Starting a Business in France – Andre de Vries

[Diana]

ISBN 1 85458 306 9

We have finally started to put things in motion to start a business in France and I am trying to establish what is the best type of structure for us.  I fully take on board we must be legal, registered and pay our taxes on contributions.  I have read the above book which gives a good overview to starting a business in France and would like to now if other people have gone done the route suggested on page 133.  I will summarise the main part of the article but quote verbatim the key points.

 

An English couple set up a Ski Chalet business in 2000, offering a complete package of accommodation, transport to the lifts, rental of equipment etc. 

 

“After consulting Ed Mannix of London Overseas Consultancy the conclusion was that we should set up a UK-based company.  We rent the property to the company and draw our salary from the company.  We remain tax resident in the UK and make our social security contributions in the UK.  The chalet runs for four and a half months of the year.  The rest of the year the company occupies the chalet, which means us of course.

 

Although the business structure may appear a bit strange, it is used by a lot of people in this type of business.  It means that you do not have to deal with the French system very much. The most we have had to do was to get a French restaurant and drinks licence.  The money we earn in France is taxed in the UK as Foreign earned income.”

 

We do not intend to sell our UK house and my husband will still continue with his UK business for some of the year. Does anyone have first hand experience of this?

 

Thanks

 

Diana

[BJSLIV]

 

Irrespective of detailed considerations, a few top of the head reactions.

Presumably you pay tax in France on the rent of the property to the UK company.

If the company is then the tenant of the property, you would be setting yourself up for thy UK IR to tax you on the benefit in kind of using the property.

When any local inspections take place yuou could have real fun explaining to the Gendarmes that you are really supplying breakfasts in the UK.

When you need local help, who would employ the cleaners etc?

[Will]

I am certainly not a qualified lawyer or accountant, but my understanding, backed up by experience, is that if you are working in France for a foreign-based company, then you have to set up a French subsidiary of the UK company, and pay social charges etc as employees of that company - which unless you are very careful can mean that you effectively end up paying twice in France, as employee and employer, as well as possibly being liable for taxes etc in the UK.

There are ways under EU law in which you can work in other EU countries while resident in another, but surely in this type of case as your main economic activity is in France, then the French authorities would be bound to regard you as French resident under the tax residency qualifications.

I don't know how old is the book to which you refer, but would suggest that maybe the information is based on outdated legislation? Something along the lines of what it suggests used to be frequently recommended in publications like French Property News and on web sites (though it was never easy to set up, as I understand it) but the loophole has been closed now.

[Diana]

Will

The book was published in April this year and has many references to legal acts of 2003 and 2004 so I think it is up to date.  I am not saying this is what I want to do I just want to understand how it works so I can make a choice.  While my husband is still working in the UK anything I earn will be a small part of our income and the majority of our assets will remain in the UK. 

If this is a little used or understood but completely legal option it could be of use to others.  I just want to make sure what I do is the right option for me.  I just found the couple I mentioned website and have emailed them to see if they can suggest a professional who is qualified to advise on which route to take.

Diana

[Nick Trollope]

Having delved very deeply into this (we are in a similar situation) I have to say that I am not convinced. The USSARF and my (French) accountant say that this approach is illegal. It can be "legalised" for a "one-off" project (as we are doing), but for run of the mill, day-to-day, cliche-to-cliche work, then you must be registered with the French authorities. Fin.

What I also fail to understand is why, when people up sticks and move 1/2 way across Europe, knowing (and I am sure that everyone knows) roughly how the system works, they try to con the French out of what is their rightfully theirs. If you want to avoid taxes, move somewhere third world, buy an AK47 & you can steal from, or con whosoever you wish, 'till they shoot you...... Or stay in the UK, 'till someone shoots you.

 

 

[fatboyslim]

Your attitude leaves me in despair.  Stay in England! 

[Nick Trollope]

[quote]Your attitude leaves me in despair. Stay in England![/quote]

Who's attitude? This forum layout does not make it very easy to know who you are referring to (unless you "quote").

[fatboyslim]

sorry for not making that clear, Diana why would you want to move to France and continue to live under another countries tax system.

I have lived in France for 12 years and as time goes on I hear more and more horror stories of English people moving to France and not trying to integrate into the French system, both culturally and financially speaking.   When I moved here it was for a change in the way I lived my life and frankly I have no regrets paying more money in tax (even if it is a lit on the heavy side) I have gained in so many other ways.

 

For Diana,  This is what you get for your money

 

The number 1 health service in the world

Public transport that works

Roads without traffic jams(well most of the time)

Cheap housing

Great museums

Wonderful countryside

Wonderful food and wine

But most of all a life changing experience that should (if you want it to) change your perspective on the true values of life.

[Diana]

That is just it, I will not be moving to France, I will spend probably 4 months of the year there and my husband will just visit for holidays.  Our number one home is still the UK, and my husband will continue to work there, he will not be working either in France or from France.  I was not trying to avoid paying tax etc but wanted to make sure I was paying them to the right people.  Having done more research I realise it is not posible to do my end of things from the UK.

I have been emailing the people featured in the report and they where disapaointed that the article failed to mention that they still pay French tax and social charges.  At that point I became totally lost with their strategy and could not see the point of what they where doing by having an UK company.

Diana

 

[fatboyslim]

In that case I apologise for being so arrogant.

[Diana]

Appology accepted.

Diana

[Gollum]

A lot depends on where you are resident for tax purposes (sounds like the UK for you) and where the work takes place (sounds like France). 

If you have a French tax number, or if you know the location of the French tax office that deals with your region, I would suggest that you contact them and ask their advice.  They are legally required to give you objective guidance. 

However, different tax officers will give different (and sometimes conflicting) advice.  That's why it's useful to know your tax number, which will lead to a specific contact person at the Fisc: if you can identify the person who would normally deal with your tax return, then that person's interpretation of the rules should guide your future actions.

If you plan to relocate permanently to France, it's always best to get things set up correctly at the start, to avoid problems later.  Your local Chamber of Commerce (www.cci.fr) can also help.

 

 

[Quillan]

I came accross this artical some time back in "French News" which I have copied and pasted here in case others are interested. It may not fit the situation that Diana is looking at but it does for others. On a personal not the French tax man gave me back all my UK tax then re taxed me at the French rate on the basis that you can't be taxed twice in two different EU member states, anyway here's the artical.

"

Businesses beware	top
Dear Sir, We have been resident in France for fifteen years. We registered as a UK Ltd Co in 1999 thinking we would be legally entitled to work in France under the EEC. All of this company’s income was declared in the UK – our French income from property rental was declared to the French impôts. But in January 2004 we received a recorded delivery letter from the French impôts informing us that we were under investigation for 2001 and 2002. This involved every single transaction that had gone through our bank and we had to account for them all – the impôts had a copy of every cheque we had issued as well as details of every sum of money that had gone into our accounts, both here and in the UK. This was nothing to the dawn raid by three gendarmes a few weeks later who seized our computer. We were forced to cease trading for over three months until our accountant had gone through very lengthy, expensive work in order that we re-start work legally. It transpired that, although all our business was declared in the UK, as we were not registered with the Chambre des Métiers we were considered to be working ‘on the black’. In the UK you only have to make sure the DSS and the Inland Revenue know you are self-employed and the Chambre des Métiers does not exist. There are two points to this story. Firstly, for the French impôts and the Inland Revenue, if you are living and working in France for around 180 days, you are deemed to be resident here for tax purposes and ALL of your income here should be declared to the French. Secondly, in the eyes of the gendarmes, if you are working here at all and are not declared at the Chambre des Métiers then you are working ‘on the black’ and your clients are also liable to prosecution. I had to endure ten hours of questioning at the local gendarmerie and am waiting for the judge to decide if I should be prosecuted or not. We are repaying taxes (at a much higher company rate than in the UK) and sécurité sociale charges. We have had to register a French ‘branch’ of our UK Co as a SARL – not cheap. I am writing because the disclaimer that heads your Small Ads section, whereby you must give your French Siret No. or your UK Co Reg No, is wrong. If you are working over here for the aforesaid amount of days then the UK number is of no use – you must have a French Siret No. In our area 50 extra gendarmes have been drafted in to inspect ads in shops/newspapers and check out all the people offering work! Name and address witheld. By email. This is very relevant as many newcomers seem confused by French business and employment laws. In a nutshell, if your company is based in the UK and your products are sold from the UK in France, then a UK company registered number is sufficient. If, however, you are living and operating here, you must register in France and obtain a Siret number. To address these thorny issues, we will be starting a new ‘How to’ series next month on setting up the commonest types of businesses in France. Meanwhile, the Chambres des Métiers have started issuing a quality ‘A’ label, which can be attached to business vehicles, office premises, stationery..... and adverts. It guarantees that the artisan has the necessary qualifications for the work he advertises. – Ed.

 

[Later]

Quillan  That is a very intersting article. Forgive me for being so tedious, but let me see if I understand all this.

If you earn your living from your own UK Ltd company (in my case we sell things over the Internet), but you are fiscally domiciled in France, then one legal option is to set up a French "branch" of that company as a SARL (... but this is expensive - how much is expensive?). 

And

if you are living and operating in France, you must register in France and obtain a Siret number.

And

You must register with the Chambre des Métiers otherwise you will be considered to be working illegally outside the French regulatory system and you will be deep in the doo doo.

Another point made is that ALL of your income in France should be declared to the French.

I presume this exludes the profits of one's own UK Ltd company in the UK.  That is, given above, a UK company's profit is not subject to any French tax if that UK Ltd company pays UK corporation tax (remember a UK company (Ltd) is a separate legal entity to the people who own the company) and if (i) no dividends are paid and (ii) the company's profits stay in the company's UK bank account?  

What I'm getting at is, is it possible to draw a minimum income through a French "branch" of your UK Ltd company and leave the profits in the company in the UK, under the more friendly British tax regime, possibly with a view to extracting those profits at a later stage by selling the company thereby being only subject to Capital Gains Tax in France - which if you've owned the company for more than 15 (or 22?) years will be zero.  Surely that option must have been stamped on many years ago?

[zeb]

Sorry Later but you have to declare your global income to les impots even if you have paid tax on income or investments in another country.

[Later]

Thanks Helen 16, but what I'm not clear about is whether, through some strange twist they would nail me for leaving profits in my British company.  This is not money paid to me, but paid to my company.  I am not my Ltd company and my Ltd company is not me even though I own most of the shares (this is the subject of most first business law lectures  ) so if the money stays in the company, then I have not received it and I am not liable to pay French tax on it.   

Does anyone have a veiw on this?

 

[Quillan]

[quote]Quillan That is a very intersting article. Forgive me for being so tedious, but let me see if I understand all this. If you earn your living from your own UK Ltd company (in my case we sell things o...[/quote]

To be honest I don't know the answers to your questions as I have not gone down this route and have no interest in it. The reason for my post is that it seemed rather interesting in view of the original post and one or two others that have asked about this sort of thing. It just shows that how ever apt you think you are at circumnavigating the system you get found out in the end and have to pay up.

In Diana's case, as somebody said, it would be best for her to go visit the HOI and ask them. I know she mentioned a bokk, we bought a book about B&B's wich was 'up to date', well it wasn't. Also you have to take in to account the interpretation of French law in each department. I think we have all come accross this one at times, two different departments interpreting the same law but in different ways.

[Will]

A couple of points.

Residency qualifications for tax purposes are different for France and UK. Under some circumstances you can be resident in both, and this can be to your advantage as well as to your disadvantage. 'Domicile' is different - this is something much more set in stone and doesn't change like residency.

Where a dual taxation agreement exists, as between UK and France, if you have already been taxed on a certain income in one country you won't normally be taxed on it a second time in another (beware - there are a few exceptions). That doesn't remove your obligation to declare all world-wide income in France if you are resident in France. You can make a 'nil' tax return in France and people are generally advised to do this if you can, as this helps establish tax residency for the purpose of capital gains etc.

If you play by the book you have little to worry about. However if you try to pull a fast one you can expect to get unsympathetic treatment, particularly from the French authorities. Gendarmes aren't likely to get involved in a routine controle but a report of evasion or black-marketeering will usually result in an unwelcome visit from les flics; their powers and duties are more far-reaching than the English police.

 

[Le Jardin]

Sorry but I can;t work out how to post a new forum. Doh, stupid me.

I am trying to deal directly with (French or UK) wholesalers (ideally) of French artisan products - crafty, gift type items that are quitessentially French. Any ideas of a central source of information or even som enames of suppliers? The sort of things I'll be selling will include zinc planters, rusty iron furniture and planters, organic soaps, foie gras, painted garden lanterns, vintage style clocks etc.

Any help or redirectrion gratefully appreciated.