France: Types of Company
This page was last updated on 6 Nov 2018.
Although French corporation tax rates have been falling, with the highest bracket currently at 33.33%, France has never been considered an attractive international financial centre. However, to attract the headquarters of foreign multinational groups, favourable tax treatment has been accorded to entities known as ‘co-ordination centres’, usually known in France as headquarters and logistics centres. A co-ordination centre is typically involved in the stocking, labelling, packaging, distribution, control & co-ordination of administrative and logistical activities for and on behalf of a group of enterprises under common ownership but with a multinational geographic dispersal. Prior administrative consent is required before an entity can be granted co-ordination centre status.
French co-ordination centres pay corporate income tax on a fixed sum amounting to 6-10% of ‘operating expenses’. The actual percentage depends on the operational structure of the co-ordination centre and the proposed activities and where either of these factors change after the granting of co-ordination centre status so too can the percentage factor.
It is often possible for the management of a co-ordination centre to make arrangements for expatriate management to receive tax benefits in France; but there is no scheme as such, and individual negotiation is required.
However, as in other EU member states with co-ordination centre regimes, the European Commission has been on the attack under state aid rules, and said in May 2003 that French co-ordination centres infringe the rules. The coordination centre regime was later amended to fall into line with European rules, although generally the scheme remains attractive.
Other measures included the deductibility of pension and healthcare contributions paid in their country of origin from taxable income.
“We know that although the image of France is good as far as its infrastructure, quality of life and workforce is concerned, it has a poor reputation for taxes and employment legislation,” a spokesman representing the Finance Ministry commented.
The measures were effective from January 2004 and were expected to benefit around 3,000 executives. The measures also apply to French managers who have been paying taxes abroad for at least ten years.
In 2010, increase in the public debt and the urgent need for pension reform has led the French government to announce budget cuts resulting in an average saving of €10bn over two years. Most of the savings are to be achieved through cuts in tax breaks for individuals as well as businesses.