Foreign corporations are subject to corporate income tax only if they conduct business in France. Business is conducted if it is carried out through an autonomous establishment or if it constitutes a complete business cycle, (transactions that can be considered on the whole as a business, such as the sale and resale of goods). A French registered company is always considered to be a resident, but non-resident parents of French subsidiaries are not directly subject to tax.

Branches (succursales) and other permanent establishments of non-resident companies established in France are subject to corporate income tax at the standard rate on French-source income earned by or attributed to them. Under French law, a French branch of a foreign company is not recognised as a separate legal entity. Therefore it is not a resident of France for treaty purposes and cannot benefit from the French treaty network.

Profits of foreign branches, net of French corporate income tax, are deemed to have been distributed to the shareholders of the parent. If those shareholders are non-residents, the deemed distributions are subject to withholding tax at 25%. This rate is reduced by most existing tax treaties.

Headquarters branches may be eligible for favourable tax treatment.

Portfolio Income
Non-resident companies not conducting business in France are subject only to withholding taxes on passive income.

Dividends paid to non-resident companies are subject to a withholding tax of 25%. For the rules on interest, see Section Resident Corporation. Most existing tax treaties reduce the withholding tax rate.

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. For additional information contact Pierre Knoepfler on +33 (1) 46 93 70 00.
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