In principle, there are no restrictions on foreign investment, but non-EU member states' nationals must obtain prior investment approval to invest in major industries designated by the French government, such as defense and information technology.
Industrial sectors requiring prior approval are constantly expanding.

Foreign companies from outside the European Union (EU) must obtain prior permission from the French Economy Minister when investing in six areas: energy, water, transport, telecommunications, public health, and defense-related companies, facilities, and equipment projects.
Additionally, foreigners (from EU member countries) taking over and merging (M&A) more than one-third of the shares or voting rights of French-based companies also require prior approval.

The Loi PACT Act (Loi PACTe) of the Corporate Innovation and Growth Promotion Strategy Implementation Act, effective since May 2019, included the requirement for prior permission for foreign investment in industries related to public security and safety.
Additionally, prior permission is necessary when investing in research on web hosting services dealing with sensitive information such as aerospace, public safety projects, cyber safety, AI, and robotics.

In early 2020, amidst the economic crisis caused by the spread of COVID-19, the Ministry of Economy announced a policy to strengthen foreign investment sanctions on major French companies by December 31, 2020.
The maximum participation rate of foreign shares in major French listed companies was reduced from 25% to 10%, and the French government would intervene if investments exceeded that threshold.
The biotechnology sector was also added to the existing French strategic industries requiring prior permission for investments.
The French government extended this policy until December 31, 2023.

Application Submission: Foreigners intending to invest in areas requiring prior approval from the French government must submit an application to the Directorate-General of Finance of the Ministry of Economy and Finance (Bureau Multicom 4 / Télédoc 233, 139 rue de Bercy, 75572 Paris Cedex 12).
When applying online, the submission should be made through the email of the Foreign Investment Permit Bureau (IEFautorisations@dgtresor.gouv.fr).

Starting from January 1, 2019, the bill revision allows not only foreign investors but also companies subject to investment to apply for prior permission.

The steps for submitting an application for investment permission are as follows:
If the investor is a corporation, they must provide information that can identify the owner.
If it is an investment fund, information on the operator's identity is required.
For natural persons, residential and identity guarantee documents must be submitted.

Information on the French companies the foreigners intend to invest in should be provided, including company name, address, company registration certificate (K-Bis), sales, operating performance, number of employees, major customers, etc., for the last fiscal year.

Additionally, details such as the total investment size, pre- and post-investment equity and voting rights dividends, information on capital settlement, payment methods (whether foreign capital is transferred, other financial instruments used), and capital and voting rights ownership status before and after the investment must be included.

One copy of the document containing all other required information should be submitted to the Treasury Bureau of the Ministry of Economy and Finance.

COMPANY REGISTRATION: Investors who have obtained prior approval may initiate the company registration process.

Dedicated Institution for Attracting Foreign Investment: The investment department operates within Business France, a trade and investment promotion agency in France.

The government's tax reduction policy (local tax reduction system of the French government and local governments)

The French government is actively creating a tax cut system and an incentive system to attract foreign companies to invest in France.
Corporate tax cuts are a representative policy, and President Macron has announced the abolition of the Corporate Value Added Charge (CVAE), one of the production taxes imposed on companies, from 2022.
The production tax does not include corporate tax and is granted by the local government to which the company belongs.
Corporate value-added charges are in the process of being abolished over a two-year period until 2024. The French government also provides various incentives, including tax cuts, to Research and Development (R&D) companies and innovative startups.

Corporate tax reduction for R&D investment costs (CIR)

Target: All industrial, commercial, and agricultural enterprises, regardless of legal form and size, are taxed according to the actual system, and research can apply for support if development expenditures are carried out.
Contents: 30% reduction in corporate tax for companies with less than 100 million euros in R&D expenses, 5% reduction in corporate tax for companies with more than 100 million euros in R&D expenses, and 50% reduction in corporate tax for investment in French overseas territories (DOM).

Tax reduction or exemption for new enterprises in local development areas (AFR)

Target: Companies in manufacturing, agriculture, services, etc., newly established in the region by December 31, 2023. 50% or more of the capital must be directly owned by the enterprises.
Corporate tax: 100% of profits until 24 months after the establishment of the company, 75% in the third year, 50% in the fourth year, 25% in the fifth year, etc.
Land tax and value-added contributions: Land tax (CFE) and value-added contributions (CVAE) reduced by 100% for two to five years after deliberation by local governments.

Special Zone Employment Enterprise Tax Reduction and Exemption System (ZFU)

Target: Companies with less than 50 employees, including manufacturing, agriculture, and services, newly established in the target area between January 1, 2016, and December 31, 2023, with annual sales of less than 10 million euros.
Contents: 100% corporate tax reduction benefits for the first five years since the establishment of the company, 60% for the sixth year, 40% for the seventh year, and 20% for the eighth year.
Up to EUR 50,000 per year, up to EUR 200,000 per 3 years.

Corporate tax reduction for employed companies in rural revitalization areas (ZRR)

Target: Companies established in the region that have employed at least 11 full-time (CDI) or non-regular (CDD) employees for more than 6 months by December 31, 2023. Limited to companies that directly own 50% or more of the capital. Excluding financial, real estate, and single-person companies, except for the expansion of existing businesses.

Tax Reduction and Exemption (CII) for Innovative Enterprises

Target: R&D companies investing in the European Economic Zone (EEE: l'Economique Europe) among companies with fewer than 250 employees and annual sales of less than 50 million euros by December 31, 2023.
Content: Tax credits for spending on prototype design or production of new products and on pilot installations of new products.
For prototypes or pilot installations, technical performance must be good.
For expenses incurred before January 2023, 20% of expenses incurred up to 400,000 euros per year can be deducted.
For expenses incurred in 2023, the tax deduction rate will be raised to 30%, increasing from 35% to 40% depending on the size of the enterprise.

Cash subsidy based on new employment (QPV)

Target: Full-time (CDI) employees of unemployment benefits recipients in the region until December 31, 2023; non-regular (CDD) employees for more than six months.
Contents: 5,000 euros per employee for full-time employee (CDI) employment (up to 3 years); 2,500 euros per employee for non-regular employee (CDD) employment over 6 months (up to 2 years).Restrictions and Prohibitions (Industry) There is no investment ban; however, it is impossible to invest in projects that harm the social public interest or cause environmental pollution, destroy natural resources, or harm national health or national security without prior permission.
This requirement applies to French domestic companies as well. According to the Act of May 14, 2014 (Decree no. 2014-479), the following five areas require prior permission from the French Economy Minister for direct or indirect investments in third countries that acquire more than one-third of the shares or voting rights of French companies:
Energy sector: electricity, gas, hydrocarbons, and other sources of energy
Water: Water supply-related projects
Transportation: Public transport networks and services
Electronic Communications: Electronic Communications and Services
Public health: any business that affects public health.

France continues to tighten foreign investment regulations, adding industries that require prior permission for foreign investment and expanding the scope of investor regulations.
The Loi PACT Act, which took effect in May 2019, included foreign investment regulations, requiring prior permission when investing in research on web hosting services dealing with sensitive information such as aerospace, public safety, cybersecurity, AI, and robotics businesses.

In cases where permission is not obtained in advance, the level of punishment is as follows:

Double the investment, 10% of the investment firm's sales, €5 million for corporations, and €1 million for individuals as the highest fines. Two-year sentence for forgery of permission, €30,000 in fines The scope of the bill initially applied to direct/indirect managers of companies established in France, managers of some or all branches of French-based companies, and non-EU nationals with more than 33.3% of capital or voting rights.
However, the regulations have been tightened since January 2020, reducing the threshold from 33.3% to 25% of their capital and adding additional industries, such as political or general information media (including online), food safety, energy storage, and quantum physical technology industry. On April 27, 2020, the Minister of Economy announced the strengthening of France's strategic industry expansion and foreign (non-European) investment sanctions on major companies.
This move was part of a French economic relief policy designed to support major French companies facing a crisis due to COVID-19.
The policy reduced foreign equity participation in major French listed companies from up to 25% to 10% by December 31, 2020, and obligated the French government to grant permission if the investment exceeded 10%.
Additionally, biotechnology was added to existing French strategic industries, such as energy, telecommunications, agriculture, space, aviation, transportation, water resources, and medical care, requiring prior permission for investments.
The French government extended this policy for another year, until December 31, 2023.

Cluster Support Policy

France supports companies that move into specific locations through cluster support policies.
French companies and foreign companies in aerospace, automotive, biotechnology, and IT are eligible for support, which are equally applied to domestic and foreign companies. On March 27, 2023, the French government announced the 5th cluster support project, which calls for raising 9 million euros annually to support major R&D projects and innovation platforms from 2023 to 2026, to finance major themed projects. Paris-Saclay, a science and technology industry cluster near Paris, Sophia Antipolis, a science and technology education complex near Nice in southern France, and Simec Industries near the border with Germany are among the representative French clusters.

Île-de-France

• Area: 12,012 km²

• Population: 12.21 million, 18.3% of France's population

• Provincial capital: Paris

• Major institutions: Government, Senate, House of Representatives, Supreme Court, etc

• Major industries: tourism such as services, transportation, finance, hotels, restaurants, real estate, information and communication, and medical, education, public services account for more than 80% of regional industries

• Remark: 431 overseas in 2022Attracting corporate investment projects (7% year-on-year), creating 10,900 jobs

* Source: Ile de France Announces March 2023

Auvergne-Rh-Alpes (also known as Aubergne-Rh-Alpes)

• Area: 69,711 km²

• Population: 66.22 million

• Key industries: machinery, electronics, energy, pharmaceuticals, medical technology, manufacturing, rubber/tyre (Micherin headquarters), plastics, eco-friendly technologies, etc.
  Large retailers Casino, Renault Trucks Renault Trucks, bus manufacturer Iveco, Sanofi Pasteur, Evian Evian and others reside.

• Note: In terms of area and population size, it is the largest city in Europe, the second-largest domestic GDP in France, and the fourth-largest among European cities

Occitanie

• Area: 72,724 km²

• Population: 5.83 million

• Province: Toulouse

• Major industries: agriculture (France's No. 1 bio-agricultural region), wine, aviation (Toulouse Aerospace Valley, Airbus Group resident), R&D (bio industry, aviation industry)

• Note: Major companies such as Airbus, Airbus operation, and Royal Canin, Europe's No. 1 aviation industry city

Le Havre

• Area: 46.95 km²

• Population: approximately 17.24 million

• Province: Haute Seine-Maritime Province in the Normandie region

• Major industries: Previously known for aviation and offshore wind power generation, the current industrial field has developed into various fields such as automobiles, petrochemicals, and chemical industries.

• Vigo: The region's top industrial employer is Renault, followed by the chemical industry sector (a total of 28 industrial facilities produce plastics in the Le Havre region alone).

Moselle

• Area: 6,216 km²

• Population: approximately 103.6 million people

• Leadership: Metz

• Major industries: Previously, it was responsible for the local economy with heavy industry and steel industry, but in the late 1900s, it focused on science and technology and is now famous as a catenom nuclear power plant.

• Note: Located near the border with Germany, the cultures of the two countries tend to be mixed.

A corporation can conduct independent business activities and has the advantage of corporate trust among third parties.
Additionally, when a limited liability company (SARL) or a corporation (SA) is established, limited responsibility is incurred only within the amount of investment.
A corporation is a separate organization, not a part of the headquarters organization under local commercial law.
Consequently, it has the advantage of experiencing relatively few conflicts with tax authorities and the ability to carry over deficits.
Corporations can sign contracts directly based on market matters, surpassing branches in terms of speed and management efficiency.
However, local legal regulations apply, requiring registration in the commercial register and a significant amount of documents for the initial establishment.
Subsidiaries established in France by foreign companies are subject to French law similarly to French companies.
Local corporations include stock companies, joint ventures, limited liability companies, single-person limited liability companies, private companies, simple corporations (SAS), single-person simple corporations (SASU), producer cooperatives (Scop), and associations (Association).
Foreign corporations subject to foreign laws (parent companies) include branches and liaison offices.

Local Corporations: Representative local corporations include Stock Company (SA) and Limited Liability Company (SARL).
In terms of operational structure, a subsidiary in the form of an S.A. (Societe Anonyme) shall be managed by a board of directors consisting of at least two directors.
The nationality of the director is irrelevant, and no residency conditions are required.
The Board of Directors may delegate the right to operate the company on a daily basis to one or more persons.
In the case of a local corporate subsidiary in the form of a limited liability company (SARL), only one director can be granted the right to delegate.
Even if the establishment process for a limited liability company is completed, the CEO must personally assume responsibility until the company's commercial registration is finalized.
The personal responsibilities of the CEO or employee are exempted after the commercial registration number is issued.
Subsidiaries are required to maintain accounting records under French accounting law and prepare and publish annual accounting reports.
According to French regulations, one copy of the annual accounting report must be submitted to the central bank of France.

The branch office is not a separate corporation independent of the headquarters but a part of the headquarters, and the law that applies to the headquarters (national law where the headquarters are located) also applies to the branch office.
Important contract matters should be conducted under the name of the headquarters, making it easier to control, and there is no need for the headquarters to invest capital.
However, since the headquarters must approve major contracts one by one, flexibility and speed are insufficient, and if the branch makes a mistake, the headquarters has to take unlimited responsibility.
Additionally, there is a possibility of friction with local tax authorities regarding how much of the generated income should be considered as local source income.
The branch also needs to register in the commercial register, and the process is complicated, involving translating any foreign language contents of the foreign commercial register related to the headquarters into local languages and going through notarization.
The branch is not obligated to release its own annual accounting report like a local subsidiary, but the headquarters' annual accounting report should be released in the official French language, and the first part should be submitted to the French central bank.
Furthermore, the annual accounting report of the headquarters must be audited and certified according to the accounting laws of the concerned country.
Therefore, there is a disadvantage that the accounting secrets of the headquarters may be exposed.

Branch Registration: In the case of independent branches, commercial registration is necessary, making it generally referred to as a registered branch.
Non-independent workplaces are called non-registered branches because registration is unnecessary, and they can be established only by registering businesses in the competent city hall.
Since an independent branch is regarded as part of the parent company (headquarters), the branch of a foreign company is subject to the foreign laws applied to the parent company.
Since it is a part of the parent company, it is a principle to have the same company name as the parent company.
Of course, it is possible to add a certain phrase to the company name, such as 'French branch' or 'Paris branch.' The registered branch of a foreign company must register with the court of its jurisdiction.
At the time of registration, it must be notarized, and essential documents such as the parent company's recognition of establishment must be attached.
The application must be signed by all directors of the parent company before receiving notarization.
If signed in a foreign country, consular confirmation must be obtained from the French diplomatic mission in that country.
A registered branch of a foreign parent company established in France can directly sign deals or contracts on behalf of the parent company after appointing a delegated branch manager, allowing independent decision-making.
Non-registered branches, on the other hand, cannot make independent decisions.
In the case of independent branches, commercial contracts, including issuing invoices, are possible, while non-independent workplaces can conduct business on behalf of the headquarters, but invoices can be issued only in the name of the headquarters.
However, the debtor for the debt borne by the governor is the headquarters (if the headquarters is an individual other than a corporation, the individual concerned).

Whether to Form a Management Organization: There is no provision stating that there should be a separate management organization other than the branch manager because the branch does not have a corporate qualification.
Similar to a joint venture, the Workers' Council is recognized by labor law, primarily functioning to seek company management advice or provide management-related information to employees.

Other Matters: In the case of branches, the headquarters does not need to invest capital because the headquarters directly bears responsibility for sales.
Although branches have the advantage of being able to conduct business activities compared to liaison offices, there is also a burden of generating appropriate sales due to business activities.
In other words, if significant sales are not generated for several years after the establishment of the branch, resulting in only losses, the frequency of rigorous additional inquiries and tax audits by the French tax office may increase.
This is because there is a significant additional cost to establish a branch office and register it in the commercial register.
For example, if a branch to be established in France must be registered as a branch of a large foreign company, all information on the Commercial Register related to the headquarters must be translated into French and notarized by a notary.
Additionally, unlike local corporations, the fact that the burden of responsibility is not limited to capital is another reason for preferring the establishment of a corporation over a branch.

The liaison office is an appropriate option if you want to assess the local market situation before fully establishing your business.
A liaison office does not need to be registered in the commercial register; you can submit the necessary documents to the Guichet d'entreprise and obtain the company number.
However, even for a liaison office, a business card must be issued by the French government for office registration.
The establishment process is the simplest among the three forms, requiring only the completion of a business report.
However, liaison offices are primarily established for market research, customer contact, research and development, or after-sales (A/S) activities before setting up a corporation or branch office, as they cannot sign sales and transaction contracts.

A liaison office typically refers to a non-profit branch that does not engage in business activities but can conduct various market research, promotion, and recruitment activities, such as establishing contact points and monitoring industrial trends of major customers, supply lines, and buyers.
There is no specific installation procedure, and by reporting the required documents to the French Chamber of Commerce and Industry's Business Procedures Center (CFE), you will receive a company registration number (SIREN and SIRET) from the French Statistical Office (INSEE).
In the event of financial difficulties, the headquarters is responsible for the office's debt performance.
The representative must be a local resident, a European Union citizen, a citizen of an OECD member country, or a citizen of a country that has an agreement with France.
If you employ local staff, you must report it to the Social Security Agency (URSSAF) and pay social security tax.
Additionally, the office must be registered with the corporate tax office in the jurisdiction.

However, if you need to open a bank account, you require a company registration certificate (K-Bis) and must follow the same procedure as branch registration.
In such cases, it should be reported to the local social security institution, and social security tax must be paid.
VAT (at the normal tax rate of 20%, etc.) included in the cost of opening the liaison office and operating expenses may be eligible for a refund.
The liaison office is also obligated to pay taxe d'habitation

The most common form of business environment in France is a corporation with a board of directors and a chairman and CEO.
In France, an SA (Société Anonyme) presupposes a relatively larger scale than a limited liability company, and having a board of directors is mandatory.
The board of directors must consist of at least three to 18 members, including one auditor, and it may delegate operational rights to the management committee.
Additionally, the board of directors operates based on the basic principle of freedom of stock transfer.

This structure is advantageous for companies with substantial potential for listing or internationalization.
A minimum capital of 37,000 euros is required.
If the capital exceeds 225,000 euros, the company is eligible for listing.
During the establishment of a corporation, more than 50% of the capital must be invested and maintained for at least five years.
This initial capital payment obligation provides reassurance to partners such as suppliers, banks, and customers.
There must be two to three promoters (with at least one full-time obligation).
Voting rights are vested in the CEO for daily management issues, while accounting and major decisions are made at the General Assembly.
Share transfers are possible following the company's articles of incorporation or with shareholder consent.

The manager's liability is limited to the amount of investment, except in cases of management negligence.
The chairman and the president are considered salaried workers but are exempt from the unemployment insurance system.
Management remuneration can be deducted from profits subject to corporate tax.
If the company is less than five years old, income tax may be conditionally selected instead of corporate tax.

A limited liability company (S.A.R.L) can be a one-person limited liability company or one with two or more partners.
In the case of a one-person limited liability company, there is only one investor, and the company's liability is limited to the initial promoter.
The decisions regarding the company's operation must be documented.
A single-person limited liability company can enjoy the advantages of a private company.
Since the company's assets and personal assets are separate, it can avoid the progressive tax applied to individual income.

A limited liability company with two or more partners is a private company established with multiple partners, and each partner is responsible within the limit of their investment.
The partners' authority can be transferred only under certain conditions.
In specific situations, a couple may establish a limited liability company with two or more people.
While the duration of the company is generally unlimited, the articles of incorporation may specify a limited duration.

According to Article L232-22 of the French Commercial Act, limited liability companies must provide specific information related to financial statements, rapport de génération, business reports, rapports des commissaires aux comptes, and minutes for registration.
This obligation also applies to société par actions under Article L232-23 of the same Act.

Furthermore, when a company is involved in a specific legal act, it is mandatory to disclose relevant information.
For instance, in the case of a merger or separation, the company must submit a projet de fusion ou de scission to the registry office at its location 30 days before the general shareholders' meeting, as stated in Article L236-6 of the French Commercial Act and Article R236-2 of the same Act.

In the case of private companies, the establishment process is simple, and it can be set up with little capital.
However, unlike a limited liability company, where personal assets and the company's assets are not distinguished, the operator is obligated to be fully and unlimitedly responsible for the company's debt.
Consequently, when a company goes bankrupt, there is a disadvantage in that not only the individual business operator but also the family assets of the business operator are used to pay the company's debt.
Moreover, it is not suitable for foreign investment companies that want to expand their business scope due to a lack of financial liquidity, such as bond issuance or listing.

There are non-collective, civil companies, and Groupement d'Intérêt (GI) management conventions, which are not commonly chosen due to the requirement of unlimited liability between partners in times of poor financial conditions.
However, there is no minimum capital requirement, making it an attractive alternative for subsidiaries because of its high structural flexibility and accounting transparency.
Anonymous companies, which are special types of companies, are being adopted in the construction industry, performing arts, and publishing sectors.
This type of company is simple to establish (no registration required in the corporate business register) and does not necessitate legal notice.
Companies located in two or more EU member states may opt for European company status.
Companies that choose European company status can benefit from the same regulations, unified management systems, and disclosure of financial information.