Start a company in France instead of Ireland/Hong Kong?

[thomasparra]

Nope because of French exit tax (among other things).

Exit tax: Unrealized capital gains from the transfer of individual assets, a main office, or an establishment from France to an EU/EEA country that has concluded a mutual assistance agreement for the recovery of tax with France are spread over five years. Any tax due on the unrealized gains must be paid within two months following the transfer, either in full or in five equal annual installments.

I mean I would still pay any corporate or individual taxes before exiting the country (social contributions/corp tax on the business side & individual tax on dividend/income on the individual side) so not sure what the issue would be?

 

[RealDude]

Nope because of French exit tax (among other things).

Exit tax: Unrealized capital gains from the transfer of individual assets, a main office, or an establishment from France to an EU/EEA country that has concluded a mutual assistance agreement for the recovery of tax with France are spread over five years. Any tax due on the unrealized gains must be paid within two months following the transfer, either in full or in five equal annual installments.

Is there only one legal form for entrepreneurs in France?

 

[thomasparra]

If you intend to make only 5 figures there's no point creating a LTD company in HK or Ireland, especially if you don't want to live there. In France, you can have the "microentrepreneur" or "autoentrepreneur" regime with lower social contribution and income tax rates.

The exit tax only applies to company assets over 800k € held in a french limited company, so not relevant here.

Thank you. This is a high margin business but revenue wise I definitely don't expect more than 300k/year even within the first 2 years of launching the company).

However, I am not sure that I will stay in France in the long term but I can always transfer the company overseas at a later stage right? I am trying to start the business as soon as possible.

I know about the entrepreneur status but I do not think my clients would be too keen on this as there are some elements of compliance in my business and I think I would need a proper corporate structure/entity to contract clients (a competitor does 2M in revenue and is under a SAS entity)

 

[algotrader]

Thank you. This is a high margin business but revenue wise I definitely don't expect more than 300k/year even within the first 2 years of launching the company).

However, I am not sure that I will stay in France in the long term but I can always transfer the company overseas at a later stage right? I am trying to start the business as soon as possible.

I know about the entrepreneur status but I do not think my clients would be too keen on this as there are some elements of compliance in my business and I think I would need a proper corporate structure/entity to contract clients (a competitor does 2M in revenue and is under a SAS entity)

It depends on the legal form of your company, whether the profit has been paid out to you via dividends or is still in your company, wether you keep the company with its assets in France, how long you have lived in France during the last 10 years and whether the country you move to is within EU/EEA. The text below is from french tax office:

Transfert du domicile hors de France : imposition des plus-values latentes Le transfert de votre domicile hors de France entraîne l'imposition des plus-values latentes afférentes à certains droits sociaux ainsi que l'imposition immédiate de vos plus-values en report d'imposition, si vous étiez domicilié en France pendant au moins 6 des 10 années précédant votre départ. Les plus-values latentes sont imposables lorsque, à la date du transfert, les membres du foyer fiscal détiennent une participation directe ou indirecte d'au moins 50% dans les bénéfices d'une société ou lorsque la valeur globale des participations directes ou indirectes est supérieure à 800 000 €. Vous pouvez cependant bénéficier d'un sursis de paiement qui sera accordé automatiquement si vous transférez votre domicile dans un Etat membre de l'Union européenne ou dans un Etat membre de l'espace économique européen ayant conclu avec la France une convention d'assistance administrative en vue de lutter contre la fraude et l'évasion fiscales ainsi qu’une convention d’assistance mutuelle en matière de recouvrement ayant une portée similaire à celle prévue par la directive 2010/24/UE du Conseil, du 16 mars 2010, concernant l’assistance mutuelle en matière de recouvrement des créances relatives aux taxes, impôts, droits et autres mesures, pour un État autre qu’un État membre de l’UE. Sur demande expresse, vous pouvez aussi en bénéficier si vous transférez votre domicile dans un autre Etat à condition de désigner un représentant en France et de fournir des garanties de recouvrement. Le sursis expire notamment à la cession des titres.

 

[Marzio]

The exit tax only applies to company assets over 800k € held in a french limited company, so not relevant here.

Les plus-values latentes sont imposables lorsque, à la date du transfert, les membres du foyer fiscal détiennent une participation directe ou indirecte d'au moins 50%

It doesn't apply only to company assets over 800K but it's enough to have a 50% participation in the company.

Hey if you are keen to pay taxes in French after 5 years you exit the country because you want to rely on FR social security then go ahead.

If you already know that you will be generating X00K a year and you will not stay in FR in the long term i don't really see any reason to start there.

I'd only start in French if commuting to Switzerland and pay taxes in France. The italian guy got in trobule because he wasn't paying italian taxes on his swiss salary but this would not be a problem for you. Then you could move your company without problems since you don't have any assets in France.

Is there only one legal form for entrepreneurs in France?

There are serveal like everywhere, SA, SARL, SAS, SNC, SCS, SCA and others but however way you see it is better to avoid tax hell.

 

[thomasparra]

It depends on the legal form of your company, whether the profit has been paid out to you via dividends or is still in your company, wether you keep the company with its assets in France, how long you have lived in France during the last 10 years and whether the country you move to is within EU/EEA. The text below is from french tax office:

Transfert du domicile hors de France : imposition des plus-values latentes Le transfert de votre domicile hors de France entraîne l'imposition des plus-values latentes afférentes à certains droits sociaux ainsi que l'imposition immédiate de vos plus-values en report d'imposition, si vous étiez domicilié en France pendant au moins 6 des 10 années précédant votre départ. Les plus-values latentes sont imposables lorsque, à la date du transfert, les membres du foyer fiscal détiennent une participation directe ou indirecte d'au moins 50% dans les bénéfices d'une société ou lorsque la valeur globale des participations directes ou indirectes est supérieure à 800 000 €. Vous pouvez cependant bénéficier d'un sursis de paiement qui sera accordé automatiquement si vous transférez votre domicile dans un Etat membre de l'Union européenne ou dans un Etat membre de l'espace économique européen ayant conclu avec la France une convention d'assistance administrative en vue de lutter contre la fraude et l'évasion fiscales ainsi qu’une convention d’assistance mutuelle en matière de recouvrement ayant une portée similaire à celle prévue par la directive 2010/24/UE du Conseil, du 16 mars 2010, concernant l’assistance mutuelle en matière de recouvrement des créances relatives aux taxes, impôts, droits et autres mesures, pour un État autre qu’un État membre de l’UE. Sur demande expresse, vous pouvez aussi en bénéficier si vous transférez votre domicile dans un autre Etat à condition de désigner un représentant en France et de fournir des garanties de recouvrement. Le sursis expire notamment à la cession des titres.

It doesn't apply only to company assets over 800K but it's enough to have a 50% participation in the company.

Hey if you are keen to pay taxes in French after 5 years you exit the country because you want to rely on FR social security then go ahead.

If you already know that you will be generating X00K a year and you will not stay in FR in the long term i don't really see any reason to start there.

I'd only start in French if commuting to Switzerland and pay taxes in France. The italian guy got in trobule because he wasn't paying italian taxes on his swiss salary but this would not be a problem for you. Then you could move your company without problems since you don't have any assets in France.



There are serveal like everywhere, SA, SARL, SAS, SNC, SCS, SCA and others but however way you see it is better to avoid tax hell.

Based on this text, I would need to be in France for at least 6 years for the exit tax to apply. I have only been in France for a few months hence I can leave France anytime during the next couple of years if I see greater opportunity to live overseas.

I might also live in the UK in 2023/2024 to move with my partner hence I was wondering if it would be hard to move the company from France to UK?

 

[DBeker]

I set up an SAS (i.e. French LLC) in France about 6 months ago. I am resident in France and while I hold dual nationality, in order to simplify my life I chose to set up here. Things like France being a tax-hell, while not a myth, are exaggerated in my opinion. My SAS has dual purpose: a Holding vehicle and a Consulting/Professional Services firm.

Positives of setting up in France:

1. If you need to raise or borrow money, there are good sources available in France. There is also a really good VC culture here.
2. Good network of business support that result in lower operating costs (I was looking at setting up in the NL or Luxembourg but operating costs would have been higher there, completely negating any perceived tax savings). For example low cost legal advise, accounting etc. compared with the offers I was seeing in the neighborhing countries.
3. If you don't have any employees, your payroll taxes and such are inexistant. If you do have employees, while you pay initially, you get a lot of tax rebates and write-offs, so it balances out
4. If your business is innovative, you can get a lot of state help
5. I am also doing some import/export activities with this SAS company and having a French company makes things easier when dealing with French suppliers (and there are a lot of suppliers here that often supply various goods at cheaper prices than procuring from elsewhere in the EU). This is especially true when dealing with Excise goods
6. If I ever want to set up a US LLC or something, I can let the French SAS be the owner of it and so being a French resident, it makes things easier. Also France operates a territorial tax system, so there could be some additional benefits in generating foreign income this day - but to be honest I have not fully explored this bit yet.

Some Cons:
1. Not all that efficient - especially if you are registering DIY and not making the best use of professional services. Despite the cost savings, I would say it's a hassle. Took me almost 2 months to get my VAT number activated
2. The notion of the CFE Tax (Cotisation Fonciere des Entreprises) - I am using a centre de domiciliation in Paris and while i don't need to pay anything for the first two years, it will be a 76 EUR a year tax that you pay no matter whether you make any money or not. If you are set up outside of Paris, whether it be the Paris suburbs or another region of France this CFE tax can easily be upwards of 5-600 EUR a year that you have to pay no matter what.
3. Logistics network for the trading of excise goods is not that great. For this, I have found the NL to have the best set of partners as well as logistics culture.

I'd say don't worry too much on the taxes. If you are French, you will likely know how to navigate the landscape with a clever accountant (that aren't that expensive btw) and you will never pay the headline tax rates. You will likely pay a lot less and at the end when you weigh in all the operating costs of setting up in a compliant manner elsewhere, you will find that you will have lower operating costs by doing it all in France.

 

[thomasparra]

I set up an SAS (i.e. French LLC) in France about 6 months ago. I am resident in France and while I hold dual nationality, in order to simplify my life I chose to set up here. Things like France being a tax-hell, while not a myth, are exaggerated in my opinion. My SAS has dual purpose: a Holding vehicle and a Consulting/Professional Services firm.

Positives of setting up in France:

1. If you need to raise or borrow money, there are good sources available in France. There is also a really good VC culture here.
2. Good network of business support that result in lower operating costs (I was looking at setting up in the NL or Luxembourg but operating costs would have been higher there, completely negating any perceived tax savings). For example low cost legal advise, accounting etc. compared with the offers I was seeing in the neighborhing countries.
3. If you don't have any employees, your payroll taxes and such are inexistant. If you do have employees, while you pay initially, you get a lot of tax rebates and write-offs, so it balances out
4. If your business is innovative, you can get a lot of state help
5. I am also doing some import/export activities with this SAS company and having a French company makes things easier when dealing with French suppliers (and there are a lot of suppliers here that often supply various goods at cheaper prices than procuring from elsewhere in the EU). This is especially true when dealing with Excise goods
6. If I ever want to set up a US LLC or something, I can let the French SAS be the owner of it and so being a French resident, it makes things easier. Also France operates a territorial tax system, so there could be some additional benefits in generating foreign income this day - but to be honest I have not fully explored this bit yet.

Some Cons:
1. Not all that efficient - especially if you are registering DIY and not making the best use of professional services. Despite the cost savings, I would say it's a hassle. Took me almost 2 months to get my VAT number activated
2. The notion of the CFE Tax (Cotisation Fonciere des Entreprises) - I am using a centre de domiciliation in Paris and while i don't need to pay anything for the first two years, it will be a 76 EUR a year tax that you pay no matter whether you make any money or not. If you are set up outside of Paris, whether it be the Paris suburbs or another region of France this CFE tax can easily be upwards of 5-600 EUR a year that you have to pay no matter what.
3. Logistics network for the trading of excise goods is not that great. For this, I have found the NL to have the best set of partners as well as logistics culture.

I'd say don't worry too much on the taxes. If you are French, you will likely know how to navigate the landscape with a clever accountant (that aren't that expensive btw) and you will never pay the headline tax rates. You will likely pay a lot less and at the end when you weigh in all the operating costs of setting up in a compliant manner elsewhere, you will find that you will have lower operating costs by doing it all in France.

Thanks a lot for the inputs here, this is very helpful.

Did you start this company with a partner? Are there any differences with its sister sole shareholder company structure (SASU)?

Is it ok to run this company from another country (in Asia or UK for example)? Are there any downsides?

 

[DBeker]

Thanks a lot for the inputs here, this is very helpful.

Did you start this company with a partner? Are there any differences with its sister sole shareholder company structure (SASU)?

Is it ok to run this company from another country (in Asia or UK for example)? Are there any downsides?

So there is no fundamental difference between a SAS and a SASU. It is just a single shareholder vs multiple shareholder type thing. However if you have a business and you need to raise capital or some other finance, some investors/lenders are more comfortable in investing in a company with more than one founder/shareholder.

As for operating a French company from abroad, once it's fully up and running (i.e. can really take about 2 - 3 months from the time you register it to really have all the support pieces in place such as banking, your tax accounts, vat etc) it is entirely possible.

But the question is would you want to?

I live in France and don't plan to move out, hence for me it makes things easier to operate with a French SAS. But if I were living abroad with unclear intentions of returning to France to settle down, then I'm not so sure I'd have done it here. However say you have a business that is capital intensive, does a lot of value-added tech or pharma work or something, then France might make sense as you have a a fantastic ecosystem to work with and grow your business, not easily available elsewhere. You can live abroad and have a good reason to want to operate in France. But if your business is simpler and not so labour/capital intensive, perhaps there are other jurisdictions worth looking at.

 

[thomasparra]

So there is no fundamental difference between a SAS and a SASU. It is just a single shareholder vs multiple shareholder type thing. However if you have a business and you need to raise capital or some other finance, some investors/lenders are more comfortable in investing in a company with more than one founder/shareholder.

As for operating a French company from abroad, once it's fully up and running (i.e. can really take about 2 - 3 months from the time you register it to really have all the support pieces in place such as banking, your tax accounts, vat etc) it is entirely possible.

But the question is would you want to?

I live in France and don't plan to move out, hence for me it makes things easier to operate with a French SAS. But if I were living abroad with unclear intentions of returning to France to settle down, then I'm not so sure I'd have done it here. However say you have a business that is capital intensive, does a lot of value-added tech or pharma work or something, then France might make sense as you have a a fantastic ecosystem to work with and grow your business, not easily available elsewhere. You can live abroad and have a good reason to want to operate in France. But if your business is simpler and not so labour/capital intensive, perhaps there are other jurisdictions worth looking at.

Thanks a lot again for the help. I have never set up a company before hence I thought that starting out of France would make the most sense as I just want to get the ball rolling and start focusing on the actual operations and client management.

The services provided are entirely manageable from anywhere in the world. As an example my previous company I was employed at (a competitor in the space) ran with just one headquarter office in Asia and some very small offices in various countries to have a basis to hire people there locally but that was it.

To be honest, I have never worked in France (I was living overseas from 2014 to 2022) and I do not even know how long I will stay in the country (probably at least a year, but I might join my partner in Bali or UK for a couple of months this year and I do not know where life will take me afterwards...).

I thought that opening a company in France would be the easiest, like you said a lot of the services are rather cheap (accounting, corporate attorneys etc). If I ever feel like I need to move the business to another country in 1 or 2 years, are there any inherent issues with that or is it manageable?

 

[EliasIT]

It will be much harder to relocate exiting France (another tax hell) instead of setting up directly in HK. If you are already out of EU's radar, keep it that way. Forever if possible.

exactly what I would have said. You better incorporate in HK and stay out of France unless you have family tights there.

 

[Marzio]

I thought that opening a company in France would be the easiest

Surely it is but there's a reason if all people in this thread are telling you to start your business elsewhere since the services you provide could be rendered anywhere in the world and you'll be out of France in a year or two anyway.

 

[algotrader]

Based on this text, I would need to be in France for at least 6 years for the exit tax to apply. I have only been in France for a few months hence I can leave France anytime during the next couple of years if I see greater opportunity to live overseas.

I might also live in the UK in 2023/2024 to move with my partner hence I was wondering if it would be hard to move the company from France to UK?

While it would be difficult to move the company out of France (you first need to liquidate it which triggers capital gains or dividend taxation even without exit tax applicable in your new residence country) you could maybe keep it in France without operations and use it as a holding with subsidiary abroad or give a loan to your new company abroad. But this should be discussed with a specialized lawyer first to avoid pitfalls.

 

[Marzio]

use it as a holding with subsidiary abroad or give a loan to your new company abroad

What's the point of giving a loan if the loan has to be repaid to the FR holding?

He then will need to think where to establish a subsidiary that has 0% WHT on interests paid to FR

Also, if i'm not mistaken, French SAS isn't tax transparent so if he wants to take out money from SAS he would pay dividends tax even if he is not FR resident.

 

[algotrader]

What's the point of giving a loan if the loan has to be repaid to the FR holding?

Moving the capital abroad tax-free and use it for his relocated business without liquidating it first and triggering CGT.
WHT on dividends depends on on DTT between new country of residence and France. Can be as low as 0%.

France - Corporate - Withholding taxes

Detailed description of corporate withholding taxes in France

taxsummaries.pwc.com

 

[Marzio]

Fair enough, it surely requires some planning but it can be done.

 

[thomasparra]

Surely it is but there's a reason if all people in this thread are telling you to start your business elsewhere since the services you provide could be rendered anywhere in the world and you'll be out of France in a year or two anyway.

While it would be difficult to move the company out of France (you first need to liquidate it which triggers capital gains or dividend taxation even without exit tax applicable in your new residence country) you could maybe keep it in France without operations and use it as a holding with subsidiary abroad or give a loan to your new company abroad. But this should be discussed with a specialized lawyer first to avoid pitfalls.

I do not know where I will be based out from even looking at 1 year ahead from now. I know that in France as I have zero income I can claim some small including free healthcare as well as unemployment grants every month as long as my business is not generating money.

If I create a structure in Ireland, or Hong Kong I would still need to pay French tax on salary or income as long as I am a resident in France right? So aren't the benefits of creating a company overseas (supposedly low tax) are outweighed by the cons of added complexity and setting up costs versus creating it in France especially as again I do not believe I can generate more than 50k in my first year, 100k in my second year etc?

 

[Marzio]

If I create a structure in Ireland, or Hong Kong I would still need to pay French tax on salary or income as long as I am a resident in France right?

It's more difficult than that because if you operate the offshore company from France, the company will be considered tax resident in France.

So aren't the benefits of creating a company overseas (supposedly low tax) are outweighed by the cons of added complexity and setting up costs versus creating it in France especially as again I do not believe I can generate more than 50k in my first year, 100k in my second year etc?

It's all about short term vs long term.

In short term it will be easier to start with a FR company

In the long term, especially if you expect your income to grow, France will take a hefty chunk of money not mentioning the added bureaucracy, compliance and so on.

If then you'll want to move the company it will be difficult because of everything wrote before.

 

[treasureinyou]

I'd suggest getting employed very briefly, then being put on 'chomage'

After that setup as micro entrepreneur. Corporate taxes aren't the issue in France, social taxes are the killer.

If you do micro entrepreneur after being unemployed you get like a year without social taxes.
In // look into setting up an SAS, which should enable you to pay yourself in dividends only, they are variations on setup.

If you want to keep your personal address out of it they are address providers.

With a little research you can limit your taxation for a few years, after that maybe you'll try and escape the 'vivre ensemble'

 

[Mike Forman]

Just register a business in France, make expenses to reduce your tax base and pay tax.

It is not worth the risk to set up anything thing in Hong Kong if you live in France. In the future when you relocate out of EU you can always create a new business in Hong Kong and inform all your clients you move out and will bill with the new corporation.

France is even more strict than neighboring countries on anything from China (product import) and Hong Kong (tax evasion). Even if you would do any legal setup, which is unlikely since you don't have substance in Hong Kong it will only raise red flags and cost you a lot to tax consultants, lawyers and compliance.

Even using Hong Kong and paying taxes in France still raises red flags, as why would you do that if there is no substance in Hong Kong.

Focus on the business