A foreign company can usually enter the French market through an independent distributor without incorporating a French subsidiary or opening a branch. That route is often attractive: the distributor buys products, resells them in its own name, finances its stock and deals directly with French customers. It does not, however, create an automatic tax safe harbour. The contract, the parties’ conduct and the practical authority given to the French business must all point to a genuine buy-and-resell relationship.

The central distinction is between a distributor and a commercial agent. A distributor is normally the buyer and reseller. A commercial agent negotiates, and sometimes concludes, contracts in the name and for the account of the foreign principal. The label placed on the agreement is only one item of evidence. French courts examine the activity actually carried out. A French person who routinely binds the foreign company, works from premises made available to it or merely obtains formal approval for transactions may create a very different tax and contractual profile.

This guide gives a practical framework for a foreign founder, group or supplier preparing a French distribution arrangement. It covers permanent-establishment risk, registration and VAT, exclusivity and pricing, evidence of independence, and termination. The starting point is the commercial reality: who owns the goods, who bears the customer credit risk, who fixes the resale price, who signs the customer contract and who has authority to commit the foreign company?

I. How can a foreign company use a French distributor without creating a permanent establishment?

A. Is a French distributor legally different from a commercial agent?

Yes. A distributor purchases goods or services from the foreign company and resells them to customers. Its margin is the difference between its purchase cost and its resale revenue. It generally invoices the customer, bears the risk of non-payment, carries inventory or commits its own resources to fulfilment, and decides how to organise its sales activity. The foreign supplier remains a seller to the distributor, not the contracting party in each downstream sale.

A commercial agent follows another legal model. Article L. 134-1 of the French Commercial Code states that L’agent commercial est un mandataire. In English, that means the agent is an independent intermediary acting under a mandate. The provision covers a person who, on a permanent basis, negotiates and possibly concludes contracts in the name and for the account of the principal. The complete official provision is available in Article L. 134-1 of the French Commercial Code on Légifrance.

The distinction matters even when the agreement is called a distribution agreement. In its decision of 10 July 2007, Commercial Chamber, no. 05-19.373, the Court of Cassation began its reasoning with the words Quels que soient les termes employés par la convention. It held, on the facts before it, that a company which had behaved as a distributor and bought products for resale was not a commercial agent. The official decision is published by the Court of Cassation on Légifrance, Commercial Chamber, 10 July 2007, no. 05-19.373. A contractual disclaimer cannot therefore cure conduct that actually gives the intermediary power to negotiate or conclude sales for the foreign principal.

French courts also look at how the relationship operates rather than accepting the parties’ chosen title. In its decision of 17 May 2023, Commercial Chamber, no. 21-23.533, the Court of Cassation applied the principle that the agency status depends on the conditions in which the activity is actually exercised. The decision is available on Légifrance, Commercial Chamber, 17 May 2023, no. 21-23.533. The case concerned a different professional setting, but its qualification method is directly relevant when a foreign principal wants to preserve a distributor model.

The contract should therefore describe, and the parties should implement, the following features:

• The French business purchases the products in its own name and resells them in its own name.
• It does not sign customer contracts as the foreign company’s representative.
• It cannot make commitments, warranties, discounts or admissions on behalf of the foreign company unless a separate, limited authority is expressly approved.
• It decides how to organise its personnel, sales channels and customer follow-up.
• It bears the commercial risk associated with stock, customer credit, ordinary returns and its own marketing spend, subject to the negotiated product warranty.
• It remains free to serve other suppliers unless a carefully drafted and lawful exclusivity clause says otherwise.

Those features are indicators, not a checklist that overrides facts. A distributor may receive technical training, brand guidelines, recommended customer segments and sales forecasts without becoming an agent. Conversely, a document that says “independent distributor” is weak evidence if the foreign company approves every customer, fixes every downstream price, owns all stock, pays the French seller’s staff and signs every commercial document.

Article L. 134-4 of the Commercial Code provides that the relationship between a commercial agent and its principal is governed by loyalty and reciprocal information. The official text says that Les rapports entre l’agent commercial et le mandant sont régis par une obligation de loyauté. That rule does not turn every distributor into an agent. It shows why a foreign company should not copy an agency template and simply replace the word “agent” with “distributor”. The appropriate contract must reflect the allocation of ownership, authority, risk and remuneration.

The French administrative vocabulary can also cause confusion for an overseas team. A greffe is the registry office attached to a court, although company registration information is now largely routed through the INPI one-stop shop. INPI is the National Institute of Industrial Property, which operates the online business-formality service. The RNE is the National Register of Enterprises. The RCS is the Trade and Companies Register. A Kbis extract is the official extract showing the legal identity and registration details of a company registered in the RCS; it is not a licence to act as the foreign principal’s agent.

For a distributor that already has a French company, the foreign supplier should obtain and retain the distributor’s Kbis extract, RNE or RCS registration evidence, legal representative details, VAT number and insurance certificates. The distributor should also provide its own bank details, premises address, inventory process and customer-invoicing model. These documents help demonstrate that the French business is a real enterprise buying and reselling goods rather than a nominal French desk for the foreign company.

For a newly established French business, the parties should keep the incorporation and registration trail. The INPI guidance on company formalities explains how company information and changes are filed through the formalities portal. The distributor should be able to identify its French registration number, bank account, business address and tax registrations independently of the supplier’s website or premises.

Other structures require a separate analysis. A branch or succursale is an establishment of the foreign company in France, not an independent buyer-reseller. A subsidiary is a separate French legal person, but it can still become a dependent agent or fixed-place establishment of the parent if the parent controls the substance of its French activity. A commissionaire may sell in its own name but for another party’s account; that model can carry different tax, agency and contract consequences. A franchise adds know-how, brand and operating-system issues. The safe question is not “which label is cheapest?” but “which entity contracts, owns, invoices and bears each risk?”

B. When does a French distributor create permanent-establishment or registration exposure?

A distribution agreement does not by itself create a permanent establishment in France. A permanent establishment is a tax concept assessed under French domestic law and the applicable tax treaty. The treaty between France and the country of the foreign company must be checked before a conclusion is reached. The French tax administration explains that the usual analysis considers a fixed place of business or a dependent agent in France who habitually exercises authority to bind the foreign company. Its official overview is available on impots.gouv.fr, Permanent establishment in France.

Article 209 of the French General Tax Code links French corporate tax to profits of businesses operated in France, subject to treaty rules. The official wording refers to les bénéfices réalisés dans les entreprises exploitées en France. The current text is available on Article 209 of the French General Tax Code on Légifrance. This is why a foreign company should separate three questions: whether it has a corporate-tax permanent establishment, whether it has French VAT obligations, and whether it has a registration or employer obligation. One answer does not automatically decide the others.

The first permanent-establishment question is premises. Does the distributor merely use its own warehouse and offices for its own business, or does the foreign company have a space in France at its disposal? A sign bearing the foreign company’s name, a dedicated office assigned to its sales team, a French address used on contracts, or equipment reserved for the foreign company’s personnel can weaken the independent-distributor analysis. A distributor can of course stock the supplier’s products. The evidence must show that it does so as owner or reseller, under its own logistics arrangements, rather than operating a French warehouse for the supplier.

The second question is authority. May the French business accept orders on behalf of the foreign company, negotiate final terms that the foreign company routinely approves, sign customer contracts, issue binding quotations or settle claims? The more the foreign company treats the distributor as its sales office, the greater the risk. A clause reserving final approval for the foreign company is helpful only if the approval is genuine. A routine rubber stamp after the French intermediary has decided all material terms can be treated differently from a real, commercially meaningful decision by the foreign company outside France.

The Conseil d’État addressed this practical issue in its decision of 11 December 2020, no. 420174. The official decision explains that a French related company can constitute a dependent agent where it effectively decides transactions that the foreign company merely approves routinely, even though the foreign company formally signs. The decision is available on Légifrance, Conseil d’État, 11 December 2020, no. 420174. The lesson for a distributor is clear: a signature outside France is not enough if all substantive decisions have already been made in France.

In its decision of 5 July 2022, no. 458293, the Conseil d’État found a dependent-agent situation where a French legal representative signed contracts and documents while the foreign company essentially invoiced. The official decision is published on Légifrance, Conseil d’État, 5 July 2022, no. 458293. The reasoning refers to an agent dépendant disposant des pouvoirs d’engager la société. That is not the normal profile of a distributor buying and reselling products. It is a warning against giving a French intermediary broad authority while calling it independent.

The case law is fact-sensitive in both directions. In its decision of 6 October 2010, no. 307680, the Conseil d’État considered that a French office which negotiated, prepared and carried out operations did not, on the facts found, satisfy the dependent-agent criterion where the foreign company itself signed the contracts. The official decision is available on Légifrance, Conseil d’État, 6 October 2010, no. 307680. It should not be read as a general permission to centralise all activity in France. It demonstrates that authority, signatures, economic substance and the actual distribution of decisions must be documented together.

The third question is whether the French operation has become a fixed place through the foreign company’s own personnel. A foreign sales manager who works from the distributor’s office may be travelling temporarily, or may be using premises at the foreign company’s disposal. The answer depends on the contract for the premises, access rights, equipment, reporting lines, customer communications and duration. The foreign company should avoid presenting the distributor’s address as its French office and should use its foreign registered address on its own contracts unless a French establishment is intended.

Registration rules reinforce the need for a precise structure. Article L. 123-11 of the Commercial Code refers to l’agence, la succursale ou la représentation établie sur le territoire français and requires a foreign legal person establishing such an activity to justify premises. The official text is available on Article L. 123-11 of the Commercial Code on Légifrance. A French distributor’s own registration does not register the foreign supplier. If the supplier actually establishes an agency, branch or representation, it must complete the appropriate formalities instead of relying on the distribution contract.

VAT is a separate exposure. VAT is the English term for value-added tax; in France it is called TVA, or taxe sur la valeur ajoutée. A foreign company can have French VAT filing, invoicing or registration obligations even when it has no corporate-tax permanent establishment. The result depends on the movement of goods, the place of supply, whether the distributor buys as principal, the use of French stock, imports, intra-European transactions, distance sales and the identity of the importer of record. The official registration guidance is available on impots.gouv.fr, VAT registration.

At the launch stage, the parties should write down a transaction map. For every flow, identify the seller, buyer, owner of the goods, invoice issuer, delivery point, importer, VAT debtor, warranty provider and person who bears customer credit risk. For example, if the French distributor buys from the foreign company and imports the goods into France, it may be the importer and reseller. If the foreign company owns stock in a French warehouse and sells directly to French customers, the structure is materially different. Consignment stock, drop-shipping and online sales to consumers each require their own VAT review.

A practical risk map can be stated as follows:

• Lower establishment risk: the distributor buys and resells, uses its own premises and staff, signs downstream sales in its own name, bears stock and credit risk, and has no power to bind the foreign company.
• Review required: the foreign company supplies a dedicated display, warehouse area, customer-service team or French sales employee, or requires approval of every customer and material term.
• High exposure: the French business routinely concludes contracts for the foreign company, acts as its public French office, holds authority to commit it, or operates a fixed place at the foreign company’s disposal.

The foreign company should obtain written tax advice under the relevant treaty before signing where any “review required” or “high exposure” fact is present. A contract cannot eliminate a taxable presence that the operating model has already created. It can, however, allocate responsibilities, prevent accidental authority and preserve evidence of the independent-reseller model when that is genuinely how the business works.

II. How should the distribution agreement protect the foreign company?

A. Which clauses should cover territory, exclusivity, pricing, VAT and compliance?

The agreement should begin with an accurate description of the parties and their capacity. Identify the foreign company’s full legal name, place of incorporation, registration number and registered office. Identify the French distributor’s legal name, Kbis or RCS details, registered office, French registration numbers and authorised signatory. Define the products, territory, customer categories and sales channels. If the distributor may appoint sub-distributors or sell online, say so expressly. Ambiguity about the transaction path is often the first source of later requalification.

French contract law gives weight to a carefully negotiated agreement. Article 1103 of the Civil Code states that Les contrats légalement formés tiennent lieu de loi à ceux qui les ont faits. The official text is available on Article 1103 of the Civil Code on Légifrance. That principle supports clear allocation of risk, but it does not displace mandatory rules, competition law, agency status, tax law or the court’s assessment of the parties’ real conduct.

For exclusivity, define exactly what is exclusive. It may concern a territory, a named customer group, a product line, a sales channel or the foreign supplier’s appointment of another distributor. State whether the foreign company reserves direct sales, key accounts, public tenders, online sales or existing customers. Attach objective performance conditions if exclusivity depends on minimum purchases, marketing activity or stock levels. Explain what happens if the target is not met: cure period, loss of exclusivity, conversion to non-exclusive status or termination. A vague promise of “exclusive France rights” can create disputes over every sale and every website visit.

Pricing needs equal care. Article L. 420-1 of the Commercial Code prohibits agreements that restrict competition, including arrangements that interfere with free price formation. The official text identifies the conduct of Faire obstacle à la fixation des prix par le libre jeu du marché; see Article L. 420-1 of the Commercial Code on Légifrance. The foreign supplier may publish a recommended resale price or a maximum price in an appropriate context, but it should not impose a fixed minimum resale price through pressure, threats or automatic sanctions. The distributor should retain genuine commercial discretion.

The agreement should separate the distributor’s purchase price from its downstream resale price. Include currency, payment terms, credit limits, late-payment consequences, ownership transfer, risk transfer and the chosen Incoterm. An Incoterm is an internationally recognised delivery term that allocates transport, insurance, customs and risk; it does not answer every French tax question. Specify who arranges export clearance, who imports into France, who pays duties, who maintains product documentation and who handles recalls.

The parties should document the VAT position for each flow rather than use a generic sentence saying “all taxes are included”. State whether prices include French VAT, whether the distributor is the purchaser, which VAT number appears on invoices, who handles import VAT and whether stock is held on consignment. If the foreign company sells directly to French customers for some channels, that activity should be analysed separately. The contract should require each party to provide valid tax information and to cooperate with audits without transferring an unlawful tax liability.

Commercial terms should not quietly confer agency authority. The distributor may be authorised to market products and receive purchase orders addressed to it. It should not be authorised to accept a customer order “on behalf of” the foreign company, negotiate binding warranties for the foreign company or settle claims in its name unless that authority has been separately reviewed. The agreement can provide that the foreign company may reject a distributor purchase order for objective reasons such as credit, sanctions, stock or compliance. It should not turn rejection into a routine formality after the distributor has already bound the supplier to the customer.

General terms and conditions also matter. Article L. 441-1 of the Commercial Code provides that terms and conditions of sale include, in particular, payment conditions. The official text states that les conditions générales de vente comprennent notamment les conditions de règlement; see Article L. 441-1 of the Commercial Code on Légifrance. Decide whether the distributor uses its own French terms with its customers and whether the foreign supplier’s terms govern only the supply relationship. Product warranties, limitation clauses and returns should be consistent across the two contracts.

The agreement should include a compliance schedule suited to the product. Depending on the goods, this may cover product safety, labelling, language requirements, consumer information, environmental obligations, packaging, extended producer responsibility, data protection, export controls, sanctions and anti-corruption. The distributor should be responsible for obligations arising from its own resale activity, while the foreign company should provide accurate technical and safety information for the products it manufactures or supplies. Use an audit mechanism focused on records and compliance, not a right to direct the distributor’s daily work.

Marketing and intellectual property clauses should preserve independence while protecting the brand. Grant a limited, revocable licence to use the trademark and marketing material only for authorised products and territory. Require approval of claims that concern product performance or regulated characteristics. Make clear that the distributor pays for its own ordinary marketing unless a written campaign budget says otherwise. The distributor should not hold itself out as a French branch or office of the foreign company. Its website should identify its own legal entity, customer contract and contact details.

Personnel and premises clauses are especially important for establishment risk. The distributor hires, pays and supervises its own employees. The foreign company may provide product training and technical support, but it should not issue daily instructions, approve holidays or set individual sales commissions as if the French employees were its staff. If a foreign employee visits France, record the temporary business purpose, employer, reporting line and place of work. If a French employee works for the foreign company, obtain employment, payroll and social-security advice before the arrangement begins.

Information rights should be proportionate. The foreign company can require sales reports, purchase forecasts, inventory information, customer complaints and compliance certificates. It can verify whether its products are being used correctly. It should avoid control rights that resemble management of a sales department: daily approval of every customer, mandatory scripts for every conversation, continuous supervision from a French office or power to discipline the distributor’s personnel. The contract and the email trail should tell the same story.

If the distributor is exclusive, the agreement should address competing products, passive sales, online advertising and customer enquiries from outside the territory. Exclusivity should be checked under current competition rules, including any applicable European vertical-restraint framework. A short competition-law review at signing is cheaper than designing a network that later has to be dismantled. The parties should also identify whether a restriction applies after termination and whether it is necessary, proportionate and legally enforceable.

B. What happens when the French distribution relationship changes or ends?

Termination should be designed before the first order. Decide whether the contract is for a fixed term or an indefinite term, how it renews, what notice applies, which breaches permit immediate termination and how stock is handled. Article 1211 of the Civil Code provides that, for an indefinite-term contract, each party may end it subject to the agreed notice or, if none is agreed, a reasonable period. The official text is available on Article 1211 of the Civil Code on Légifrance.

A fixed-term contract is not necessarily easier to end. Article 1212 provides that a fixed-term contract must be performed until its term and that no party can demand renewal. The article appears in the official Légifrance section on the duration of contracts, Articles 1210 to 1215. The agreement should state whether the term covers a launch period, a test period or a long-term appointment, and should set a written renewal process. Continuing to order and accept goods after expiry can create evidence of a continuing relationship.

For serious breach, Article 1224 of the Civil Code recognises resolution through a termination clause, a creditor’s notification in the case of sufficiently serious non-performance or a court decision. The official wording is available at Article 1224 of the Civil Code on Légifrance. The agreement should identify the breach, notice method, cure period and consequences of an urgent suspension. A foreign company should not simply stop supplying because a commercial relationship has become inconvenient. Preserve the written reason, the contractual basis and the evidence of the distributor’s failure.

Even where a contract contains a notice clause, a long-established commercial relationship may raise a separate issue under Article L. 442-1, II of the Commercial Code. The provision addresses a party that rompre brutalement, même partiellement, une relation commerciale établie without appropriate written notice, subject to the statutory framework and case law. The official text is available on Article L. 442-1 of the Commercial Code on Légifrance. The relevant notice depends on the relationship’s duration, stability, volume, investments, dependence and the time reasonably needed to reorganise, not only on the number printed in the agreement.

The Court of Cassation has applied this risk in cross-border distribution settings. In its decision of 3 February 2015, Commercial Chamber, nos. 13-24.592 and 13-25.496, it examined the abrupt ending of an established relationship involving a Swiss supplier and a French distributor or reseller. The official decision is available on Légifrance, Commercial Chamber, 3 February 2015, nos. 13-24.592 and 13-25.496. The case is fact-specific, but it shows why a foreign principal should assess the distributor’s dependence, investments and reasonable replacement time before reducing orders or terminating.

The commercial-agent regime creates an additional and different termination risk if the facts support that qualification. Article L. 134-11 sets statutory notice periods for agency contracts, including one month in the first year, two months in the second year and three months from the third year. The official provision is available on Article L. 134-11 of the Commercial Code on Légifrance. A distribution contract cannot safely contract around mandatory agency protection by title alone.

Article L. 134-12 provides that, when the relationship with the principal ends, l’agent commercial a droit à une indemnité compensatrice, subject to its conditions and exceptions. The official text is available on Article L. 134-12 of the Commercial Code on Légifrance. Article L. 134-13 lists situations in which the indemnity is not due, including serious fault or termination initiated by the agent in circumstances specified by law; see Article L. 134-13 on Légifrance. A genuine distributor is not automatically entitled to an agent’s indemnity, but a requalification can materially change the exit budget.

At the first sign that the operating model is changing, review the facts rather than waiting for a dispute. Common triggers include the foreign company taking ownership of French stock, appointing a French salesperson, asking the distributor to sign customer contracts, moving customer service to France, granting a dedicated office, routing all French leads through one person or replacing the distributor’s margin with commission. The right response may be an amended distribution agreement, a separate agency appointment, a French branch, a subsidiary or a deliberate return to a genuine reseller model.

An orderly exit should cover at least the following:

• the effective termination date and the contractual or reasonable notice calculation;
• open purchase orders, delivery obligations, customer returns and warranty claims;
• stock valuation, repurchase rights, title, transport, storage and payment;
• continued use or removal of trademarks, websites, product pages and marketing content;
• customer and supplier data, confidentiality, technical files and regulatory records;
• the removal of any French address or wording suggesting that the distributor is the foreign company’s office;
• the treatment of sub-distributors, agents, employees and local service providers;
• the preservation of evidence for tax, VAT, competition and termination analysis.

Dispute clauses should match the business. Choose governing law, jurisdiction or arbitration with attention to mandatory French rules, enforcement, language, evidence and the location of the goods and customers. A foreign-law clause does not necessarily exclude French rules on agency status, abrupt termination, competition, product liability, insolvency or public policy. The parties should name a reliable notice address and method, and should provide a process for urgent injunctions where stock, data, trademarks or customer access is at risk.

A foreign founder can use a simple pre-launch file to make the structure auditable. Keep the approved organisation chart, a flowchart of goods and invoices, a map of authority and signatures, the distributor’s Kbis and VAT evidence, the tax-treaty analysis, the final contract, the pricing policy, the Incoterm, insurance certificates, compliance records and a sample transaction. Review the file after the first three months and whenever the distributor receives new authority. The objective is not to create paperwork for its own sake; it is to prove that the legal model and the daily model remain aligned.

The decision of 10 July 2007, no. 05-19.373, is a useful reminder that a court may look past the contract’s wording. The decisions of 11 December 2020, no. 420174, and 5 July 2022, no. 458293, show why practical authority can matter for tax presence. The decision of 3 February 2015, nos. 13-24.592 and 13-25.496, shows the commercial cost of an abrupt exit. Together, these authorities support a conservative operational rule: give the French distributor enough freedom to be a reseller, but do not create a disguised French sales office through instructions, premises, signatures or routine approvals.

Conclusion

A foreign company can appoint a French distributor without creating a permanent establishment when the distributor is genuinely independent, buys and resells in its own name, uses its own resources, bears meaningful commercial risk and lacks authority to bind the foreign company. That conclusion must be tested against the treaty, the premises, the people, the decision-making process and the actual invoices. A contract that says “no agency” is useful only when the business behaves consistently with it.

Before launch, map every sale, stock movement, signature and VAT obligation. Then draft exclusivity, pricing, compliance, authority, information, renewal and termination clauses around that map. Revisit the analysis when the distributor becomes more integrated, receives French staff or premises, or starts negotiating customer contracts. If the foreign company wants a French office in substance, it should choose and register that structure openly rather than rely on a distribution label.

For a broader overview of structuring a business presence in France, see the firm’s French business and company-law guidance.

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