The following article is intended to provide the potential foreign investor with a broad overview of the investment climate in France.

Investor considerations

Government is receptive to the inflow of foreign capital.
Profits and capital may be repatriated.
Significant presence of foreign-controlled companies.

Investment climate

Government attitude toward foreign investment

The French government is favorably disposed to foreign investment in most economic sectors. It reserves the right, however, to approve each investment, even those made from EU countries, and, where deemed politically or economically advisable, to find an alternative "French solution." If a direct investment application of a foreign investor is refused, this is generally because the potential investment is in a sector related to national defense (e.g., armaments) or in a sector considered to be strategic to the economy (e.g., semiconductors). (See "Restrictions on foreign investment and investors in France" by same author in this database). All types of legal vehicles are available to foreigners, as are tax and nontax incentives (see "France: Investment Incentives--An Overview" by same author in this database). Provided taxes are paid and formalities are met, after-tax profits and capital may be repatriated without significant difficulty.

According to statistics compiled by the Ministry of Industry, at January 1, 1992, there were 2,564 foreign-controlled French companies (i.e., more than 50 percent of the company's capital was held by foreigners).

On a per country basis, the United States is the principal investor. There has been a substantial increase in Japanese investments since 1980. France now ranks second in Europe (after the United Kingdom) for Japanese investments; there are 80 industrial units. The main industries include electronics, engineering, chemicals and pharmaceuticals. Investments are commonly carried out through joint ventures with French companies (e.g., Toroy and Elf, Toshiba and Rh"ne-Poulenc, JVC and Thomson) or takeovers (e.g., Dunlop by Sumitomo) or the creation of new companies (e.g., Canon).

Trade policy

The government's trade policy is essentially based on the principles of free trade. The liberalization of foreign exchange controls is but one indicator. As a member of GATT and the EU, much of France's trade policy in terms of customs duties and tariffs is established in cooperation with these supranational organizations.

Taxation policy

The tax consequences of foreign investment are discussed in more detail in other articles on this database. France offers tax concessions that are available to both domestic and foreign investors.

Local competitor attitude toward foreign investment

As is normal in any market, businesses prefer not to see competitors, foreign or otherwise, enter the market. Official government policy sanctions such actions as discriminatory pricing designed to prevent access to markets.

Labor attitude toward foreign investment

Provided employment opportunities are created, the French work force is receptive to foreign investment and management.

Planning guide for the foreign investor

National and local government policy considerations

Foreign investment is welcome in nearly all industries (see above). Incentives are available.

Investment possibilities/restrictions

Foreigners may wholly own companies or may form joint ventures with French investors. Certain sectors are closed to foreign investors.

Prior registration or approval

Many types of foreign investment must be approved by the Ministry of Economy, Finance, and Budget (see "Restrictions on foreign investment and investors in France" by same author in this database).

Possible business structure

All types of business structures are available (see other articles by the same author on this database relating to business entities in France). In general, branches are not favored in that they do not protect the foreign head office.

Setting-up or acquiring

It may be advisable to acquire a French company with pre-existing facilities and sales network rather than to establish a new business, but undisclosed liabilities are a major concern. The French generally accept acquisition audits and U.S.-type acquisition contracts.

Investment incentives

The government-offered incentives can be very attractive and are available to foreign investors (see "France: Investment Incentives--An Overview" by same author in this database).


Many coastal regions have high unemployment rates, making for a sufficient supply of available labor, and benefit from special government programs rewarding investment in these regions (see "France: Investment Incentives--An Overview" by same author in this database).


Local funds are available through traditional financial institutions or the local capital market (see other articles by the same author on this database relating to sources of funds in France).

Repatriation of capital and profits

Capital and after-tax profits may be repatriated.

Tax planning considerations

Tax considerations and disclosure requirements are always highly relevant to any foreign investment (see other articles by the same author on this database relating to taxation of foreign investors in France).

Labor and labor costs

Labor is widely available. Social charges are rather high, thereby increasing the relative cost of labor (see other articles by the same author on this database relating to labor relations and the social security system in France).

Market studies

Market studies are advisable before committing a large investment in France.

International financial centre

France has concluded over 80 tax treaties, many with matching credit provisions. France also encourages the establishment of regional headquarters, offering special tax incentives for companies (such as favorable VAT status and income taxation on a cost-plus basis) and for their expatriate employees (such as tax exempt allowances).

Information and assistance

Local Price Waterhouse offices are available for consultation in these matters.


Exchange controls have been significantly liberalised.

For additional information 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.