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France offers a dynamic business environment with a complex framework of regulations covering legal, fiscal, labour, commercial, and banking aspects. On this page, we provide a comprehensive overview of the essential business regulations in France that entrepreneurs must be aware of and comply with to operate successfully in the country.
Introduction to the French legal system
France has one of the oldest legal systems in Europe, based on civil law, which governs business activity in the country.
Before commencing operations in France, it is imperative that companies comply with the necessary legal and licensing requirements, to ensure they operate within the established legal framework.
These requirements include the formal registration of the company, which can be completed through various legal structures, from a sole proprietorship to public limited companies (SA) or limited liability companies (SARL).
The process of establishing a business in France is dependent on the structure chosen. For instance, public limited companies (SA) are required to have a minimum capital and must comply with specific business regulations regarding management and auditing.
It is also crucial to note that French and foreign companies are subject to the same legal rights and obligations, thereby fostering a more transparent business environment.
Taxation in France
For any company wishing to operate in France, it is essential to be aware of and comply with the country’s fiscal regulations. One of the primary taxes that businesses must pay is corporate tax, which has a standard rate of 25% for fiscal years beginning on or after the 1st of January 2022. Additionally, a social contribution of 3.3% is levied on the portion of the tax exceeding €763,000.
Small businesses with gross revenues under €10 million can benefit from a reduced rate of 15% on the portion of taxable income that does not exceed €38,120.
Understanding annual tax obligations and optimising tax structures are vital for companies to comply with the law while maximising profitability.
Other tax obligations include value-added tax (VAT), which has a standard rate of 20%, though reduced rates apply to certain goods and services.
Companies must also consider taxes on capital gains, which vary depending on whether the gains are short-term or long-term. Additionally, special rules may exempt part of the dividends received from subsidiaries.
Business regulations in France: audit and accounting
France’s audit and accounting framework is designed to ensure the utmost transparency and reliability in companies’ financial information. This system is governed by strict regulations with the objective of protecting investors, shareholders, and other stakeholders.
In France, companies are required to adhere to a set of accounting standards that facilitate clarity and uniformity in financial statements. These standards are largely aligned with the International Financial Reporting Standards (IFRS), enabling companies, particularly those operating in both local and international markets, to maintain a globally recognised standard.
Business regulations in France require that each company prepares and submits annual financial reports that include:
- A balance sheet: shows the financial status of the company at a given moment.
- An income statement: details the income and expenses during a specific period, providing a view of the company’s profitability.
- A cash flow statement: offers a summary of cash operations in and out of the company.
Audits verify the accuracy of financial reports and ensure that companies operate within the established legal frameworks.
These audits are mandatory for public companies, public limited companies (SA), and limited liability companies (SARL) that exceed certain size thresholds, defined in terms of revenue, assets, or number of employees.
They must be carried out by suitably qualified and independent professionals who examine the financial and accounting records of the company to ensure compliance with applicable regulations and accounting principles.
Human resources and labour law
The French government has implemented extensive business regulations governing labour standards and human resources practices, with the objective of protecting the interests of both employers and employees. It is essential for businesses to comply with these regulations to ensure proper operations and avoid legal penalties. Below is a brief overview of the relevant business regulations.
Labour laws and hiring
Before hiring an employee in France, it is mandatory to comply with a series of legal formalities. These include submitting the pre-employment declaration (DPAE) to French social security and ensuring that non-EU foreign workers have a valid work permit.
Employment contracts
Employment contracts must clearly detail the working conditions, including the position, working hours, and the duration of the probationary period. To avoid contracts being considered indefinite due to technical defects in their formulation, it is vital that these contracts are drafted in accordance with legal standards.
Working hours and compensation
In accordance with French labour regulations, the maximum number of working hours per week is 35. Any additional hours worked are considered overtime and must be compensated accordingly. It is the responsibility of employers to meticulously record these hours to comply with labour regulations and avoid any infringements.
Workers’ rights
In France, workers’ rights are strongly protected. These include the right to job security, protection against unjustified dismissal, and access to social and health benefits as stipulated by law. Furthermore, workers are entitled to continuous training and professional development opportunities.
Health and safety
Employers in France are responsible for ensuring that their employees work in a safe and healthy environment. This includes conducting regular risk assessments, providing health and safety training, and making necessary adaptations to protect employees from occupational hazards. For example, this is a common practice in the shipbuilding sector.
Trade: regulations affecting trade and investment
France, located in a central European location, is a significant player in global trade. This exposure to international markets means that France is subject to various regulations designed to ensure fair and sustainable trade practices. Notably, the country is subject to environmental regulations, consumer protection laws, and intellectual property rights.
Environmental regulations
France is a leader in Europe regarding ecological transition, having implemented strict environmental regulations that affect all industries.
The business regulations in France are designed to minimise the environmental impact of commercial activities and promote sustainable practices. For instance, the “France 2030” plan has set an investment target of over $24.8 billion in green technologies and the decarbonisation of existing industries. It is a requirement for companies operating in sectors such as energy, manufacturing, and logistics to adhere to these standards when conducting business in France.
Consumer protection
France places great importance on consumer protection. Its consumer protection legislation covers a wide range of areas, from product quality and safety to transparency in advertising and sales. These regulations guarantee that consumers’ rights are respected and that a fair balance exists between consumers and businesses. Violations can result in severe penalties and reputational damage, making it crucial for companies to understand and comply with these laws.
Intellectual property rights
Respecting intellectual property rights is of the utmost importance in France, a country renowned for its robust copyright and trademark regime. Companies must ensure that their innovations and creations are duly registered and protected to prevent infringements. The French legal system provides strong enforcement mechanisms to protect these rights and combat piracy and misuse of intellectual property.
Banking regulations and financial operations
The French banking system is subject to a comprehensive regulatory framework, that covers the establishment and operation of banks, as well as the supervision of their activities. It is of the utmost importance for any company operating in France to thoroughly understand and comply with these business regulations to guarantee safe and efficient financial transactions.
The French banking sector offers a wide range of services, including checking and savings accounts, loans, mortgages, and investment services.
Additionally, banks provide a range of digital services that support e-commerce and online financial management. Given the critical importance of customer confidentiality and the security of financial information, complying with data protection regulations is essential.
Comprehensive business regulations have also been implemented in France to prevent fraud and corruption in the banking sector. This includes anti-money laundering legislation that requires banks to conduct thorough verification of their clients’ identities and the source of their funds.
Having a solid understanding of the regulatory banking environment in France is vital for businesses that wish to manage their financial operations efficiently. This covers everything from opening bank accounts to managing commercial transactions and investments.
Companies must make sure that their banking operations comply with all applicable regulations to avoid penalties and legal issues.
Do you have any questions about the business regulations in France? If you would like assistance with relocating your business to Atlantic France, please do not hesitate to contact us.
