KnowFrance

Meeting your regulatory responsibilities

CHOOSING YOUR LEGAL STRUCTURE

 

TRADING FROM YOUR EXISTING LEGAL ENTITY AT HOME…

Your responsibilities when selling to French consumers will differ depending upon whether you are selling from a fellow EU member state or from a country outside of the EU. Of particular relevance here are the EU E-Commerce Regulations, which provide that the ‘country of origin’ principle does not apply to inter-EU consumer contracts. In effect, these regulations mean that any EU-based e-commerce seller must abide by the consumer laws of every member state where it is the case that that state’s consumers can buy its products. Thus, if you are selling to French consumers from an EU member state, you will need to be familiar with and abide by French consumer laws. Whilst this might sound burdensome, the EU’s desire to create a level playing field across its members means that there are largely common rules operating across all member states, in fact making inter-EU trade easier and reducing the transaction costs involved. By comparison, if you are selling to French consumers from a country outside of the EU you will continue to be bound by your own domestic legislation. In this case, strict customs procedures must be complied with and customs duties will become payable. Please see our logistics page for more information.

The EU directive on the VAT System, in effect from January 2015, is set to make a notable impact on anyone selling to EU-based consumers, irrespective of where they are trading from. This legislation provides that online merchants are now required to pay VAT on digital products sold according to the location of the consumer. Therefore if you are selling to French consumers you will need to be registered for and pay VAT in France. The administrative burden resulting from these new rules is somewhat alleviated by VAT MOSS (Mini One-Stop Shop), which eliminates the need to register for VAT in every country to which you sell, enabling you to register for all in one place.

A number of options exist if you wish to establish a physical presence in France without setting up a distinct legal entity. These include both representative and branch offices wherein your existing legal entity will remain liable for any debts or obligations incurred by this French office. Alternatively, you may wish to operate via a franchising agreement, commercial agency or distribution agreement. In all cases, it is crucial to consult specific legal advice before contracting.

SETTING UP A NEW LEGAL ENTITY IN FRANCE

Should you decide to ring-fence your new venture by setting up a distinct legal entity in France, there are a number of corporate forms available to choose from. The most common choice is the establishment of a limited liability company, which can take the form of any of the following; Société Anonyme (SA), Société par Actions Simplifiée (SAS) or Société à Responsabilité (SARL). Alternatively, general or limited liability partnerships are also available. Incorporating a company under French law takes between 10-15 days, a process which will only start after submitting all the relevant documents. The regulations imposed on a business entity will depend upon the corporate form chosen and, naturally, once you set up as a legal entity in France you will be subject to French law. Seeking expert legal advice is therefore essential to ensure you’re compliant.

Whilst establishing such an entity may sound complex, both French consumers and local suppliers often show a preference for dealing with locally incorporated entities, therefore providing you with greater market access. Foreign investment control in France is also generally very relaxed and doesn’t normally require prior approval. Exceptions to this do however apply, and certain business operations are considered ‘regulated activities’ in France and so will require a licence or special permit. Examples of such regulated activities are found in the insurance, banking, gas and pharmaceutical sectors. It is therefore recommended you seek advice on any specific venture.


FRENCH TAX SUMMARY

Tax Rate Notes
Corporation Tax 33.33% The corporate profits tax rate is 33.33% for all companies. A reduced corporate tax rate of 15% applies to the first $44,176 (€38,120) made in profit for small and medium-sized companies if certain conditions are met.
Capital Gains Tax – For Companies 33% Capital gains are subject to tax at the normal corporation tax rate.
Withholding Tax – Dividends 30% – 55% The withholding tax rate is 30%, though tax treaties may reduce or eliminate this rate. A withholding tax rate of 55% applies to distribute profits into uncooperative states.
Withholding Tax – Other Interest 0%-50% No withholding tax is charged on interest paid between associated companies of EU member states providing certain conditions are met. Withholding tax is charged at 50% for interest paid into uncooperative states.
Value Added Tax 2.1% – 20% The standard rate of VAT is 20% which is charged on goods sold and services rendered. Reduced rates of VAT are charged on certain food and drink items as well as medicines and certain utilities.
Social Tax on Employee’s Salaries 35-45% Employer Social security contributions on gross earnings are charged at between 35 – 45%.
Currency Exchange Control – Cash $11,607 (€10,000) Individuals are permitted to carry a maximum of $11,607 (€10,000) in cash into and out of France without the need to declare it. There are no limits for travel to and from other European Union (EU) member states.
Currency Exchange Control – Bank Transfer N / A There are generally no restrictions on payments to foreign entities or individuals through normal banking channels.

KEY LEGISLATION

THE SNAPSHOT PROVIDED HERE IS NOT AN EXHAUSTIVE GUIDE. THE FRENCH LEGAL FRAMEWORK CAN BE COMPLEX, AND APPLICABLE LAWS AND TAXES WILL DIFFER DEPENDING ON WHICH APPROACH TO ENTERING THIS MARKET YOU DECIDE TO TAKE. FURTHER CONSIDERATION WILL ALSO NEED TO BE GIVEN TO APPLICABLE EU LEGISLATION. CONSULTING AN EXPERT IS THEREFORE ESSENTIAL TO ENSURE YOU MEET YOUR REGULATORY RESPONSIBILITIES!

Privacy and Data

French law adopts a notably strict approach to the protection of personal information, made more complex by the fact that national regulation is further supplemented by a number of sectoral laws and the EU Data Protection Directive. The national regulatory body created by the Data Protection Act is the Commission Nationale de l’Informatique et des Libertés (CNIL).

France enforces a notification regime which requires that applications be made before the automatic processing of personal information. Once approved, a number of further obligations come into play. First, the consent of the data subject must be obtained (note that pre-ticked boxes do not constitute valid consent!), and data subjects must be informed of the purpose of information collected. Data subjects have the right to object to and access their collected data, as well as have their data rectified, completed, blocked or deleted. Organisations must preserve the security of any data they collect and special rules apply to the collection of sensitive data or data from individuals under the age of 18.

With regards to the use of Cookies on websites, French law provides that data subjects must be informed of the purpose for the collection and be made aware of the means available to object. Prior consent must also be obtained through a positive action – i.e. by ticking a box or a banner on the first page of the website.

Advertising

The French Postal and Electronic Communications Code regulates the sending of unsolicited electronic communications in France. The Code distinguishes between business-to-consumer and business-to-business communications. When sending electronic communications to consumers, you must first have obtained the recipient’s explicit consent. Two exceptions to this rule exist: a) where the recipient is already an existing customer; and/or b) where the marketing message is not commercial in nature.

Intellectual Property

In France, intellectual property rights (IPR) are set out in the Intellectual Property Code (IPC), legislation which is harmonised with international agreements both at EU and international levels. French law takes a relatively broad approach to trademarks and arguably allows for the registration of certain combinations of letters and numbers that might not be registrable elsewhere.

In order to protect your IPR, it is highly recommended that you ensure it is registered in France before exporting your goods. Equally, you must check that you are not infringing the IPR of other parties as France takes a notably active approach to pursuing counterfeiting claims. France is a member of the WTO and a signatory to the Madrid Protocol, the International Trademark System, which offers a one-stop solution for registering your trademarks all in one place, for one set of fees, ultimately protecting your mark in the territories of all its members across the world. Alternatively, EU-wide protection is available by registering your trademarks with the Office for Harmonisation in the Internal Market (OHIM).

Consumer Protection

The body responsible for the protection of French consumers is the Directorate-General for Competition, Consumer Affairs and Prevention of Fraud (DGCCRF).

General provisions of French law, passed in accordance with the EU’s Consumer Rights Directive, make it obligatory for all pre-contractual information to be detailed, transparent and displayed clearly, and – specifically in relation to e-commerce websites – there must be no ambiguity for a consumer when they are taking an action which gives rise to an obligation to pay. In this regard, companies cannot charge consumers using pre-ticked boxes as the basis for the conclusion of a contract, and consumers must be told which methods of payment are accepted and whether any delivery costs or restrictions apply.

Where no agreement has been made in relation to the date of delivery, French law dictates that merchants must deliver goods within 30 days. Consumers additionally have the right to withdraw and cancel any purchase made within a period of 14 days. Where they are not informed of this right, this period is extended to 12 months. On withdrawal, the consumer must return any goods delivered within 14 days and the merchant must then provide a refund within 14 days. French law also provides a number of additional provisions in relation to product liability, one element of which is that both producers and distributors are subject to all general safety obligations.

Other areas of interest

Reaching and engaging your consumers

French consumers are efficient online shoppers who place great value on the accessibility of information and are very likely to shop around for the best deal.

Receiving Payment From Your Customers

Online shoppers in France are very confident when it comes to placing trust in online payment mechanisms.

Getting the goods to your customers

Low-cost or free delivery options have been reported to be the most influential factor for French consumers.

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