Foreign company in France: subsidiary, branch or permanent establishment

Branch vs subsidiary in France, or no presence at all: what changes

The table sets out the rules of French domestic law. The tax treaty between France and the State of the head office may change them, particularly for withholding tax: it can be read on our tax treaty atlas.

The corporate income tax rate is the same for a subsidiary and a branch, but the base may differ: the subsidiary computes its own profit, while the branch is attributed the profits a separate enterprise would have made, head office costs, risks and funding included. The difference lies mainly in the withholding tax on repatriated profits, in the parent company's liability and in the treatment, in the State of the head office, of the branch's start-up losses, which depends on that State's law and on the treaty.

Attributed profits and the article 115 quinquies withholding

The branch's profit is computed under French rules, from accounts recording the transactions carried out in France. It bears corporate income tax at the standard 25% rate. The share of head office overheads relating to the French activity is deductible if it is justified and allocated on a consistent key: this is the subject of our analysis of management fees and head office costs.

The branch tax (a deemed-distribution withholding tax, not a separate tax). Profits made in France by a foreign company are deemed distributed, each financial year, to non-resident partners or shareholders (CGI, art. 115 quinquies). The base is the profit, taxable or exempt, after corporate income tax; the rate is that of the withholding tax on dividends paid to a legal person, i.e. 25% (art. 187, 1, which refers to the standard rate of art. 219, I). The withholding does not apply to a company that has its seat in a State of the European Union or the European Economic Area and is liable to corporate tax there without option or exemption, including any exemption specific to those profits. The company may obtain a refund of the withholding to the extent that it exceeds its actual distributions, or to the extent that the recipients of those distributions are established in France; a company with its seat in the EU or EEA may also obtain it for the amounts not disinvested outside France (art. 115 quinquies, 2).

The effect of treaties. Many treaties cap this withholding at the dividend rate, or remove it. The France-United States treaty, for instance, caps it at 5% and removes it entirely only for companies meeting the stricter conditions of its article 10, including the limitation on benefits tests (BOI-INT-CVB-USA-10-30). The treaty must therefore be read before comparing a subsidiary and a branch.

Theoretical illustration. A branch makes a profit of EUR 1,000,000. Corporate income tax at 25% amounts to EUR 250,000; the article 115 quinquies withholding applies to the remaining EUR 750,000, i.e. EUR 187,500 at 25%, or EUR 37,500 if the treaty caps the withholding at 5%. It would be nil for a company established in the European Union and subject to corporate tax there.

Registration, tax representative and reverse charge

• The subsidiary and a branch with resources. The subsidiary is a taxable person established in France. So is the branch where it is a fixed establishment for VAT purposes, a European concept based on its own human and technical resources and distinct from the corporate income tax permanent establishment: see our page permanent establishment and VAT.
• Reverse charge by the customer. Where a taxable person established outside France supplies goods or services taxable in France to a customer who is a taxable person identified for VAT in France, the tax is in principle paid by that customer (CGI, art. 283, 1, second paragraph); for business-to-business services located in France under the general rule of article 259, 1°, the tax is due by the recipient (art. 283, 2). A foreign company that sells only to businesses may therefore have no French VAT to report.
• Registration. It becomes necessary as soon as the company carries out transactions for which it remains liable: sales to consumers, stock held in France, intra-Community acquisitions, letting of real estate with the option for VAT. Non-established businesses fall under the tax office for foreign businesses (service des impôts des entreprises étrangères).
• The tax representative. A company established outside the European Union that is liable for VAT or has filing obligations must in principle appoint an accredited taxable representative established in France, who undertakes to complete its formalities and pay the tax (CGI, art. 289 A). The obligation does not apply, in particular, to companies established in a State bound to France by a mutual assistance instrument for tax recovery, listed by ministerial order, nor to those carrying out only certain transactions under VAT suspension or certain energy supplies for which the purchaser is liable. Without a representative, the tax and penalties are due by the customer.
• 2027. These rules are recodified in the Code of taxes on goods and services (CIBS) from 1 January 2027 (article 49 of Ordinance No. 2025-1247 of 17 December 2025, as amended by Ordinance No. 2026-671 of 27 July 2026); the CGI references given here are those in force in 2026, and the tax representative will then fall under Chapter II of Title V of Book I of that code.

Dividends, interest, royalties and services paid abroad

• Dividends (CGI, art. 119 bis, 2 and 187). The withholding tax is, as a general rule, 25% for a corporate recipient (certain EU or EEA non-profit bodies benefit from a reduced rate), 12.8% for an individual and 75% for income paid in a non-cooperative State or territory within the meaning of article 238-0 A CGI. It does not apply to dividends paid to an EU or EEA parent company that is their beneficial owner, has held at least 10% of the capital for two years or undertakes to keep it (5% where it cannot credit the withholding), and is not part of a non-genuine arrangement (art. 119 ter). Treaties reduce the withholding, subject to residence and beneficial ownership; the Conseil d'État accepts that the benefit may be denied to a mere apparent recipient even without an express clause (CE, 8 November 2024, No. 471147).
• What changed in 2026. Since 1 January 2026, dividends paid to residents of States whose treaty provides for no withholding, or exempts from it, without any minimum holding requirement, bear the withholding at the time of payment; the recipient then obtains a refund by proving that it meets the treaty conditions (CGI, art. 119 bis A, II, introduced by the 2025 Finance Act). The tax authorities currently list nine treaties: Saudi Arabia, Bahrain, Egypt, the United Arab Emirates, Finland, Kuwait, Lebanon, Oman and Qatar (BOI-INT-DG-20-20-20-30). Details, and the refund of withholding contrary to EU law, are on our page withholding tax on non-residents' dividends.
• Interest. Interest paid to a foreign lender, for instance on a parent company current account, bears no withholding in principle, unless it is paid in a non-cooperative State or territory (75% levy, CGI, art. 125 A, III). Its deduction by the subsidiary remains limited by the interest rate and net borrowing cost rules (art. 39, 1-3° and 212 bis).
• Royalties and services (CGI, art. 182 B). Intellectual property royalties, fees and services of any kind supplied or used in France, paid by a debtor carrying on business in France to a company with no permanent professional installation in France, bear a withholding at the standard corporate tax rate, i.e. 25%, on the gross amount (10% allowance for EU or EEA companies), and 75% in a non-cooperative State. Royalties between associated EU companies are exempt, subject to conditions of legal form, holding and duration (art. 182 B bis, referring to art. 119 quater), and treaties usually remove the withholding on services, which fall under business profits. See our page withholding tax on royalties and services.
• Dividends received by the French company. Where the subsidiary itself holds shareholdings, the dividends it receives fall under the parent-subsidiary regime, with the add-back of a share of costs and expenses: see our page parent-subsidiary regime add-back.

What must be filed, depending on the form chosen

• Registration. The subsidiary registers with the Trade and Companies Register through the single business formalities portal; the branch is registered as an establishment of the foreign company. Both file a corporate tax return and pay corporate tax instalments.
• Local business taxes. A subsidiary or branch with premises in France is liable for the business property contribution (CFE); the business value added contribution (CVAE) applies to businesses with turnover above EUR 152,500, only results in tax above EUR 500,000 and is being gradually abolished.
• Real estate held by a foreign company. Rents from a French property are taxable in France, and the capital gain on its sale bears the levy of article 244 bis A CGI: 25%, on a gain computed under specific rules (acquisition price of a built property reduced by 2% per full year of ownership), except for a company resident in the EU or in an EEA State bound to France by an administrative assistance agreement, other than a non-cooperative State, which follows corporate tax rules.
• Annual 3% tax (CGI, art. 990 D). Any entity that owns real estate located in France, directly or through intermediate entities, owes each year a tax of 3% of its market value. The exemptions of article 990 E cover in particular entities whose French real estate assets represent less than 50% of their French assets, excluding property used in a business other than real estate, and entities whose shares are subject to significant and regular trading on a regulated market. For entities with their seat in France, in the European Union, or in a State bound to France by an administrative assistance agreement or a non-discrimination treaty, further exemptions apply, notably where the entity's share in French real estate or real estate rights is below EUR 100,000 or 5% of their market value, and the exemption requiring an annual report, by 15 May, of the properties and of the shareholders holding more than 1%. A foreign company unaware of it often accumulates several years of tax: see our page French 3% tax on real estate held by entities.
• French real estate wealth tax. Individual shareholders of a foreign company holding French real estate may, subject to conditions, be liable for IFI in proportion to their holding, depending on the nature of the assets and the deductible debts: see our page French wealth tax for non-residents and foreign companies.