Who is taxed in France?

• “French subsidiaries are taxable in France on profits attributable to their French activities (under the territoriality rule in Article 209(I)), with exceptions only where specific rules or tax treaties allocate additional income to France.”
• Holding inventory or using a third-party warehouse in France generally creates value added tax registration and filing obligations. For corporate income tax, storage alone usually does not create a taxable presence. This risk arises only if the French activities go beyond auxiliary warehousing (for example, a fixed place used for core operations or a dependent agent who habitually concludes contracts).

Standard corporate income tax rate

The standard corporate income tax rate in France is 25 percent. Small and medium-sized enterprises that meet specific legal conditions can benefit from a reduced rate of 15 percent on the first 42,500 euros of taxable profit (the remainder stays taxed at 25 percent). Eligibility is typically limited to companies with annual turnover not exceeding about 10 million euros, with fully paid-up share capital that is held at least 75 percent by individuals (or by companies that meet the same small-enterprise tests). The reduced band is applied pro rata for short financial years and is confirmed each year by the finance law, so thresholds and conditions should be checked for the filing year.

Example: if a qualifying company earns 200,000 euros of taxable profit, 42,500 euros are taxed at 15 percent (6,375 euros) and 157,500 euros at 25 percent (39,375 euros), for a total of 45,750 euros—an effective rate of about 22.9 percent instead of 25 percent.

Other profit‑related charges you should know

• A social contribution on corporate income tax may apply to larger companies once the corporate income tax due exceeds a statutory threshold; smaller companies are commonly out of scope. Check your status each year.
• Local production and property taxes still exist, such as the cotisation foncière des entreprises. Budget for them even if your profit tax is low.

What income is taxed?

• Taxable profit starts from accounting profit and is then adjusted for tax rules. Common add‑backs include non‑deductible expenses and certain provisions.
• Depreciation follows tax lives; accelerated methods may be available for qualifying assets.
• Interest deductibility is limited by anti‑base‑erosion rules; there is also an equity‑ratio test for highly leveraged groups.
• Dividends, capital gains and intragroup transactions may benefit from participation or merger regimes if conditions are met.

Filing, payments and deadlines

• Returns are filed electronically. For calendar‑year companies, the deadline typically falls around early May; for off‑calendar years, it is generally within three months after year‑end. Always verify the official calendar for your specific case.
• Companies make advance instalments during the year and pay the balance when filing the final return. Large companies may have additional instalment rules.
• Keep statutory books and supporting documentation in case of an audit, including transfer pricing documentation when thresholds are met.

Permanent establishment risk: practical indicators

• Staff or contractors in France habitually negotiating or concluding contracts on behalf of the foreign company.
• A fixed place of business such as an office, workshop, or long‑term site used to deliver core business activities.
• Repeated on‑site projects or construction activities lasting beyond treaty or domestic thresholds.

Common ways to structure your presence

• French subsidiary (limited liability company): clear liability ring‑fence, straightforward taxation in France, easier compliance for payroll and value added tax.
• Branch: taxed on profits attributable to French activities; simpler to open and close than a subsidiary but less separation from the foreign head office.
• No entity, local agent only: workable for limited activities, but monitor permanent establishment risk and ensure value added tax and registration requirements are met.

Incentives and credits

• France offers research and development incentives, innovative company regimes, and sector‑specific measures. Effective access requires documentation and, in some cases, pre‑filings.

Compliance checklist for foreign companies

• Determine whether you have a permanent establishment or other taxable presence.
• Choose the right form (subsidiary, branch, or agent) based on operations, liability and administrative burden.
• Register for taxes (income tax, value added tax, payroll) before starting billable operations.
• Set up bookkeeping, e‑filing credentials and a calendar for instalments and returns.
• Prepare intercompany agreements and transfer pricing files if you transact with related parties.
• Plan for local taxes and payroll compliance even in low‑profit years.

Frequently asked questions

Do I need to pay tax in France if I only sell online from abroad?

If you have no French permanent establishment and your contracts, staff and decision‑making remain abroad, income tax may not apply in France. However, you could still need a French value added tax registration if you store goods in France or exceed distance‑sales thresholds, and you may have consumer protection or marketplace obligations.

Is a French subsidiary always better than a branch?

A subsidiary provides liability protection and can simplify local compliance. A branch can be faster to open and close but offers less separation. The right choice depends on scale, staffing and risk tolerance.

How can I reduce my effective tax rate?

Combine the standard rate with available incentives, ensure deductibility of costs, manage financing limits, and use tax losses efficiently. Document transfer pricing and substance to secure your positions.

Takeaways

• The headline rate is 25 percent, but the effective rate depends on your facts, incentives and financing.
• Permanent establishment analysis is essential before hiring staff, signing local contracts, or storing inventory in France.
• Set up e‑filing early, track instalments, and keep robust documentation to stay audit‑ready.