez pourquoi !

sedomicilier.fr

72K isn't for 'services' it's more like under 40Kand revenues are pro rated on the year. There is tolerance in year 1, but beware. The state is NOT your friend.


There's nothing stopping you being an auto entrepreneur & having SASU, as long as activities are distinct. Running the same activity and even worse with same clients will create issues.

Check:

Captain Contrat - Création de société - Formalités juridiques

they have a 'comparateur de structure'

Check out also Fiscalité SASU

IMO and I legally cannot provide advice, but it is what I would have done is run in // auto entrepreneur and SASU in year one, to make enough income to then be able onwards to use SASU dividends. Even better if you can run SASU on IR (impots revenus)
and have wife/kids you'd only pay less than 17% charges sociales.

Bonne Chance!

72k is for services afaik - non services is more. You can check this calculator and you will see effective tax + socials is not more than 21%.

I have kids but they dont live with me

What is the deal with SASU on IR? no need to pay corporate tax? is all the money taxed as IR? or i decide how much and keep rest in the company?

I have CDI with another company - how can that affect having a company on the side? does it get merged or is it a separated taxation?

 

[treasureinyou]

SASU on IR is for 5 years max and you need to elect doing so when you start.

You can have company + CDI (might want to check if your employment contract allows this)

If SASU is taxed IR all income goes to you, no separate taxation, if taxed IS corporate tax etc.

unless you absolutely must stay in France look at Cyprus, Portugal etc.

 

[dziter]

unless you absolutely must stay in France look at Cyprus, Portugal etc.

Any possibility to not be considered tax resident in France with following criterias?
- You have a company in Cyprus
- You live 6+ months in Cyprus
- But you take a CDI (french unlimited employee contract)
- For work, you have to stay in France 3.5 months per year

Or is it possible to keep the taxation for the company (and other investments like stocks etc to take advantage of nice dividends incentive) in Cyprus & for the employment in France.