MAY 2004
FRANCE SPOTLIGHT
Foreign Investment
Reforms Sharpen France's
Competitive Edge
Reforms Sharpen France's
Competitive Edge
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he French government is enacting measures designed to streamline business creation and development and to enhance France's appeal to foreign investors. Already a leading recipient of foreign direct investment – trailing only China in that regard in 2002 – France is reforming several key areas that will bolster its competitiveness relative to other European markets. Measures passed by the French government in December 2003 fall under five categories: streamlined procedures for entry and work, fiscal measures, support of new businesses, R&D and education and business law reform.
"Impatriates," or workers relocating to France, are the beneficiaries of the first category. One agency, rather than multiple ones, will now provide visas, work and residence permits, and the families of executive impatriates will also benefit from streamlined relocation procedures. The foreign business permit has been abolished, and spouses of impatriates are now permitted to be employed in France.
Foreign investors will find it easier to establish new businesses, particularly venture capital companies with a single owner, or SUIR (Société Unipersonnelle d'Investissement à Risque). Such companies are exempt from corporate tax until completion of their 10th year in business, and the owner is exempt from income tax on the SUIR payouts. In the case of foreigners, the income tax exemption applies to the country to which taxes are paid.
Those involved in start-up R&D projects gain several tax benefits, including a waiver from the employer's social security charges for the first eight years of operation; total corporate tax exemption for the first three profitable years with decreasing exemption over the following two years; exemption from local taxes; and exemption from capital gains tax for individual shareholders or securities held more than three years.
Programs that support doctoral students in the form of remuneration, guidance and supervision by a research laboratory in order to enter the business community are doubling over the next several years. And job-opportunity resources for international students are being improved in several areas.
Finally, the business climate with respect to legal matters improved as of August 2003 with the passage of several measures. These include elimination of the minimal requirement of capital for small businesses, permission for small businesses to be based at home for up to five years, online registration and the ability to delay payment of social security taxes the first year of existence.
Additional reforms, particularly in the area of business taxes, are under way, noted Ms. Clara Gaymard, France's Ambassador at Large for International Investment and President of the Invest in France Agency, at an early March 2004 luncheon in Atlanta. High-ticket capital investment projects are being brought into line where taxation is concerned so that they are taxed at more equitable rates, she noted. "This is a tax that comes at the end of the day, so psychologically it is a very bad tax," she noted. "In the U.S., you pay high taxes on real estate, which is not the case in France, but you do pay this other business tax, so we have to reform that so it is more like how things are in other countries."
"Impatriates," or workers relocating to France, are the beneficiaries of the first category. One agency, rather than multiple ones, will now provide visas, work and residence permits, and the families of executive impatriates will also benefit from streamlined relocation procedures. The foreign business permit has been abolished, and spouses of impatriates are now permitted to be employed in France.
New Aid for Startups
New fiscal measures effective in fiscal year 2004 include a permanent R&D tax credit with a cap increase of 33 percent to a maximum of 8 million euros (US$9.6 million). The credit applies to all industrial, commercial or agricultural businesses. Also, impatriates gain an improved way of calculating personal income tax, provided the base salary is within the market price range and the allowance does not exceed 30 percent of the base salary.
Foreign investors will find it easier to establish new businesses, particularly venture capital companies with a single owner, or SUIR (Société Unipersonnelle d'Investissement à Risque). Such companies are exempt from corporate tax until completion of their 10th year in business, and the owner is exempt from income tax on the SUIR payouts. In the case of foreigners, the income tax exemption applies to the country to which taxes are paid.
Those involved in start-up R&D projects gain several tax benefits, including a waiver from the employer's social security charges for the first eight years of operation; total corporate tax exemption for the first three profitable years with decreasing exemption over the following two years; exemption from local taxes; and exemption from capital gains tax for individual shareholders or securities held more than three years.
Programs that support doctoral students in the form of remuneration, guidance and supervision by a research laboratory in order to enter the business community are doubling over the next several years. And job-opportunity resources for international students are being improved in several areas.
Finally, the business climate with respect to legal matters improved as of August 2003 with the passage of several measures. These include elimination of the minimal requirement of capital for small businesses, permission for small businesses to be based at home for up to five years, online registration and the ability to delay payment of social security taxes the first year of existence.
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Additional reforms, particularly in the area of business taxes, are under way, noted Ms. Clara Gaymard, France's Ambassador at Large for International Investment and President of the Invest in France Agency, at an early March 2004 luncheon in Atlanta. High-ticket capital investment projects are being brought into line where taxation is concerned so that they are taxed at more equitable rates, she noted. "This is a tax that comes at the end of the day, so psychologically it is a very bad tax," she noted. "In the U.S., you pay high taxes on real estate, which is not the case in France, but you do pay this other business tax, so we have to reform that so it is more like how things are in other countries."