French special economic zone company with 0% corporate income tax

[bartholomeus]

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.

What do you mean 100% of the time in my office? 100% of the hours I billed to the customer for my side work (lets say I bill 20 hours / week). I have already full time work for another company - this in only my side work.

I found now the office with possible address that at least sells it like that in ZFU 30km away from my home.I can go there and work every now and than lets say 20 hours / week, and I guess if the check comes reception can notify me and I can come there in 30min, no? How can they say I have to be there every day between 9-16h if for example I work only 3 days a week in the evenings?

 

[SimpleGuy]

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?

Yes you can go live there without any problem as an EU citizen. Saint-Martin is part of the European Union, you pay there in €. If you have a company in Saint-Martin that derives its income from international markets and you pay yourself dividends, yes you will be at 0% tax.

No Saint-Martin has its own treaties. At present they only have a treaty with France.

What do you mean 100% of the time in my office? 100% of the hours I billed to the customer for my side work (lets say I bill 20 hours / week). I have already full time work for another company - this in only my side work.

I found now the office with possible address that at least sells it like that in ZFU 30km away from my home.I can go there and work every now and than lets say 20 hours / week, and I guess if the check comes reception can notify me and I can come there in 30min, no? How can they say I have to be there every day between 9-16h if for example I work only 3 days a week in the evenings?

You must work 100% of legal time (35 hours) in the office located in the ZFU. If you do not work there, the activity is considered non-sedentary, and in this case you must hire a person who works 100% of his legal time (35 hours) in the ZFU office.

Source : Zones franches urbaines, quelles opportunités pour les entreprises ? (see below)

If you are not working full-time at your office, it is not a sedentary activity. The French administration is strict, they won't call you on the phone to come. They will come once, if you are not there they come back tomorrow, if you are still not there they will consider it a virtual office.

Welcome to the least business-friendly country in the world.

 

[JustAnotherNomad]

Yes you can go live there without any problem as an EU citizen. Saint-Martin is part of the European Union, you pay there in €. If you have a company in Saint-Martin that derives its income from international markets and you pay yourself dividends, yes you will be at 0% tax.

Could be a good alternative to the UAE then?

No Saint-Martin has its own treaties. At present they only have a treaty with France.

That's not so great. Do you know what is required to get a tax residency certificate? Only renting an apartment all year?
What about Dutch overseas regions? Would you get access to NL tax treaties in such a case?

 

[bartholomeus]

Yes you can go live there without any problem as an EU citizen. Saint-Martin is part of the European Union, you pay there in €. If you have a company in Saint-Martin that derives its income from international markets and you pay yourself dividends, yes you will be at 0% tax.

No Saint-Martin has its own treaties. At present they only have a treaty with France.


You must work 100% of legal time (35 hours) in the office located in the ZFU. If you do not work there, the activity is considered non-sedentary, and in this case you must hire a person who works 100% of his legal time (35 hours) in the ZFU office.

Source : Zones franches urbaines, quelles opportunités pour les entreprises ? (see below)

View attachment 5027

If you are not working full-time at your office, it is not a sedentary activity. The French administration is strict, they won't call you on the phone to come. They will come once, if you are not there they come back tomorrow, if you are still not there they will consider it a virtual office.

Welcome to the least business-friendly country in the world.

so If i hire a person they must live in that area or just come 35 hours / week there to work?

Am I even legally able to work in France after my full time CDI? I found on some posts there are some hour limitations ?

 

[SimpleGuy]

Could be a good alternative to the UAE then?



That's not so great. Do you know what is required to get a tax residency certificate? Only renting an apartment all year?
What about Dutch overseas regions? Would you get access to NL tax treaties in such a case?

Yes and no. I advise you to forget the European Union, and especially France, even its overseas territories. I'd rather go to the Bahamas instead of you.

A company opened in Saint-Martin is tax resident in Saint-Martin if it has a registered office there. You can find virtual offices I think.

so If i hire a person they must live in that area or just come 35 hours / week there to work?

Am I even legally able to work in France after my full time CDI? I found on some posts there are some hour limitations ?

He has to work 35 hours in the office yes. For the first employee he does not need to live in the ZFU, but for the second yes.

Yes no problem, it is not even necessary to have a CDI to work if you are a business manager. I just wanted to point out that if you want to set up a virtual office without a real presence, it's better to forget.

Why do you absolutely want to be in the European Union if you do consulting?

 

[bartholomeus]

Why do you absolutely want to be in the European Union if you do consulting?

at the moment I am resident here in France and have CDI with a local company here. Since I moved from a more expensive country I started to work as freelancer as I could offer lower hour rate and business is growing fast. My wish is to quit full time when I have enough work to sustain myself at the level that I can do now with CDI + side gigs. I think for me I need to be in EU at least part time (once a mont for family obligations) and if I move outside I need to make sure that I'm not to far to fly in every month and I have same amount of healthcare, insurance etc covered etc

 

[SimpleGuy]

Ok I am French too.

If you are looking for a country where you can open a business, you have plenty of them that are better without France pissing you off (Bahamas, BVI, Vanuatu, Anguilla, Cayman Islands...). For example Vanuatu, you open a company there, you hire a part-time employee, it will cost you 100€/month and you will be able to justify your presence by the fact that you have an employee on site. With this setup you can even remain a physical tax resident in France.

Whereas if you put your company in Saint-Martin without being able to justify the presence of your company there, France will requalify you for that and will apply the normal French rate to you.

If you are French, avoid Saint-Martin or Saint-Barth.

 

[bartholomeus]

Ok I am French too.

I am not French citizen only resident - see my orignial post here France Tax Optimization

Why would I open company in Vanuatu if I get taxed in France same as its french company?

 

[JustAnotherNomad]

For example Vanuatu, you open a company there, you hire a part-time employee, it will cost you 100€/month and you will be able to justify your presence by the fact that you have an employee on site. With this setup you can even remain a physical tax resident in France.

There's no way that would pass a substance check.
I'll create a separate thread about Carribean islands, so we can focus on this ZFU regime here.

 

[SimpleGuy]

There's no way that would pass a substance check.
I'll create a separate thread about Carribean islands, so we can focus on this ZFU regime here.

Of course yes. If you employ someone locally, what other substance do you need to justify?

 

[JustAnotherNomad]

Certainly more than a €100 salary per month.
For example, I believe the Netherlands explicitly require a 100k or so investment in such low-tax territories to accept the substance.

 

[SimpleGuy]

Certainly more than a €100 salary per month.
For example, I believe the Netherlands explicitly require a 100k or so investment in such low-tax territories to accept the substance.

It's wrong. You have the right to open a company anywhere in the world if you have a reason to be there. If the minimum wage is €200 per month there and you only need to rent an office and hire an employee to run your business, there are no other substances that need to be fulfilled.

You are not going to pay your employee 5000€ per month or buy an office just to satisfy the substances.

And, I don't know about the Dutch but as we speak as French, here is what applies for us: https://www.impots.gouv.fr/international-professionnel/questions/une-entreprise-etrangere -can-it-be-subjected-tax-on-the

I quote :

"Subject to the application of an international convention, it is necessary to consider as taxable in France foreign companies:

- who, without having an establishment in France, nevertheless use the assistance of representatives who do not have a professional personality distinct from their own; these intermediaries are considered to be genuine employees carrying out an activity in our country on behalf of the foreign company;
- or who, without having an establishment or a qualified representative in France, carry out operations forming a complete commercial cycle there.

By complete commercial cycle, they mean for example a company domiciled abroad, whose manager is in France, which obtains supplies from French suppliers and which sells to French customers, while cashing in abroad."

In the case of consulting, marketing, or other services, if the service is provided for example from Vanuatu by Vanuatu employees, to a French client, this does not represent a complete commercial cycle and therefore @bartholomeus would be perfectly in legality.

Sorry wrong link and can't edit : Une entreprise étrangère peut-elle être soumise à l'impôt sur les sociétés en France ?

 

[bartholomeus]

@SimpleGuy can you write me privately or on that other tread for this as this is relevant to me but I guess not so much for this tread

 

[SimpleGuy]

@SimpleGuy can you write me privately or on that other tread for this as this is relevant to me but I guess not so much for this tread

Unfortunately I can't, I need 60 posts to be able to contact people by message. But carry on here if you don't mind.

 

[JustAnotherNomad]

f the minimum wage is €200 per month there and you only need to rent an office and hire an employee to run your business, there are no other substances that need to be fulfilled.

They will look at things like non-tax reasons for operating your business.
If you pay a single employee a €200 minimum-wage salary and claim that this person is running your multi-million dollar business, while you as the only shareholder are residing in France or some other high-tax country, there's no way, they will believe that you're not secretly running everything from your home. They'll say it's a nominee and you have no other reasons for being there except tax, so it violates the GAAR or some other stuff, and then it's game over for you. CFC rules could also ruin the fun, but that would be a different matter.

 

[SimpleGuy]

They will look at things like non-tax reasons for operating your business.
If you pay a single employee a €200 minimum-wage salary and claim that this person is running your multi-million dollar business, while you as the only shareholder are residing in France or some other high-tax country, there's no way, they will believe that you're not secretly running everything from your home. They'll say it's a nominee and you have no other reasons for being there except tax, so it violates the GAAR or some other stuff, and then it's game over for you. CFC rules could also ruin the fun, but that would be a different matter.

Maybe for you as a Dutchman.

But for us as French, if we live in France, this is not the case.

The French courts to qualify if our foreign company has "substance" as you say, they refer to the "full commercial cycle". And a lot of court rulings have been made on what does or does not constitute a “full commercial cycle”. And since the French courts are obliged to apply the same decisions that have already been rendered, this setup is perfectly correct and legal.

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.

You can read here: BOFiP BOI-IS-CHAMP-60-10-30 - 29/06/2022 article III where some examples are cited on which types of company have been requalified.

 

[dziter]

In France, ZFU are not the only areas giving you access to tax advantages.
For more information, you can translate from official source:

Création d'entreprise dans certaines zones : panorama des dispositifs existants

Les entreprises qui s'implantent dans certaines zones du territoire français peuvent bénéficier d'allègements fiscaux. Quels sont ces territoires ? Et quelles sont les exonérations fiscales prévues ? Retrouvez l'essentiel des dispositifs existants.

www.economie.gouv.fr

From my understanding, AFR and ZRR look quite interesting because you do not have this notion of sedentary/non-sedentary activity, 25% turnover from the area OR employing someone from this area.
The territory coverage is broader too.
I am not an expert at all. Just my quick understanding.

@SimpleGuy : I think the government clarified some stuff since many people are now working remotely. Because you can still find on some french accounting websites, for services activity (prestations de services), that they consider the place of where the service happened (ZFU) inside the 25% turnover rule. It's totally wrong and as you pointed out, it's clear that the clients should be in ZFU for this specific part too.
Are you familiar with AFR and ZRR incentives?

If you are not working full-time at your office, it is not a sedentary activity.

Source: BOFiP BOI-BIC-CHAMP-80-10-50 - 22/04/2020
This is from the BPO related to BER area.
Translation:
"Note: Business consultancy and service provision activities should be considered as sedentary activities, provided that the work involved in the study of the case or the actual object of the service is carried out at the service provider's head office, provided that the head office is located in the zone."

The BPO related to ZFU does not give the definition of sedentary activity, they only speak about non sedentary activity.

If we assume that the definition is the same, then my understanding: Someone working for example in IT is considered as a SEDENTARY activity. And so we do not care about extra rules pointed out previously by your screenshot. (the exemption is just capped up to 50k€ turnover + extra easy requirements to have).

But it is not clear if the activity needs to be performed full-time in the ZFU to get full tax exemption on the turnover.

The Sénat replied here :

Nouvelle fiscalité applicable aux zones franches urbaines

www.senat.fr

'Ainsi, le prorata en fonction des éléments d'imposition à la CFE a été remplacé par un prorata en fonction du montant hors taxes du chiffre d'affaires ou des recettes réalisé en zone.'
Translation: "As a result, the prorata based on CFE taxable items has been replaced by a prorata based on the amount of pre-tax sales or revenue generated in the zone."

So I guess that someone working in IT (in my exemple) does not pay corporate tax on services rendered from ZFU (pro-rata). When he works outside the ZFU, it does not count.
I do think the activity is always considered sedentary here?

@SimpleGuy : I will be happy to know what do you think about it. So much potential confusion. French rules are really tricky indeed.

 

[bartholomeus]

Yes thats how I understood that as well. Its just tricky to than prove that 25% of services were exectuted in the area

 

[dziter]

Yes thats how I understood that as well. Its just tricky to than prove that 25% of services were exectuted in the area

It seems that you do not have to prove that in case of a "sedentary activity".
As I pointed out, ZRR and AFR look nice too. We do not only have ZFU

Another thing I am wondering, is it possible to be eligible to one of these tax incentives and considered non-tax french resident (spending most of the time outside France) ?

EDIT/
ZRR and AFR are less interesting with these rules in my opinion (so it clears my previous doubts):

"When a company carries out part of its activity outside the ZRR, it can benefit from the exemption if its turnover does not exceed 25% outside. The fraction beyond 25% is subject to IS or IR."
Source: Exonérations d'impôts dans les ZRR | Bpifrance Création

"The head office as well as all of the company's activity and operating resources must be located in an area eligible for this system."
Source: Exonérations d'impôts dans les zones AFR | Bpifrance Création

But for someone who wants to live in France/Corsica/French Overseas Territories, all these incentives seem great.

The big question is: How to take out most of the profits in a tax-efficient way? (Even after X years)
Otherwise, if the situation allows it, I can think about investing let's say in real estate with the company.

 

[bartholomeus]

It seems that you do not have to prove that in case of a "sedentary activity".

Who in France can give me clear answer? Can I hire an accountant? or what kind of advisors are there? I need to open the company asap so want to proceed with whatever is the best option