W.G.Z. Avocats : Articles juridiques

II. ESTABLISHING IN FRANCE

C. Conditions Required for Establishing Presence

The foreign investor exporting goods or services to France must comply with certain conditions related to the entry of capital, services and persons.

a. The Export of Capital to France
Following the abolition of exchange controls in 1989, there were very few obstacles to the transfer of funds to and from France.

Investments, whether by EU entities or by non-EU entities, that conform to one (among others) of the following cases were exempted from declaration and preliminary authorization of the French Treasury :

- the creation of subsidiaries in France or a newly-formed legal entity;
- the extension of the activity of an existing company;
- the increase of the interest held in a French company under foreign control where the investor already holds two-thirds of the capital or of the voting rights.

Every direct investment operation realized in France must only be declared to the Ministre de l’Economie et des Finances wherever this investment may come from.
However the following investments remain submitted to the obligation of prior declaration :

Investments, whether related to the exercise of the French public authority or infringing upon the public order, the health, the security and those engaged in activities connected to the production or the commerce of guns and war material or investments that are contrary to the enforcement of French laws and regulations, are subject to a preliminary authorization.

On the contrary, neither authorization nor prior declaration are required in a large variety of cases such as creation of companies, subsidiaries and new undertakings, direct investment operations realized, exceeding an amount of 10 million francs in artisan, hotel or retail enterprises in diverse commercial services or having for exclusive purpose the exploitation of quarries, direct investments in estate enterprises (excepted building enterprises), acquisition of farms, subscription to share capital increase, etc.

Subject to any applicable taxation, transfers of dividends and repatriation of capital are free.

b. The Export of Goods to France

(i) Customs Regulations

Goods circulate freely within the EU and duty is charged on imports only once. The principle is that customs duties are paid just once on arrival in the EU, even when they are shipped on from one Member State to another.
Moreover, products transferred to France from another EU country are not subject to any import declaration (D.I) or import license. The same applies to those imported from a non-EU country provided the necessary EU entry formalities have been met in another EU country.

Furthermore, procedures and documents have been standardized. The S.A.D (déclaration administrative unique), an identical document for all EU countries can be used for import, transit and export. For import into France, from a non-European country, it is simply a matter of taking the goods to customs, handing over the S.A.D and paying the duties. The operation may take 3 days, but then exist special clearance procedures which can speed up the process. The S.A.D must be filed by the importer at the EU place of entry. The certificate of origin, the invoices, and the stamped D.I form or import license, when applicable, are admitted, along with the S.A.D form to the Customs Office at the place of entry.

Therefore, apart for certain products which are considered "sensitive" because of their nature or their source (Asian countries or Eastern Europe) and require an import license, there is no restriction on imports in France.

For some products, a form known as the D.I (Déclaration d'Importation) must be filed with the Technical Division of the relevant Ministry, prior to Import. The technical Division returns the form bearing its stamp to the importer, who then has one year to import the goods.

Import licenses and D.I must be requested from the Central Import Licensing Office.

(ii) Value Added Tax (VAT)

The VAT is a tax on the consumption of goods and services and is paid by the consumer. Businesses are only charged with collecting the tax on sales and deduct the VAT they have paid on purchases and investments from the amount collected.

All EU. member states have adopted the VAT. In 1993, VAT became a pan-European tax, charged in the country receiving the goods. Once charged, goods circulated freely with the EU.

Exports of goods are fully exempt from VAT. Banking, financial and insurance transactions, teaching and some real-estate rentals are the main services exempted from VAT.

Foreign service providers established in France charge VAT to their foreign clients in accordance with the nature of their services and their place of business. For intangible services for example (consultancy, telecommunications, advertising, data processing, financial services, etc.), the foreign service provider must collect the VAT when the service is provided to a client in France and is exempt from the VAT when the client is in another country.

Reduced rates of VAT for many goods and services : The standard rate of VAT on the sale of goods and services is 19.6% but lower rates are applicable in many cases. In particular, the rate is 5.5% for some agricultural products, medicine (5.5 % to 2.5%), books, public transport, newspapers and magazines (5.5% to 2.1%), some types of entertainment, etc.

(iii) Exemptions from customs duty and the VAT

They include:

- Goods imported for re-export
- In certain cases, alterations or repairs to goods for subsequent re-export
- Imports of goods for storage in France for maximum of 3 years in a warehouse
- There are also three zones such as Guadeloupe where goods may be stored free of customs duty and VAT for up to 5 years
- There exist a certain number of import subsidies which mostly involve exemptions or reductions in customs duties for goods entering France
- These measures are largely directed at products from developing countries (Africa, Central or South America), from the former Soviet countries and from China.

c. The Export of Services to France
Foreign entities engaged in the supply of services are subject to compliance with certain requirements prior to providing services in France. Each service sector, be it insurance, banking, financial services, architecture, legal services, accountancy, audiovisual communication, data processing, advertising, etc. has its own particular requirements that will be detailed hereinafter.

One should bear in mind that foreigners must have a Tradesman Identity Card. The foreign shareholders of a "Société en Nom Collectif", of a "Société en Commandite Simple" or "par actions", the managing director of a "S.A.R.L.", the President of the Board of Directors in a "SA", etc., are also obliged to obtain this document.

d. Conditions imposed on non-EU workers in France
A non-EU national intending to work or conduct any commercial activity in France must have a long-term visa and/or a business permit before doing so.

(i) long-term Visas

A long-term visa is granted as a right to any person who will be working in France and a French Consulate has received notice that a business or work permit has been issued to that person;

It may take up to four months to process a visa application. U.S. nationals must apply at their local French Consulate for a long-term visa.

Since the SCHENGEN Agreement an overseas person holding a title delivered by one of the signatory countries already mentioned above is normally entitled to enter in France.

(ii) Business Permits

Any non-EU national proposed to be appointed as a manager or officer of the French subsidiary of a foreign-based company must hold a current French business permit. Application for such permit is made at the appropriate French consulate.

A business permit will subject a U.S. national (or any other Non-EU national) to the appropriate French labor and social security laws.

Besides any National in possession of a Resident Card is allowed to work in France in any fields for 10 years. This card is automatically renewable.

(iii) Social Welfare; Employment Conditions

The relations between employers and employees are governed by the French Labor code, collective bargaining agreements (union agreements), company regulations and individual employment contracts.

In accordance with the Non discrimination principle stated in the International Labour Convention N° 111 as well as in the Treaty of Rome, foreign workers benefit from the same rights and work conditions as French employees.

An employment may be for an indefinite or definite period. The Labor Code sets out minimum standards of working conditions such as hours, overtime, and paid leave (including vacation).

France has a mandatory system of social security covering health risks for salaried employees. The system is financed by contributions from both employees and employers. Contributions paid by the employer can rise to about 45% of gross salaries. Contributions to social security are tax-deductible.

For foreign employees, double contributions are avoided by international reciprocity agreements on social security concluded with France.

Pursuant the "Free Movement of Persons" European principle an employee regularly employed and resident in a Member State of the EU may work with a minimum formalities in any other Member State whatever his or her nationality may be (European or not).