French special economic zone company with 0% corporate income tax

[bartholomeus]

What do you mean 100% of the time in︀ my office? 100% of the hours I billed to the customer for my side work︁ (lets say I bill 20 hours / week). I have already full time work for︂ another company - this in only my side work.

I found now the office with︃ possible address that at least sells it like that in ZFU 30km away from my︄ home.I can go there and work every now and than lets say 20 hours /︅ week, and I guess if the check comes reception can notify me and I can︆ come there in 30min, no? How can they say I have to be there every︇ day between 9-16h if for example I work only 3 days a week in the︈ evenings?

 

[SimpleGuy]

Yes you can go live there⁤ without any problem as an EU citizen. Saint-Martin is part of the European Union, you⁣ pay there in €. If you have a company in Saint-Martin that derives its income⁢ from international markets and you pay yourself dividends, yes you will be at 0% tax.︀

No Saint-Martin has its own treaties. At present they only have a treaty with France.︁

You must work 100% of legal time (35 hours) in the office located in the︋ ZFU. If you do not work there, the activity is considered non-sedentary, and in this︌ case you must hire a person who works 100% of his legal time (35 hours)︍ in the ZFU office.

Source : Zones franches urbaines, quelles opportunités pour les entreprises ?︎ (see below)

If you are not working full-time at your office, it is not a sedentary activity. The‍ French administration is strict, they won't call you on the phone to come. They will⁠ come once, if you are not there they come back tomorrow, if you are still⁤ not there they will consider it a virtual office.

Welcome to the least business-friendly country⁣ in the world. 😉

 

[JustAnotherNomad]

Could be a⁤ good alternative to the UAE then?

That's not so great.⁢ Do you know what is required to get a tax residency certificate? Only renting an︀ apartment all year?
What about Dutch overseas regions? Would you get access to NL tax︁ treaties in such a case?

 

[bartholomeus]

so If i hire a person they must live in︆ that area or just come 35 hours / week there to work?

Am I even︇ legally able to work in France after my full time CDI? I found on some︈ posts there are some hour limitations ?🙄

 

[SimpleGuy]

Yes and no. I advise you to⁤ forget the European Union, and especially France, even its overseas territories. I'd rather go to⁣ the Bahamas instead of you.

A company opened in Saint-Martin is tax resident in Saint-Martin⁢ if it has a registered office there. You can find virtual offices I think.
He has to work 35 hours in the office︃ yes. For the first employee he does not need to live in the ZFU, but︄ for the second yes.

Yes no problem, it is not even necessary to have a︅ CDI to work if you are a business manager. I just wanted to point out︆ that if you want to set up a virtual office without a real presence, it's︇ better to forget.

Why do you absolutely want to be in the European Union if︈ you do consulting?

 

[bartholomeus]

at the moment I am resident here in France and‍ have CDI with a local company here. Since I moved from a more expensive country⁠ I started to work as freelancer as I could offer lower hour rate and business⁤ is growing fast. My wish is to quit full time when I have enough work⁣ to sustain myself at the level that I can do now with CDI + side⁢ gigs. I think for me I need to be in EU at least part time︀ (once a mont for family obligations) and if I move outside I need to make︁ sure that I'm not to far to fly in every month and I have same︂ amount of healthcare, insurance etc covered etc

 

[SimpleGuy]

Ok I am French too.

If you are looking for a country where you can‌ open a business, you have plenty of them that are better without France pissing you‍ off (Bahamas, BVI, Vanuatu, Anguilla, Cayman Islands...). For example Vanuatu, you open a company there,⁠ you hire a part-time employee, it will cost you 100€/month and you will be able⁤ to justify your presence by the fact that you have an employee on site. With⁣ this setup you can even remain a physical tax resident in France.

Whereas if you⁢ put your company in Saint-Martin without being able to justify the presence of your company︀ there, France will requalify you for that and will apply the normal French rate to︁ you.

If you are French, avoid Saint-Martin or Saint-Barth.

 

[bartholomeus]

I am not French citizen‌ only resident - see my orignial post here France Tax Optimization

Why would I open‍ company in Vanuatu if I get taxed in France same as its french company?

 

[JustAnotherNomad]

There's no way that would⁤ pass a substance check.
I'll create a separate thread about Carribean islands, so we can⁣ focus on this ZFU regime here.

 

[SimpleGuy]

Of course yes. If you employ someone locally, what other substance do you need⁠ to justify?

 

[JustAnotherNomad]

Certainly more than a €100 salary per month.
For example, I believe the Netherlands explicitly‌ require a 100k or so investment in such low-tax territories to accept the substance.

 

[SimpleGuy]

It's wrong. You have the right to open a company anywhere⁠ in the world if you have a reason to be there. If the minimum wage⁤ is €200 per month there and you only need to rent an office and hire⁣ an employee to run your business, there are no other substances that need to be⁢ fulfilled.

You are not going to pay your employee 5000€ per month or buy an︀ office just to satisfy the substances.

And, I don't know about the Dutch but as︁ we speak as French, here is what applies for us: https://www.impots.gouv.fr/international-professionnel/questions/une-entreprise-etrangere -can-it-be-subjected-tax-on-the

I quote :︂

"Subject to the application of an international convention, it is necessary to consider as taxable︃ in France foreign companies:

- who, without having an establishment in France, nevertheless use the︄ assistance of representatives who do not have a professional personality distinct from their own; these︅ intermediaries are considered to be genuine employees carrying out an activity in our country on︆ behalf of the foreign company;
- or who, without having an establishment or a qualified︇ representative in France, carry out operations forming a complete commercial cycle there.

By complete commercial︈ cycle, they mean for example a company domiciled abroad, whose manager is in France, which︉ obtains supplies from French suppliers and which sells to French customers, while cashing in abroad."︊

In the case of consulting, marketing, or other services, if the service is provided for︋ example from Vanuatu by Vanuatu employees, to a French client, this does not represent a︌ complete commercial cycle and therefore @bartholomeus would be perfectly in legality.

Sorry wrong link and︍ can't edit : Une entreprise étrangère peut-elle être soumise à l'impôt sur les sociétés en︎ France ?

 

[bartholomeus]

@SimpleGuy can you write me privately or on that other tread for this as this‌ is relevant to me but I guess not so much for this tread

 

[SimpleGuy]

Unfortunately I can't, I need 60 posts to be able to contact⁠ people by message. But carry on here if you don't mind.

 

[JustAnotherNomad]

They will look at things⁠ like non-tax reasons for operating your business.
If you pay a single employee a €200⁤ minimum-wage salary and claim that this person is running your multi-million dollar business, while you⁣ as the only shareholder are residing in France or some other high-tax country, there's no⁢ way, they will believe that you're not secretly running everything from your home. They'll say︀ it's a nominee and you have no other reasons for being there except tax, so︁ it violates the GAAR or some other stuff, and then it's game over for you.︂ CFC rules could also ruin the fun, but that would be a different matter.

 

[SimpleGuy]

Maybe for you as a Dutchman.︀

But for us as French, if we live in France, this is not the case.︁

The French courts to qualify if our foreign company has "substance" as you say, they︂ refer to the "full commercial cycle". And a lot of court rulings have been made︃ on what does or does not constitute a “full commercial cycle”. And since the French︄ courts are obliged to apply the same decisions that have already been rendered, this setup︅ is perfectly correct and legal.

If you have a company providing service from Vanuatu, with︆ Vanuatu employees, to French customers, there is absolutely no reason for this to constitute a︇ full commercial cycle. Beyond the fact that it's legal, it even makes sense.

You can︈ read here: BOFiP BOI-IS-CHAMP-60-10-30 - 29/06/2022 article III where some examples are cited on which︉ types of company have been requalified.

 

[dziter]

In France, ZFU are not the only areas giving you access to tax advantages.
For more information, you can translate from official source:
https://www.economie.gouv.fr/entreprises/exoneration-impots-zones-zafr-ber-zrd-zrr-zfu-qpv
From my understanding, AFR and ZRR‌ look quite interesting because you do not have this notion of sedentary/non-sedentary activity, 25% turnover‍ from the area OR employing someone from this area.
The territory coverage is broader too.⁠
I am not an expert at all. Just my quick understanding.

@SimpleGuy : I think⁤ the government clarified some stuff since many people are now working remotely. Because you can⁣ still find on some french accounting websites, for services activity (prestations de services), that they⁢ consider the place of where the service happened (ZFU) inside the 25% turnover rule. It's︀ totally wrong and as you pointed out, it's clear that the clients should be in︁ ZFU for this specific part too.
Are you familiar with AFR and ZRR incentives?

Source: BOFiP BOI-BIC-CHAMP-80-10-50 - 22/04/2020
This is from the BPO related︃ to BER area.
Translation:
"Note: Business consultancy and service provision activities should be considered as︄ sedentary activities, provided that the work involved in the study of the case or the︅ actual object of the service is carried out at the service provider's head office, provided︆ that the head office is located in the zone."

The BPO related to ZFU︇ does not give the definition of sedentary activity, they only speak about non sedentary activity.︈

If we assume that the definition is the same, then my understanding: Someone working for︉ example in IT is considered as a SEDENTARY activity. And so we do not care︊ about extra rules pointed out previously by your screenshot. (the exemption is just capped up︋ to 50k€ turnover + extra easy requirements to have).

But it is not clear if︌ the activity needs to be performed full-time in the ZFU to get full tax exemption︍ on the turnover.

The Sénat replied here :
https://www.senat.fr/questions/base/2014/qSEQ140210650.html
'Ainsi, le prorata en fonction des︎ éléments d'imposition à la CFE a été remplacé par un prorata en fonction du montant️ hors taxes du chiffre d'affaires ou des recettes réalisé en zone.'
Translation: "As a result,‌ the prorata based on CFE taxable items has been replaced by a prorata based on‍ the amount of pre-tax sales or revenue generated in the zone."

So I guess that⁠ someone working in IT (in my exemple) does not pay corporate tax on services rendered⁤ from ZFU (pro-rata). When he works outside the ZFU, it does not count.
I do⁣ think the activity is always considered sedentary here?

@SimpleGuy : I will be happy to⁢ know what do you think about it. So much potential confusion. French rules are really︀ tricky indeed.

 

[bartholomeus]

Yes thats how I understood that as well. Its just tricky to than prove that‌ 25% of services were exectuted in the area

 

[dziter]

It seems‍ that you do not have to prove that in case of a "sedentary activity".
As I pointed out, ZRR and AFR look nice too. We do not only have ZFU⁠

Another thing I am wondering, is it possible to be eligible to one of these⁤ tax incentives and considered non-tax french resident (spending most of the time outside France) ?⁣

EDIT/
ZRR and AFR are less interesting with these rules in my opinion (so it⁢ clears my previous doubts):

"When a company carries out part of its activity outside the︀ ZRR, it can benefit from the exemption if its turnover does not exceed 25% outside.︁ The fraction beyond 25% is subject to IS or IR."
Source: Exonérations d'impôts dans les︂ ZRR | Bpifrance Création

"The head office as well as all of the company's activity and operating resources must be located in an area eligible for this system."
Source: Exonérations d'impôts dans les zones AFR | Bpifrance Création

But for someone who wants to live︃ in France/Corsica/French Overseas Territories, all these incentives seem great.

The big question is: How to︄ take out most of the profits in a tax-efficient way? (Even after X years)
Otherwise, if the situation allows it, I can think about investing let's say in real estate︅ with the company.

 

[bartholomeus]

Who in France can give me clear answer? Can‍ I hire an accountant? or what kind of advisors are there? I need to open⁠ the company asap so want to proceed with whatever is the best option