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Invest in France

Invest in France

Updated on Tuesday 17th March 2020

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France is an ideal location for international businesses and investors who want to have access to the world’s largest consumer market, the European Union. France has the second largest economy in Europe and the fifth largest one in the world. The country is not only an important destination for business, but also one of the most renowned countries in the world - a leading tourist destination, France’s indistinguishable charm attracted more than 80 million visitors in 2013. The country is currently among the largest exporter of goods and services in the world, with more than 30 French companies as world leaders when it comes to exports. This country is also known for the high quality of life its citizens have and for the opportunities to invest in France.
 
Investors who choose to base their offices in France have access to a strong and diverse economy. France has numerous overseas territories that extend throughout the world and also has the second largest exclusive economic zone. France values the quality of its exported products and French companies are renewed worldwide. Approximately 30 French companies are included in the world’s top 500 companies. 
 
Paris is one of the most sought after locations for multinational companies, along with other cities like London of Frankfurt. Besides being one of the most visited cities in the world, Paris is also a leading investment center.
 
If you want to invest in France, our French law firm can help you make the first steps towards investing in the country.
 

Reasons for investing in France

 
Some of the most important advantages that attract foreign investments in France are the country’s geographical position in the center of Europe, its skilled workforce, a wide industrial base and the country’s reputation as an important producer of agricultural goods.
 
France is one of the top ten economies in the world and it is ranked second in Europe in terms of hourly productivity. France is home to an important number of qualified researchers and the availability of qualified workforce makes France a leading innovation center for research and development.
 
Investing in France is easy for foreign companies because they enjoy the same support as domestic ones. Another advantage is the reduced amount of time necessary for establishing a business in France. Investors can choose the appropriate type of company according to their specific business needs. Our French lawyers can tell you more about the particularities of each legal entity in France and can also help you register the company for VAT.
 

Investments in the French economy

 
France is one of the largest recipients of foreign direct investment among the Organisation for Economic Cooperation and Development (OECD) countries. The French economy is primarily a service economy and the country is also an important importer and exporter in the European Union and worldwide. The trading sector and the agricultural sector are very well developed in France. However, the tourism sector is one of the most attractive business options for investors in France. France is ranked as one of the top destinations in the world (in 2012 it was ranked as the first tourist destination in the world).
 
France is not only an economic destination, with more than 600 foreign investors choosing the country every year because of its competitiveness. France dictates a certain standard for business. 
 

France’s policies on foreign direct investments

 
Foreign direct investments (FDIs) play a major role in the French economy. They are also one of the most important attraction points for entrepreneurs from all over the world. The government recognized the importance of foreign investments because of the economic benefits they bring. An increased employment rate is one of the major advantages of foreign investments and companies created by EU and non-EU investors in France.
 
Even if France does not have a specific law providing for FDIs, the government compensates through investment subsidies, freedom and equal treatment applied to overseas entrepreneurs when compared to local ones.
 
Foreign entrepreneurs considering investing in France should note that:
 
  1. they will benefit from freedom in setting up any type of company, as France is one of the less restrictive countries in the world from this point of view;
  2. the holding company regime is one of the most advantageous in Europe, as it is possible to set up this type of structure here;
  3. there are various incentives for industries like research and development (R&D), the industrial sector, such as manufacturing, information technology, etc.;
  4. both tax and non-tax incentives are available in most regions of the country;
  5. freedom of buying real estate, including commercial buildings as a private investor or through a company.
 
France has many strengths when it comes to attracting foreign investors and our local agents can offer more information on the different laws that comprise provisions on investing in France and the benefits for overseas entrepreneurs.
 

The French workforce and labor costs, an incentive for foreigners who want to invest in France

 
France can boast one of the most skilled workforces in Europe. With good universities delivering specialized personnel, France is among the best countries in Europe to offer high quality services at low costs, which is one of the most important reasons announced by foreign investors who operate here. This is also one of the reasons why multinational companies have established branch offices in France and they come to invest in France.
 
According to several reports, the average costs incurred with employees are significantly lower in France than in other European countries, such as Germany. Also, it is less costly to set up and operate a business in France than in the United States. These are just a few of reasons why France is an attractive country for foreign investors.
 
Our company formation representatives in France can offer more information on the costs related to opening a company here and incentives for investing in France.
 

Foreign investors receive assistance from the French government

 
There are many years now since the government has enabled various incentive schemes for foreign investors coming to France. This is also why the number of foreign enterprisers has grown considerably in France. Among these, the tax credit granted to foreign and French companies with commercial activities here which can benefit from a reduced tax rate of 6% related to employment costs. The government also enabled an incentive for companies in the research and development industry which can benefit from 30% tax credits from expenses incurred throughout a year, in a limit of 100 million euros.
 

The main incentives for foreign investors in France

 
Foreign investors who want to invest in France will usually benefit from various incentives. As mentioned above, not all of them are granted as tax subsidies, however, where such tax exemptions and deductions are available, they target small and medium-sized enterprises (SMEs). Such businesses will usually take the form of limited liability companies.
 
Among the tax advantages available for foreigners who invest in France, we can mention:
 
  • - subsidies for investments in specific sectors;
  • - discounts and cost reductions;
  • - loan guarantees;
  • - deductions of expenses incurred with personnel training.
 
Other incentives are offered for job creation and investments in underdeveloped regions. The food industry and activities related to the protection of the environment also benefit from various incentives.
 
If you want to open a company in France and need assistance, our local consultants are at your disposal with support in drafting and filing the documents with the Companies Register.
 

Tax benefits available in France

 
Foreign investors who create new companies in the so-called enterprise zones have the most to benefit from tax holidays in France. They can also obtain tax credits if they register companies to operate in the Northwestern and Southwestern parts of the country, among which Corsica, which is severely underemployed. For setting up businesses in these areas, French companies can benefit from partial or total tax exemptions for up to 5 years. Foreign investors will also benefit from an expedited company registration procedure and lower incorporation fees.
 
Our French company formation advisors can offer more information on the corporate taxes that need to be paid here.
 

Special economic zones in France

 
Just like other countries, France too has special economic areas which are divided into 3 categories:
 
  • - enterprise zones;
  • - privileged investment areas;
  • - free trade zones.
 
There are 3 enterprise zones located in Aubagne-la-Ciotat, Dunkirk and Toulon-la-Seyne. Here, companies can benefit from a 10-year tax holiday provided that certain requirements are met. Then, there are the privileged investment zones of Bassin Minier and Sambre Avesnois, where a tax credit of 22% is available. Gex and Haute-Savoie are France’s free zones. Here, companies can benefit from no customs duties related to importing and exporting goods.
 
A good news for foreigners interested in investing in France in the next years is a reduction of the corporate tax. Starting with 2020, the rate of the tax has been lowered to 28% and further cuts are announced for the year to come, so in 2022, the corporate tax will drop to 25%.
 
In terms of foreign investments, France:
 
  • - in 2018, the country’s FDI flows increased by 25% reaching 37 billion USD;
  • - is the 12th largest FDI recipient in the world;
  • - was the 4th country in the world by FDI inflows in the first half of 2019;
  • - ranks 32nd in the World Bank’s Doing Business Report for 2020.
Investors who are interested in setting up a company in France should know that the country has a good investment rating, provided by renowned credit rating agencies. According to the information provided by such agencies, the local market is stable, being credited with high indexes, such as AA (awarded by the Standards &Poor’s) or Aa2 (awarded by Moody’s). Our team of French company formation representatives can provide assistance to the investors who want to invest on the local market. 


AA rating, awarded to France by Standards& Poor’s 

 
The AA rating is awarded by the credit rating agency Standards& Poor’s for long term credits. The ratings are awarded from a scale starting from NR (rating hasn’t been requested) to AAA (highest rating awarded by the agency). 
 
The long-term issue credit rating is based on the following: 
 
the likelihood of payment, which refers to the possibility of the respective state to meet its financial obligations
the nature of the financial obligation;
the protection the state can assure in an unforeseen event, such as bankruptcy or reorganisation or any other event that would disrupt the terms agreed upon. 
 
The AA rating is the second highest rating offered by Standards& Poor’s, after the AAA. 
 
AA designates that the respective country has a strong capacity to meet its financial obligations and it differs from the AAA rating only to a small degree. 
 
Businessmen who want to set up a company in France should know that the state has one of the most stable economies in the European Union; our team of French company incorporation agents can assist foreign investors with more details on this matter.
 

New foreign investment rules in France

In order to ease the access of foreign enterprisers on the French market, the Government has issued a decree through which new regulations have been enabled for both EU and non-EU investors. First of all, the term “foreign investment” has been redefined and now applies based on the country of origin of the investors. Secondly, the list of investment sectors has been expanded to 11 French industries. However, for 7 of these industries prior approval from the Ministry of Economy (MINFEI) is required.

Even if the new legislation for those who want to invest in France provides for more stringent conditions, certain overseas companies are not required to apply for approval with the MINFEI. These are:

  • -          companies in the same corporate group in which a common shareholder owns more than 50% of the voting shares;
  • -          investors who have already received authorization for investing in a sector and now apply for a second approval.

Our company registration agents in France can offer more information on the new laws on foreign investments.

Industries open to foreign investments in France

According to the French laws on foreign investments, the following industries are open to overseas enterprisers and companies seeking to set up subsidiaries or branch offices here:

  • -          tourism;
  • -          automotive;
  • -          software;
  • -          telecommunications;
  • -          research and development;
  • -          biotechnology;
  • -          electricity and renewable energy.

France also offers a great number of incentives and tax exemptions to foreign investors and is still considered one of the less restrictive states in the world when it comes to foreign investment legislations.

 
If you need more information about foreign investments in France and you want to incorporate a company in this country, please contact our law firm in France