Start a company in France instead of Ireland/Hong Kong?

[thomasparra]

marioIT said:
I got back some info from my friend. The issue is that my friend lives on the border, inside the 20km italian zone. He has a swiss frontalier permit.
Has his gmbh in Switzerland just over the border, he travels daily and rent his office there.
They (finance police GDF) reported him for possibly gaming the system, as while owning the business he's taking a low employee salary (that's fully taxed in switzerland at lower rates than italy) instead of the one as company manager/director and dividends that would be fully taxed on him in Italy???
It seems there are some issues, one of them being a conflict between the frontalier treaty and the internal legislation, because in the italian version of the treaty says the job contract must be "subordinated" and the italian legislation says that to be considered "subordinated" you shouldn't own the majority of the company, as you can't fire yourself.
I think they're just nitpicking, grasping at straws just to try and get some money. Pretty sure police is wrong and you are right, and not sure how are they going after these if a Swiss Fiduciary is listed as director and the guy is covered with a regular frontalier permit, but you never know how things go in italy, till it gets to the supreme court he's fucked for life 🙄
It seems though that Switzerland recently agreed to send automatically each year a list of all names, salaries, dividends, social contributions, stocks etc paid to/from the Frontalier permit holders, to their home countries.

he linked me too this local newspaper story too but its italian only (google translate it):
Verifiche fiscali sui lavoratori frontalieri. Nel mirino i “falsi dipendenti”

it's all on his lawyer now but there's no official communication from the tax agency as today. Even if it doesn't stand in court it'll be a giant PITA to handle if he gets a crazy fine from the tax agency and have to fight it...
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This is is one of the reasons I do not want to get myself involved into this, especially as I will not make 6 figure revenue in my first year or two. Is it wise to start the business in France first (so I can claim free healthcare and some social contributions as well) versus Ireland or Hong Kong for example?

 

[thomasparra]

This is is one of the reasons I do not‌ want to get myself involved into this, especially as I will not make 6 figure‍ revenue in my first year or two. Is it wise to start the business in⁠ France first (so I can claim free healthcare and some social contributions as well) versus⁤ Ireland or Hong Kong for example?

 

[Marzio]

Nope because of French exit tax (among other things).

Exit tax: Unrealized capital gains from‍ the transfer of individual assets, a main office, or an establishment from France to an⁠ EU/EEA country that has concluded a mutual assistance agreement for the recovery of tax with⁤ France are spread over five years. Any tax due on the unrealized gains must be⁣ paid within two months following the transfer, either in full or in five equal annual⁢ installments.

 

[algotrader]

If you intend to make only 5 figures there's no point creating a LTD company‌ in HK or Ireland, especially if you don't want to live there. In France, you‍ can have the "microentrepreneur" or "autoentrepreneur" regime with lower social contribution and income tax rates.⁠

The exit tax only applies to company assets over 800k € held in a french⁤ limited company, so not relevant here.

 

[thomasparra]

Marzio said:
Nope because of French exit tax (among other things).

Exit tax: Unrealized capital gains from the transfer of individual assets, a main office, or an establishment from France to an EU/EEA country that has concluded a mutual assistance agreement for the recovery of tax with France are spread over five years. Any tax due on the unrealized gains must be paid within two months following the transfer, either in full or in five equal annual installments.
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I mean I would still pay any corporate or individual taxes before exiting the country (social contributions/corp tax on the business side & individual tax on dividend/income on the individual side) so not sure what the issue would be?

 

[thomasparra]

I mean I would still pay any corporate or⁢ individual taxes before exiting the country (social contributions/corp tax on the business side & individual︀ tax on dividend/income on the individual side) so not sure what the issue would be?︁

 

[RealDude]

Is there only one legal form for entrepreneurs in⁢ France?

 

[thomasparra]

algotrader said:
If you intend to make only 5 figures there's no point creating a LTD company in HK or Ireland, especially if you don't want to live there. In France, you can have the "microentrepreneur" or "autoentrepreneur" regime with lower social contribution and income tax rates.

The exit tax only applies to company assets over 800k € held in a french limited company, so not relevant here.
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Thank you. This is a high margin business but revenue wise I definitely don't expect more than 300k/year even within the first 2 years of launching the company).

However, I am not sure that I will stay in France in the long term but I can always transfer the company overseas at a later stage right? I am trying to start the business as soon as possible.

I know about the entrepreneur status but I do not think my clients would be too keen on this as there are some elements of compliance in my business and I think I would need a proper corporate structure/entity to contract clients (a competitor does 2M in revenue and is under a SAS entity)

 

[thomasparra]

Thank you. This is⁣ a high margin business but revenue wise I definitely don't expect more than 300k/year even⁢ within the first 2 years of launching the company).

However, I am not sure that︀ I will stay in France in the long term but I can always transfer the︁ company overseas at a later stage right? I am trying to start the business as︂ soon as possible.

I know about the entrepreneur status but I do not think my︃ clients would be too keen on this as there are some elements of compliance in︄ my business and I think I would need a proper corporate structure/entity to contract clients︅ (a competitor does 2M in revenue and is under a SAS entity)

 

[algotrader]

It depends on the legal form of your company,︂ whether the profit has been paid out to you via dividends or is still in︃ your company, wether you keep the company with its assets in France, how long you︄ have lived in France during the last 10 years and whether the country you move︅ to is within EU/EEA. The text below is from french tax office:

Transfert du domicile︆ hors de France : imposition des plus-values latentes Le transfert de votre domicile hors de︇ France entraîne l'imposition des plus-values latentes afférentes à certains droits sociaux ainsi que l'imposition immédiate︈ de vos plus-values en report d'imposition, si vous étiez domicilié en France pendant au moins︉ 6 des 10 années précédant votre départ. Les plus-values latentes sont imposables lorsque, à la︊ date du transfert, les membres du foyer fiscal détiennent une participation directe ou indirecte d'au︋ moins 50% dans les bénéfices d'une société ou lorsque la valeur globale des participations directes︌ ou indirectes est supérieure à 800 000 €. Vous pouvez cependant bénéficier d'un sursis de︍ paiement qui sera accordé automatiquement si vous transférez votre domicile dans un Etat membre de︎ l'Union européenne ou dans un Etat membre de l'espace économique européen ayant conclu avec la️ France une convention d'assistance administrative en vue de lutter contre la fraude et l'évasion fiscales‌ ainsi qu’une convention d’assistance mutuelle en matière de recouvrement ayant une portée similaire à celle‍ prévue par la directive 2010/24/UE du Conseil, du 16 mars 2010, concernant l’assistance mutuelle en⁠ matière de recouvrement des créances relatives aux taxes, impôts, droits et autres mesures, pour un⁤ État autre qu’un État membre de l’UE. Sur demande expresse, vous pouvez aussi en bénéficier⁣ si vous transférez votre domicile dans un autre Etat à condition de désigner un représentant⁢ en France et de fournir des garanties de recouvrement. Le sursis expire notamment à la︀ cession des titres.

 

[Marzio]

It doesn't apply only⁤ to company assets over 800K but it's enough to have a 50% participation in the⁣ company.

Hey if you are keen to pay taxes in French after 5 years you⁢ exit the country because you want to rely on FR social security then go ahead.︀

If you already know that you will be generating X00K a year and you will︁ not stay in FR in the long term i don't really see any reason to︂ start there.

I'd only start in French if commuting to Switzerland and pay taxes in︃ France. The italian guy got in trobule because he wasn't paying italian taxes on his︄ swiss salary but this would not be a problem for you. Then you could move︅ your company without problems since you don't have any assets in France.

There are serveal︆ like everywhere, SA, SARL, SAS, SNC, SCS, SCA and others but however way you see︇ it is better to avoid tax hell.

 

[thomasparra]

algotrader said:
It depends on the legal form of your company, whether the profit has been paid out to you via dividends or is still in your company, wether you keep the company with its assets in France, how long you have lived in France during the last 10 years and whether the country you move to is within EU/EEA. The text below is from french tax office:

Transfert du domicile hors de France : imposition des plus-values latentes Le transfert de votre domicile hors de France entraîne l'imposition des plus-values latentes afférentes à certains droits sociaux ainsi que l'imposition immédiate de vos plus-values en report d'imposition, si vous étiez domicilié en France pendant au moins 6 des 10 années précédant votre départ. Les plus-values latentes sont imposables lorsque, à la date du transfert, les membres du foyer fiscal détiennent une participation directe ou indirecte d'au moins 50% dans les bénéfices d'une société ou lorsque la valeur globale des participations directes ou indirectes est supérieure à 800 000 €. Vous pouvez cependant bénéficier d'un sursis de paiement qui sera accordé automatiquement si vous transférez votre domicile dans un Etat membre de l'Union européenne ou dans un Etat membre de l'espace économique européen ayant conclu avec la France une convention d'assistance administrative en vue de lutter contre la fraude et l'évasion fiscales ainsi qu'une convention d'assistance mutuelle en matière de recouvrement ayant une portée similaire à celle prévue par la directive 2010/24/UE du Conseil, du 16 mars 2010, concernant l'assistance mutuelle en matière de recouvrement des créances relatives aux taxes, impôts, droits et autres mesures, pour un État autre qu'un État membre de l'UE. Sur demande expresse, vous pouvez aussi en bénéficier si vous transférez votre domicile dans un autre Etat à condition de désigner un représentant en France et de fournir des garanties de recouvrement. Le sursis expire notamment à la cession des titres.

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Marzio said:
It doesn't apply only to company assets over 800K but it's enough to have a 50% participation in the company.

Hey if you are keen to pay taxes in French after 5 years you exit the country because you want to rely on FR social security then go ahead.

If you already know that you will be generating X00K a year and you will not stay in FR in the long term i don't really see any reason to start there.

I'd only start in French if commuting to Switzerland and pay taxes in France. The italian guy got in trobule because he wasn't paying italian taxes on his swiss salary but this would not be a problem for you. Then you could move your company without problems since you don't have any assets in France.



There are serveal like everywhere, SA, SARL, SAS, SNC, SCS, SCA and others but however way you see it is better to avoid tax hell.
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Based on this text, I would need to be in France for at least 6 years for the exit tax to apply. I have only been in France for a few months hence I can leave France anytime during the next couple of years if I see greater opportunity to live overseas.

I might also live in the UK in 2023/2024 to move with my partner hence I was wondering if it would be hard to move the company from France to UK?

 

[thomasparra]

Based on this text, I would need to be in France for︃ at least 6 years for the exit tax to apply. I have only been in︄ France for a few months hence I can leave France anytime during the next couple︅ of years if I see greater opportunity to live overseas.

I might also live in︆ the UK in 2023/2024 to move with my partner hence I was wondering if it︇ would be hard to move the company from France to UK?

 

[DBeker]

I set up an SAS (i.e. French LLC) in France about 6 months ago. I‌ am resident in France and while I hold dual nationality, in order to simplify my‍ life I chose to set up here. Things like France being a tax-hell, while not⁠ a myth, are exaggerated in my opinion. My SAS has dual purpose: a Holding vehicle⁤ and a Consulting/Professional Services firm.

Positives of setting up in France:

1. If you need⁣ to raise or borrow money, there are good sources available in France. There is also⁢ a really good VC culture here.
2. Good network of business support that result in︀ lower operating costs (I was looking at setting up in the NL or Luxembourg but︁ operating costs would have been higher there, completely negating any perceived tax savings). For example︂ low cost legal advise, accounting etc. compared with the offers I was seeing in the︃ neighborhing countries.
3. If you don't have any employees, your payroll taxes and such are︄ inexistant. If you do have employees, while you pay initially, you get a lot of︅ tax rebates and write-offs, so it balances out
4. If your business is innovative, you︆ can get a lot of state help
5. I am also doing some import/export activities︇ with this SAS company and having a French company makes things easier when dealing with︈ French suppliers (and there are a lot of suppliers here that often supply various goods︉ at cheaper prices than procuring from elsewhere in the EU). This is especially true when︊ dealing with Excise goods
6. If I ever want to set up a US LLC︋ or something, I can let the French SAS be the owner of it and so︌ being a French resident, it makes things easier. Also France operates a territorial tax system,︍ so there could be some additional benefits in generating foreign income this day - but︎ to be honest I have not fully explored this bit yet.

Some Cons:
1. Not️ all that efficient - especially if you are registering DIY and not making the best‌ use of professional services. Despite the cost savings, I would say it's a hassle. Took‍ me almost 2 months to get my VAT number activated
2. The notion of the⁠ CFE Tax (Cotisation Fonciere des Entreprises) - I am using a centre de domiciliation in⁤ Paris and while i don't need to pay anything for the first two years, it⁣ will be a 76 EUR a year tax that you pay no matter whether you⁢ make any money or not. If you are set up outside of Paris, whether it︀ be the Paris suburbs or another region of France this CFE tax can easily be︁ upwards of 5-600 EUR a year that you have to pay no matter what.
3. Logistics network for the trading of excise goods is not that great. For this, I︂ have found the NL to have the best set of partners as well as logistics︃ culture.

I'd say don't worry too much on the taxes. If you are French, you︄ will likely know how to navigate the landscape with a clever accountant (that aren't that︅ expensive btw) and you will never pay the headline tax rates. You will likely pay︆ a lot less and at the end when you weigh in all the operating costs︇ of setting up in a compliant manner elsewhere, you will find that you will have︈ lower operating costs by doing it all in France.

 

[thomasparra]

DBeker said:
I set up an SAS (i.e. French LLC) in France about 6 months ago. I am resident in France and while I hold dual nationality, in order to simplify my life I chose to set up here. Things like France being a tax-hell, while not a myth, are exaggerated in my opinion. My SAS has dual purpose: a Holding vehicle and a Consulting/Professional Services firm.

Positives of setting up in France:

1. If you need to raise or borrow money, there are good sources available in France. There is also a really good VC culture here.
2. Good network of business support that result in lower operating costs (I was looking at setting up in the NL or Luxembourg but operating costs would have been higher there, completely negating any perceived tax savings). For example low cost legal advise, accounting etc. compared with the offers I was seeing in the neighborhing countries.
3. If you don't have any employees, your payroll taxes and such are inexistant. If you do have employees, while you pay initially, you get a lot of tax rebates and write-offs, so it balances out
4. If your business is innovative, you can get a lot of state help
5. I am also doing some import/export activities with this SAS company and having a French company makes things easier when dealing with French suppliers (and there are a lot of suppliers here that often supply various goods at cheaper prices than procuring from elsewhere in the EU). This is especially true when dealing with Excise goods
6. If I ever want to set up a US LLC or something, I can let the French SAS be the owner of it and so being a French resident, it makes things easier. Also France operates a territorial tax system, so there could be some additional benefits in generating foreign income this day - but to be honest I have not fully explored this bit yet.

Some Cons:
1. Not all that efficient - especially if you are registering DIY and not making the best use of professional services. Despite the cost savings, I would say it's a hassle. Took me almost 2 months to get my VAT number activated
2. The notion of the CFE Tax (Cotisation Fonciere des Entreprises) - I am using a centre de domiciliation in Paris and while i don't need to pay anything for the first two years, it will be a 76 EUR a year tax that you pay no matter whether you make any money or not. If you are set up outside of Paris, whether it be the Paris suburbs or another region of France this CFE tax can easily be upwards of 5-600 EUR a year that you have to pay no matter what.
3. Logistics network for the trading of excise goods is not that great. For this, I have found the NL to have the best set of partners as well as logistics culture.

I'd say don't worry too much on the taxes. If you are French, you will likely know how to navigate the landscape with a clever accountant (that aren't that expensive btw) and you will never pay the headline tax rates. You will likely pay a lot less and at the end when you weigh in all the operating costs of setting up in a compliant manner elsewhere, you will find that you will have lower operating costs by doing it all in France.
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Thanks a lot for the inputs here, this is very helpful.

Did you start this company with a partner? Are there any differences with its sister sole shareholder company structure (SASU)?

Is it ok to run this company from another country (in Asia or UK for example)? Are there any downsides?

 

[thomasparra]

Thanks a lot for the inputs here, this is very helpful.

Did you start this company︊ with a partner? Are there any differences with its sister sole shareholder company structure (SASU)?︋

Is it ok to run this company from another country (in Asia or UK for︌ example)? Are there any downsides?

 

[DBeker]

So there is no⁤ fundamental difference between a SAS and a SASU. It is just a single shareholder vs⁣ multiple shareholder type thing. However if you have a business and you need to raise⁢ capital or some other finance, some investors/lenders are more comfortable in investing in a company︀ with more than one founder/shareholder.

As for operating a French company from abroad, once it's︁ fully up and running (i.e. can really take about 2 - 3 months from the︂ time you register it to really have all the support pieces in place such as︃ banking, your tax accounts, vat etc) it is entirely possible.

But the question is would︄ you want to?

I live in France and don't plan to move out, hence for︅ me it makes things easier to operate with a French SAS. But if I were︆ living abroad with unclear intentions of returning to France to settle down, then I'm not︇ so sure I'd have done it here. However say you have a business that is︈ capital intensive, does a lot of value-added tech or pharma work or something, then France︉ might make sense as you have a a fantastic ecosystem to work with and grow︊ your business, not easily available elsewhere. You can live abroad and have a good reason︋ to want to operate in France. But if your business is simpler and not so︌ labour/capital intensive, perhaps there are other jurisdictions worth looking at.

 

[thomasparra]

DBeker said:
So there is no fundamental difference between a SAS and a SASU. It is just a single shareholder vs multiple shareholder type thing. However if you have a business and you need to raise capital or some other finance, some investors/lenders are more comfortable in investing in a company with more than one founder/shareholder.

As for operating a French company from abroad, once it's fully up and running (i.e. can really take about 2 - 3 months from the time you register it to really have all the support pieces in place such as banking, your tax accounts, vat etc) it is entirely possible.

But the question is would you want to?

I live in France and don't plan to move out, hence for me it makes things easier to operate with a French SAS. But if I were living abroad with unclear intentions of returning to France to settle down, then I'm not so sure I'd have done it here. However say you have a business that is capital intensive, does a lot of value-added tech or pharma work or something, then France might make sense as you have a a fantastic ecosystem to work with and grow your business, not easily available elsewhere. You can live abroad and have a good reason to want to operate in France. But if your business is simpler and not so labour/capital intensive, perhaps there are other jurisdictions worth looking at.
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Thanks a lot again for the help. I have never set up a company before hence I thought that starting out of France would make the most sense as I just want to get the ball rolling and start focusing on the actual operations and client management.

The services provided are entirely manageable from anywhere in the world. As an example my previous company I was employed at (a competitor in the space) ran with just one headquarter office in Asia and some very small offices in various countries to have a basis to hire people there locally but that was it.

To be honest, I have never worked in France (I was living overseas from 2014 to 2022) and I do not even know how long I will stay in the country (probably at least a year, but I might join my partner in Bali or UK for a couple of months this year and I do not know where life will take me afterwards...).

I thought that opening a company in France would be the easiest, like you said a lot of the services are rather cheap (accounting, corporate attorneys etc). If I ever feel like I need to move the business to another country in 1 or 2 years, are there any inherent issues with that or is it manageable?

 

[thomasparra]

Thanks a lot again for the help. I have never set︊ up a company before hence I thought that starting out of France would make the︋ most sense as I just want to get the ball rolling and start focusing on︌ the actual operations and client management.

The services provided are entirely manageable from anywhere in︍ the world. As an example my previous company I was employed at (a competitor in︎ the space) ran with just one headquarter office in Asia and some very small offices️ in various countries to have a basis to hire people there locally but that was‌ it.

To be honest, I have never worked in France (I was living overseas from‍ 2014 to 2022) and I do not even know how long I will stay in⁠ the country (probably at least a year, but I might join my partner in Bali⁤ or UK for a couple of months this year and I do not know where⁣ life will take me afterwards...).

I thought that opening a company in France would be⁢ the easiest, like you said a lot of the services are rather cheap (accounting, corporate︀ attorneys etc). If I ever feel like I need to move the business to another︁ country in 1 or 2 years, are there any inherent issues with that or is︂ it manageable?

 

[EliasIT]

exactly what I would have said.⁠ You better incorporate in HK and stay out of France unless you have family tights⁤ there.