Territorial business taxation is not a foreign-company exemption
France generally taxes profits from businesses operated in France and amounts allocated to France by a treaty. This territorial business-profit principle differs from the worldwide personal tax base. A French company’s genuinely foreign operation and a foreign company’s French operation therefore need separate analysis.
A fixed business location or a dependent agent able to engage the company may create a French permanent establishment under the applicable treaty. Where management and commercial work actually occur matters; foreign incorporation is not a complete answer. The tax authority offers a specific permanent-establishment ruling procedure based on a full and accurate factual submission.
The real seat and the scope of French taxation
BOFiP generally starts with the statutory seat. If that seat is fictitious, it looks instead to where the company’s direction, administration and control are actually concentrated. Its guidance connects that real seat with effective management under many French treaties; the applicable treaty still needs to be read.
France’s information for automatic exchange of financial-account data explains domestic corporate taxation through territorial business activity. A French business or permanent establishment can create tax obligations without making every foreign profit taxable. Keep the seat, treaty residence, taxable business presence and scope of income as separate questions.
Corporate rates and the small-company test
The ordinary corporate rate is 25%. An eligible business may use 15% on the first €42,500 of profit for a twelve-month period, subject to turnover and capital-ownership conditions. The €10 million turnover test and fully paid capital/qualifying 75% ownership requirements need verification; 2026 official guidance also highlights group turnover analysis.
For €100,000 taxable profit, the ordinary charge is €25,000. A fully eligible company with a full twelve-month €42,500 lower-rate band would pay €20,750. This illustration excludes credits, losses and additional large-company charges. A 3.3% social contribution can apply on corporation tax after the relevant allowance; exceptional large-enterprise measures also require a separate current-year review.
CFC rules and real foreign operations
Article 209 B can tax income of a privileged-tax foreign enterprise or a foreign entity controlled by a French corporate taxpayer. The ordinary ownership threshold is more than 50%, with anti-fragmentation rules in specified cases. Do not substitute the individual Article 123 bis test.
The privileged-tax comparison uses the hypothetical French charge, not just an overseas nominal rate. Genuine activities, the EU anti-artificial-arrangement safeguard and other statutory exceptions need factual support. Review people, premises, authority, related-party pricing and what produces the income. An independent foreign management contract is one piece of evidence, not a statutory exemption.
Dividends, interest and royalties require different withholding analysis
For a nonresident individual, the ordinary domestic dividend income-tax withholding is 12.8%, subject to treaty and special-jurisdiction rules; the resident investment-income social levy should not simply be added. Corporate recipients require a different recipient-specific assessment.
Covered nonresident royalties and services fall within Article 182 B, with the ordinary corporate-rate reference and possible treaty or qualifying EU relief. Interest is instrument- and recipient-dependent. Obtain the legal classification, beneficial-owner evidence and relief procedure before payment; this guide does not label all outbound interest exempt or assign one dividend rate to every recipient.
VAT: location and transaction category come first
Metropolitan France ordinarily uses 20% VAT, with specified 10%, 5.5% and 2.1% treatments. A reduced rate belongs to a defined supply, not to a company merely because it operates in a favoured sector. Place of supply, imports, intra-EU transactions and reverse charge can change who accounts for the tax.
Territorial differences are material. Guadeloupe, Martinique and Réunion generally use 8.5% and 2.1% rates; VAT is currently not applicable in French Guiana and Mayotte under the rules described by DGFiP. Corsica and specialised supplies require their own checks. Keep taxable zero-rating, exemption and a transaction outside scope distinct because input-tax recovery can differ.
| Territory / category | Rate | Planning issue |
|---|---|---|
| Metropolitan standard rate | 20% | Check taxable place and supply |
| Specified metropolitan reduced rates | 10% / 5.5% / 2.1% | Category-specific, not elective |
| Guadeloupe, Martinique, Réunion | 8.5% / 2.1% | Local rules and exceptions |
| French Guiana, Mayotte | VAT currently not applicable | Other taxes and import charges may still matter |
Employer cost: the 2026 reduction reform matters
The former separate reduced health and family rates were removed in the 2026 reform, which reworked the general degressive employer reduction. An older table showing those reduced rates as the ordinary current rule can misstate payroll cost. The applicable reduction depends on remuneration and the current statutory formula.
Selected employer components below are starting rates before applicable reductions. Add the correct complementary pension, unemployment, accident-at-work, supplementary health, transport, training and other charges. Headcount, location, industry, remuneration structure and the employee’s insurance position matter. Budget paid leave and employment obligations separately from statutory contribution percentages.
| Employer component | 2026 starting rate | Base / qualification |
|---|---|---|
| Basic pension, capped | 8.55% | Up to applicable €4,005 monthly ceiling |
| Basic pension, uncapped | 2.11% | Ordinary full contribution base |
| Health contribution | 13% | Before any applicable 2026 general reduction |
| Family contribution | 5.25% | Before any applicable 2026 general reduction |
| Accident at work | Establishment-specific | No universal percentage |
Moving a business can crystallise tax
Article 221 addresses company, establishment and asset transfers. A transfer outside qualifying EU/EEA cooperation conditions can trigger cessation treatment. Certain qualifying transfers within the relevant area permit payment spreading over five years, with acceleration events and annual reporting.
Moving the owner, moving corporate management, transferring intellectual property and selling shares are different transactions. Map the functions, assets, risks, contracts and historic tax bases before implementation. A new bank account or foreign registration cannot undo a taxable transfer that has already happened.
A practical operating file
Keep an entity chart, ownership register, contracts, board authority, invoices, payroll and VAT treatment consistent with how the business actually operates. For cross-border services, document who performs the work and where, rather than relying only on an intercompany invoice.
An implementation scope should specify responsibility for bookkeeping, annual returns, tax payments, VAT, payroll and responses to notices. The owner’s personal departure file and the company’s ongoing French obligations should be tracked independently. A structure can be administratively active even after its shareholder ceases to be French resident.
Sources & research notes17 references
Sources supporting this guide. Research draft awaiting editorial review.
- BOFiP: territorial corporate taxation
- DGFiP: permanent establishment and advance ruling
- BOFiP: statutory seat, real seat and effective management (paragraph 1)
- France: tax residence information submitted for automatic exchange of information
- DGFiP: corporate rates and VAT
- DGFiP: group turnover and the reduced corporate rate, April 2026
- CGI Article 209 B: controlled low-tax foreign enterprises
- CGI Article 238 A: privileged tax regime definition
- DGFiP: nonresident individual dividends
- CGI Article 182 B: nonresident services and royalties withholding
- DGFiP: overseas VAT rates, May 2026
- CLEISS: French employer and employee social contributions
- Service Public: 2026 employer contribution reduction reform
- Service Public: general degressive employer reduction
- Service Public: social-security ceiling, 2026
- CGI Article 221: company and asset departure
- DGFiP: departure-year tax procedures