Business Start Up - France or UK ?

[Hagar]

Wonder if you good people could give some advise on this. I will be taking full professional advice should I decide to establish in France but your comments/discussion would be useful before getting into the detail with the professionals.

 

I am looking at setting up a new enterprise selling telecommunications equipment and services over the internet. The target market is EEA and EFTA countries – may include Turkey and N Africa.

 

The European based enterprise would be owned and managed by myself. The equipment and services will be bought in through a joint venture established in N America (of which I will be part owner/manager).  Myself , and possibly MOH , would be the only employees for at least the first two years. The project is unlikely to generate any kind of income or profit until the end of the first year.

 

We are moving to France permanently in a couple of months.

 

The big question is – Do I establish the European enterprise in the UK or in France?.

 

I know how to do this in the UK having done similar things in the past.

 

If we establish in the UK – and run it from France – I would assume that I would be tax resident in France but what else do you need to do to be ‘in the French system’ legally. What status would I/we have? What status should I/we register  with the French Authorities.?

 

If we establish in France – what would be the best status for the company  - EI ?, EURL? Or SARL ? . Any pitfalls to avoid?

 

How do the French Authorities view ownership of enterprises (domestic or overseas) that are making money but from which you are not drawing an income.?

 

Any body know of any enterprise agencies in the Languedoc that assist business start ups?

tks

Hagar

[Will]

Do I establish the European enterprise in the UK or in France?.

I think that if you are actually carrying out the work in France you will have no alternative but to register a business in France.

How do the French Authorities view ownership of enterprises (domestic or overseas) that are making money but from which you are not drawing an income.?

With considerable suspicion, would be my guess.

Do, as you so sensibly say you will, try and find a good source of professional advice. This is a potential minefield for those who do not know 100% what they are doing (and for those who do).

[Hagar]

How do the French Authorities view ownership of enterprises (domestic or overseas) that are making money but from which you are not drawing an income.?

With considerable suspicion, would be my guess.

Liked that Will - really made me giggle.!! - And I am sure you are correct.

More seriously there  have been a few posts of late that are saying/implying that it is legally possible to operate a UK registered business in France. - Partly the reason for my post .

In his book "Starting a Business in France" Andre de Vries clearly states he believes it is possible although the example he gives is a couple running a Ski Chalet business in France whilst remaining tax resident in the UK. My position would be the reverse - running a company in the UK whilst tax resident in France.

rgds

hagar

 

[Will]

I'm not an expert on the subject, having only my own experience to draw upon.

The Andre de Vries example has been mentioned here before - probably too far back to appear in a search. Because tax residency qualifications are different for France and UK it is possible to be tax resident in both countries simultaneously. It is quite feasible that if you have a business in UK it will be subject to UK taxes and because you live in France you will be taxed in France. This can, of course, work either in your favour or against you, according to how it is set up. A ski chalet is not a particularly good example, because even if it is a registered business in UK your economic activity will be in France so taxable in France.

In most cases, French tax authorities seem to apply the 'bums on seats' rule (for want of a better term - i.e. if you are in France when you are carrying out your work, you are subject to French tax.

In my opinion tax, which most people seem to worry about, is not the greatest problem - UK and France have a dual taxation agreement so although you can either benefit or lose out from adjustments for different tax rates etc, in broad terms you will only be taxed once on any income. Social charges are the main concern; if you want health care etc you cannot avoid paying these (and health cover is compulsory in France - if you are eligible to join the state system, and few people are not, you cannot opt to go private). Even if you set up a subsidiary company in France, and pay yourself a minimum wage from the UK company, you are still liable for social charges. In fact, as at least one forum member (Coco) found, you can be hit for both employer and employee contributions which will more than cancel out any potential tax savings.

You can use EU systems to delay joining the French tax and social security system. Note the word 'delay' rather than 'avoid'. Even then, despite what Brussels may say, if you intend to stay permanently in France you should be joining the French system from Day One.

It's complicated, and very easy to get it wrong. The French Chamber of Commerce in London has a lot of information about running businesses in France (including subsidiaries of foreign companies) and can put you in touch with professional advisers, which sound as if they will be essential for what you propose in order to avoid very expensive errors.

As you say you are selling, then Agent Commercial status may be appropriate. It doesn't suit all activities - there was a well-publicised court ruling that it wasn't suitable for property sales, which has affected a lot of British people working in France in estate agency. But it could be the simplest solution for you.