The principle of corporate tax for foreign companies in France
French corporate income tax (IS) is governed by the territoriality principle: a foreign company is in principle only taxed in France on the profits it generates there. Unlike some countries that tax worldwide income, France only taxes foreign companies on their activity carried out on French territory.
This principle is set out in Article 209 of the French General Tax Code (CGI) and is framed by bilateral tax treaties signed by France with more than 130 countries. These treaties define precisely the conditions under which a state may tax the profits of a company resident in the other contracting state.
Permanent establishment: the central criterion for liability
The concept of permanent establishment lies at the heart of a foreign company's liability to French corporate income tax. It refers to any fixed place of business through which a company carries out all or part of its activity durably on French territory.
The following generally constitute a permanent establishment:
- A management centre, office, branch, or agency located in France
- A factory, workshop, or production facility established on a lasting basis
- A building or construction site lasting more than 12 months (threshold may vary depending on treaties)
- A dependent agent residing in France who habitually concludes contracts on behalf of the foreign company
- A storage warehouse where the company directly manages orders and deliveries
In contrast, mere storage of goods, purchasing goods, or collecting information on a preparatory basis do not constitute a permanent establishment, provided these activities do not form a complete commercial cycle.
| Situation | Permanent establishment? | Corporate tax applicable |
|---|---|---|
| Permanent office with salaried staff | Yes | Yes, on attributable profits |
| Amazon FBA warehouse (without direct management) | Generally no | No (VAT only) |
| 18-month construction site | Yes | Yes |
| Independent agent in France | No | No |
| French SCI owned by a foreign company | No (separate entity) | IS on property income/capital gains |
Reporting and payment obligations in France
When a foreign company is subject to corporate income tax in France, it must fulfil a set of reporting obligations with the competent French Tax Office (SIE), generally the Directorate of Large Enterprises (DGE) for significant foreign companies.
The main obligations are as follows:
- Corporate tax return (form 2065): to be filed within 3 months of the close of the financial year. It details the taxable profits in France attributable to the permanent establishment.
- Payment of corporate tax: by quarterly instalments (15 March, 15 June, 15 September, 15 December) calculated on the basis of the previous year's tax, with a final payment at year-end.
- Withholding tax: certain income paid to foreign companies (dividends, interest, royalties, certain services) may be subject to withholding tax in France, the rate of which varies depending on applicable tax treaties.
- 3% tax on property: foreign entities owning property in France are subject to this annual tax, unless they file a declaration (form 2746) disclosing their shareholders.
Special cases: foreign SCIs, holding companies, and e-commerce
Certain foreign structures are subject to specific corporate tax rules in France, independently of the permanent establishment concept.
SCIs and property-asset-heavy companies: a foreign company whose assets consist mainly of French property is considered a property-asset-heavy company. Capital gains realised on the sale of its shares are taxable in France, even if the company has no permanent establishment. It is also subject to a 33⅓% withholding tax (a reduced treaty rate may apply).
Foreign holding companies: a foreign holding company receiving dividends from French subsidiaries may be subject to withholding tax in France on this income. The statutory rate is 30%, reduced under tax treaties or the Parent-Subsidiary Directive for European holding companies.
E-commerce sellers and storage: a foreign seller storing goods in France through a third-party logistics provider (3PL) generally does not constitute a permanent establishment. Their tax obligations are limited to French VAT. However, if they directly manage a warehouse with staff, the question of a permanent establishment arises.
To secure your position, particularly if you have a commercial presence in France, consulting an accredited professional is recommended. DGFiP-accredited tax representatives can advise you or refer you to the tax counsel best suited to your situation.