Investor considerations

Tax holidays are available for location in enterprise zones.
Tax concessions are also available.
Grants are available for both industrial and nonindustrial operations.
It is possible to obtain favourable loans for capital investment.
Some subsidised building is available.
Export financing or subsidised loans are available.
Two free-trade zones have been established.

Investment policy

Recognising the economic benefits arising from foreign investment, particularly with respect to the creation of employment, France actively encourages investment from both EU and non-EU nationals and enterprises.

French government policy is very favourable to foreign investment and actively solicits and aids foreign investment projects. The principal investment incentives take the form of subsidies or loans at preferential interest rates. Projects may be developed in co-operation with DATAR, the Regional Development Agency, which can provide important information regarding business operations in France and which can assist with site selection, administrative formalities, searches for French co-venturers, and the obtaining of local financing. All decisions regarding the amount of aid to be granted are made on a case-by-case basis, depending on the impact of the proposed investment on the economy and employment. Investments creating employment in regions of high unemployment and in state-of-the-art sectors of the economy are particularly welcome.

Investment is encouraged in industrial sectors, scientific and technical research operations and certain nonindustrial activities, such as management, engineering, consulting, and data processing. Incentives are available for companies setting up in most regions of France, with the notable exception of Paris. Both tax and nontax incentives are available.

Tax concessions

Tax holidays are available for new companies investing in one of the three newly created enterprise zones. Furthermore, tax credits are available for companies created in the two privileged investment zones in the north of France (see below). In other regions, companies may obtain a partial or total exemption from the local business tax for up to five years, a reduction of registration taxes and accelerated depreciation on new construction. As these regulations tend to change, current information should be obtained.

Regional incentives

Regions affected

For industrial operations, development grants are available in most parts of western and southern France, including Corsica, in some industrial areas of the Northeast and Southwest and, exceptionally, in other areas experiencing particularly severe unemployment. For non-industrial and research operations, grants are available anywhere in France except for the greater Paris and Lyon area.

Various tax concessions are available in most parts of France. Enterprises meeting certain eligibility criteria that establish operations anywhere in France may obtain loans at preferential interest rate. Many regions and cities offer supplementary investment incentives, which are established on a case-by-case basis.


These investment incentives are available to all investors, whether French or foreign, on the same terms.

Tax incentives

Available tax incentives take the form of tax holidays (up to ten years in the three enterprise zones, see below), tax credits for the amount of industrial investment in the privileged investment zones, (see below), exemptions from local business taxes, reduced transfer taxes, accelerated depreciation, and duty-free imports in the two free-trade zones, (see below).

Nontax incentives

Nontax incentives take the form of grants and loans at preferential interest rates. DATAR provides job training subsidies.

DATAR has grants available, known as the PAT ("prime d'amenagement du territoire"), in the amount of FF35,000 to FF50,000 per job created, up to a maximum of 25 percent of the amount invested, for industrial operations in one of the development zones, provided there is a minimum investment of FF20 million by a business having turnover of at least FF300 million or which is controlled (50 percent) by a business having at least this turnover, and provided at least 20 permanent jobs are created within three years. The PAT is also available when existing activities are expanded by the creation of 50 new jobs or the creation of 30 jobs and a 50 percent increase in existing personnel. Finally, the PAT is available for research and related activities.

Two decrees of January 19, 1988 allow the regions greater freedom in determining the amounts to be granted to business.


Dividends remitted to foreign shareholders are subject to withholding tax at 25 percent unless reduced by a tax treaty. For corporate shareholders in a country with which France has a tax treaty, this tax rate depends on the percentage of ownership in the French entity paying the dividend. Dividends distributed to a parent company, having its place of management in the European Union, are exempt from withholding tax if the recipient has held at least 25 percent of its French subsidiary for two years. This exemption is, however, subject to formal conditions.

The after-tax profit of a branch is deemed to be automatically distributed to its foreign head office and is therefore subject to a withholding tax of 25 percent or the reduced treaty rate. This withholding tax may be avoided where, for example, the foreign head office undertakes not to distribute dividends during the next fiscal year. Where this undertaking is made, no withholding tax is payable even when the branch's after-tax profits are actually remitted to its foreign head office.

There are no restrictions on reinvestment of unrepatriated earnings.

Industry incentives

Industries affected

Development grants are available for manufacturing, scientific and technical research enterprises and for certain other activities, such as management, engineering, consulting, and data processing. Investment in the steel, textiles, clothing, shipbuilding, glass, powdered milk, butter, sugar, and isoglucose industries is discouraged.

Special-use companies

Special purpose companies exist to be used as channels for certain business activities (e.g., real estate, agriculture and investment). Other forms have been created to respond to specific needs (e.g., the promotion of employee-owned companies, the encouragement of regional investment). These companies are governed by special legal and tax regulations.

Enterprise zones

Three special enterprise zones ("zones d'entreprise") are located in Dunkirk, Toulon-la-Seyne and Aubagne-la-Ciotat, regions greatly affected by unemployment. Enterprises established within the first five years of the zones' existence (i.e., before February 15, 1992 or July 16, 1992) that meet certain criteria, automatically benefit from a ten-year tax holiday and certain other benefits.

Privileged investment zones

In May 1993, two privileged investment zones ("zones d'investissement privilegie") were created. These zones are located in Bassin Minier and Sambre Avesnois in the north of France. Enterprises established between May 14, 1993 and May 14, 1988 benefit from a tax credit of 22 percent of the amount of the industrial investment realised for thirty-six months after the creation of the company. This tax credit can be deducted from the amount of the corporation tax due for ten years.

Free-trade zones

Free-trade zones ("zones franches") have been established in France in Gex and Haute-Savoie. Merchandise may be imported duty free to these zones. As goods may also be imported duty free through the use of bonded warehouses or the temporary admission procedure, free-trade zones are not extensively used by foreign companies.

International financial centre operations

Holding and investment vehicles

Special rules are not applicable to holding companies, except for those with assets that consist of substantial shareholdings in foreign companies. Nevertheless, given the favourable tax treatment of dividends received by French parent companies (see other articles by the same author on this database relating to the special tax regime for French holding companies) and the network of income tax treaties concluded by France, some of which contain especially attractive matching credit provisions, the establishment of holding companies in France may be advantageous.

Regional headquarters

Subject to a tax ruling, corporate income tax on a headquarters-type operation can be limited to the headquarters' expenses plus an uplift of 8 to 10 percent. Further, expatriates employed by the headquarters operation may also be eligible for favourable tax treatment in the nature of exempt allowances or allowances added to the taxable income of the headquarters and exempt from personal income tax.

Tax haven activities and offshore operations

France's legislative structure does not qualify it as a tax haven or permit offshore operations, but because of the territorial rules and an extensive tax treaty network, France may be an interesting country from which to conduct foreign operations.

Export incentives

Subsidised medium- and long-term loans are available to exporting companies if they meet certain minimum criteria in terms of volume and growth of export sales. Supplier credits, designed to assure cash-flow financing, are available for companies with long-term foreign obligations.

The "Compagnie Francaise d'Assurance pour le Commerce Exterieur" (COFACE), a company 50 percent controlled by the French government, insures loans made to foreign purchasers of goods to promote the export of goods of French origin. Creditors may insure against political, commercial, foreign exchange, and/or catastrophic risks.

Incentives to invest in other countries

Loans with preferential rates as well as tax deferral are available to French companies investing abroad. Long- and short-term loans are available from the "Caisse Centrale de Co-operation Economique" (CCCE) for investments designed to aid one or more of 40 countries which, for the most part, are located in Africa.

Long-term, low interest rate loans are available to assist commercial or industrial investment outside France as long as the proposed investment is projected to increase France's exports. These loans are known as "Prets de Developpement des Investissements a l'Etranger" and are available through the "Credit National" and the "Credit d'Equipement des Petites et Moyennes Entreprises".

An investment counsellor should be consulted to obtain further information regarding such investment incentives.

Incentives and foreign investment strategy

French government policy welcomes foreign investment. All of the various incentive programs available to French-owned companies are also available to foreign-owned business entities. As international trade has grown on a global scale, so too have the import/export and international investment opportunities in France.

For additional information, please contact Gilles Herreman, Price Waterhouse Paris, (33)(1)41-26-40-22.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.