You run your company from London, New York, Dubai or Dublin. You have no French office on paper, no French company number, no Kbis (the official extract of the trade register that proves a French business exists), and you never registered anything with the greffe (the clerk’s office of the commercial court that keeps the trade register). Then a letter arrives from the SIE (service des impôts des entreprises, the French tax office for businesses): France considers that you carry on business on its soil, and it taxes your profits, your VAT (TVA, taxe sur la valeur ajoutée) and adds penalties of 40 percent or even 80 percent. This is the permanent-establishment ambush, and it strikes foreign founders who prospect, deliver or invoice in France through an employee, a contractor, a stored stock or a Paris pied-à-terre that the tax administration recharacterises as a fixed place of business. This guide explains, entirely in English and with every French acronym translated, when France is legally allowed to tax a foreign company with no registered office here, how the branch (succursale, the French extension of your foreign company with no legal personality of its own) differs from the subsidiary (filiale, a French company, usually a SAS, owned by your foreign parent), who pays French VAT on cross-border services and why the reverse charge collapses once a French establishment is found, and the exact procedure to answer the reassessment, cut the penalties and litigate from abroad. Every decisive rule is quoted word for word from its official source and linked inline.

I. When France is allowed to tax your foreign company: the permanent-establishment test and the branch-or-subsidiary choice

A. Do you have a French taxable presence: the office, the staff who sign deals and the treaty definition

French corporate tax, called IS (impôt sur les sociétés), does not stop at the border. The founding rule is Article 209 of the CGI (Code général des impôts, the French General Tax Code): « les bénéfices passibles de l’impôt sur les sociétés sont déterminés d’après les règles fixées par les articles 34 à 45 , 53 A à 57 , 108 à 117 , 237 ter A et 302 septies A bis et en tenant compte uniquement des bénéfices réalisés dans les entreprises exploitées en France, de ceux mentionnés aux a, e, e bis et e ter du I de l’article 164 B ainsi que de ceux dont l’imposition est attribuée à la France par une convention internationale relative aux doubles impositions. » In plain English: a foreign company pays French IS on the profits of the business it operates in France, and on the profits a tax treaty assigns to France. You do not need a French registration, a French bank account or a French company number for this rule to bite. The question is purely factual: is there a business operated in France?

Tax treaties add a second lock with the concept of permanent establishment, translated from « établissement stable ». Take the decision of the Marseille administrative court of appeal of 4 December 2025, Yachting Financial Solutions Ltd, no. 24MA02620, which quotes the Franco-Irish treaty of 21 March 1968: « Le terme ” établissement stable ” désigne une installation fixe d’affaires où une entreprise exerce tout ou partie de son activité. » The same article lists examples — « Un siège de direction », « Une succursale », « Un bureau » — and carves out purely preparatory or auxiliary activity: « On ne considère pas qu’il y a établissement stable si : / (…) (ee) Une installation fixe d’affaires est utilisée aux seules fins de publicité, de fourniture d’informations, de recherche scientifique ou d’activités analogues qui ont pour l’entreprise un caractère préparatoire ou auxiliaire ». Most French treaties follow this OECD-style pattern, so the test travels well beyond Ireland: a fixed place where the business really happens is a permanent establishment; a showcase, a storage room for display goods or a purely preparatory liaison desk is not.

The Yachting case shows how brutally the test is applied. An Irish company with its registered seat in Ireland, run by a couple, was audited for 2011 and 2012. The court found that in Ireland it had only a domiciliation address, no employee and no telephone line, while near the port of Antibes it rented premises, employed several staff with IT equipment, put those Antibes contact details on its contracts and letterheads, and had its employees, under supervision, performing on site the whole of the activity: canvassing and managing a clientele of yacht crews received on the premises, plus the financial management of the commissions. The judges added that telephone records showed almost no calls to Ireland and that no contract documented any relationship between the Irish seat and the Antibes bureau. Conclusion of the Marseille administrative court of appeal, 4 December 2025, no. 24MA02620, quoted word for word: « Il résulte de ce qui précède que l’administration fiscale doit être regardée comme démontrant que la société Yachting Financial Solutions Ltd a au cours des années en litige exploité une entreprise en France pour l’application de l’article 209 du code général des impôts, sans qu’ait d’incidence la déclaration par la société Yachting Financial Solutions Ltd de son chiffre d’affaires auprès des autorités fiscales irlandaises et le paiement de l’impôt sur les sociétés en Irlande pour la période en litige. » Paying tax at home therefore never shields you: France taxes the French-attributable profits on top, with treaties only organising relief against double taxation afterwards, never blocking the French assessment itself.

Draw the operational lesson before any inspector knocks. If your people in France only prepare — market studies, window displays, scientific liaison — document that narrow mandate in writing and keep decision-making and contract-signing abroad. The moment a person in France habitually closes deals, manages clients on site or delivers the core service from French premises, you have crossed into « entreprise exploitée en France » and, under most treaties, into permanent establishment. A representative office that starts selling, a consultant who becomes your de facto sales director in Lyon, a stock of goods in a French warehouse from which you fulfil French orders: each of these is the classic fact pattern of the reassessed file. Conversely, merely selling to French customers from abroad, with no premises and nobody concluding contracts on French soil, normally creates no French taxable presence. Map your footprint against this line every year, because the administration reconstructs it from leases, emails, phone records and letterheads, exactly as it did in Antibes.

One more trap sits inside groups: the transfer of value between your French presence and the foreign head office. Article 57 of the CGI provides: « Pour l’établissement de l’impôt sur le revenu dû par les entreprises qui sont sous la dépendance ou qui possèdent le contrôle d’entreprises situées hors de France, les bénéfices indirectement transférés à ces dernières, soit par voie de majoration ou de diminution des prix d’achat ou de vente, soit par tout autre moyen, sont incorporés aux résultats accusés par les comptabilités. » The Council of State (Conseil d’État, the supreme administrative court) confirmed on 21 December 2022, Bupa Insurance Limited, no. 450796: « Elles sont applicables à toute entreprise imposable en France, y compris une succursale française d’une société dont le siège est à l’étranger, sans qu’y fasse obstacle la circonstance que la succursale n’a pas de personnalité morale. » And the court added: « Peut constituer une pratique entrant dans les prévisions de ces dispositions, la cession à une société établie hors de France, à titre gratuit ou à prix minoré, de la clientèle rattachable à l’activité d’une succursale française d’une société dont le siège est à l’étranger. » In that case the administration lost only because it failed to prove the French branch had a clientele of its own with real commercial autonomy. The message for founders: price every intra-group flow — management fees, brand royalties, client transfers, cost recharges — at arm’s length and in writing, because the branch you thought was invisible is fully exposed to Article 57.

B. Branch or subsidiary: what changes for registration, liability, accounts and the money sent home

Once the taxable presence is established — or better, before it is imposed on you — choose the vehicle deliberately. The subsidiary (filiale) is a French company in its own right, most often a SAS (société par actions simplifiée, the flexible joint-stock company foreign founders prefer) or sometimes a SARL (société à responsabilité limitée, the classic limited liability company). It has French legal personality, its own Kbis, its own RCS number (registre du commerce et des sociétés, the trade register) and its liability stops at its own assets: the foreign parent risks only what it invested. The branch (succursale) is the opposite: a French extension of your existing foreign company, with no legal personality of its own, no shares and no dividends. Every contract the branch signs binds the foreign parent directly, and every French debt can be pursued against the parent’s worldwide assets. Speed and cost favour the branch; protection and credibility favour the subsidiary, because French banks, landlords and major customers all prefer a Kbis-bearing French company, as explained in our founders’ setup guide: bank account, Kbis, VAT and first hire.

Registration is compulsory in both cases and runs through the same single window. Article L123-36 of the Commercial Code states: « Il est tenu un registre national des entreprises, auquel s’immatriculent les entreprises exerçant sur le territoire français une activité de nature commerciale, artisanale, agricole ou indépendante. » This RNE (registre national des entreprises, the national business register operated via the INPI, Institut national de la propriété industrielle) replaced the old parallel registers: every creation, branch opening or modification now passes through the guichet des formalités des entreprises (the online single window for business formalities). The official service-public guide for foreigners creating a business in France confirms the sequence — upstream steps for a company (drafting articles, depositing capital, proving the registered address) then the registration application must be transmitted through the website of the single window for business formalities. A branch registers the foreign parent’s details plus its French address and its representative in France; a subsidiary registers as a new French person with its own articles, capital and directors. Either filing ends with publication in the BODACC (Bulletin officiel des annonces civiles et commerciales, the official gazette of business notices) and, for companies, issuance of the Kbis. Our companion analyses detail the two halves of this birth certificate: what to do when the bank refuses the capital-deposit account and how IS is computed, paid in instalments and challenged.

The tax computation then diverges in ways founders underestimate. The subsidiary pays IS as a French resident company on its profits, can carry its losses forward against its own future profits, and can join a French tax-consolidation group (intégration fiscale) with French sisters. The branch pays IS on the profits attributable to its French activity under the territoriality of Article 209, computed with a separate French accounting and its own filing (the familiar form 2065 framework). The branch cannot distribute dividends to its head office since it has no shares; it remits profits through branch accounts, and a specific branch tax (retenue à la source applicable to branches, historically one-half of the IS rate on deemed distributed profits, subject to treaty relief) may apply depending on the applicable treaty — verify this treaty by treaty before choosing. Branches must also file the foreign parent’s annual accounts in France for public disclosure, which groups protective of their consolidated figures sometimes dislike; subsidiaries publish only their own French accounts. And as the Bupa ruling quoted above proves, the branch’s lack of personality is no shield against Article 57 transfer-pricing reassessments: the inspector taxes the branch exactly like a company.

Choose with the business plan, not with the calendar. Take the subsidiary, normally the SAS, when France is a lasting market: you will hire, sign a bail commercial (the protective French 3-6-9 year business lease), invoice locally and seek French financing, and you want liability ring-fenced in France rather than travelling back to the parent’s balance sheet. Take the branch when you need a presence in weeks with minimal capital — for instance to second two engineers to a French client site for a fixed project — accepting that the parent answers for everything the branch signs. Reconsider at each growth step: many groups start with a branch for year one and convert to a subsidiary before hiring a sales team, because payroll, URSSAF (union de recouvrement des cotisations de sécurité sociale et d’allocations familiales, the agency collecting French social contributions) affiliation and dismissal rules sit far more comfortably inside a French employer company. Whatever the vehicle, register before the inspector does it for you: a voluntarily registered branch or subsidiary negotiates transfer prices and penalties from a credible position, while an unregistered presence discovered by audit starts every discussion with the 40 percent or 80 percent surcharge described in part II.

II. VAT on your cross-border services and the battle against the French reassessment: reverse charge, fixed establishment and the defence from abroad

A. Who really pays French VAT when you invoice from abroad: place of supply, reverse charge and the fixed-establishment trap

VAT obeys its own territoriality, and it traps even founders who have solved the IS question. The starting rule is Article 259 of the CGI: « Le lieu des prestations de services est situé en France : 1° Lorsque le preneur est un assujetti agissant en tant que tel et qu’il a en France : a) Le siège de son activité économique, sauf lorsqu’il dispose d’un établissement stable non situé en France auquel les services sont fournis ; b) Ou un établissement stable auquel les services sont fournis ; c) Ou, à défaut du a ou du b, son domicile ou sa résidence habituelle ; » When the French client is a taxable person (assujetti, a business registered for VAT), the service is located in France, and the normal mechanism is the reverse charge (autoliquidation): the foreign provider invoices without French VAT and the French client self-assesses it. Article 283 of the CGI sets the principle — « La taxe sur la valeur ajoutée doit être acquittée par les personnes qui réalisent les opérations imposables » — with the cross-border exception: « lorsqu’une livraison de biens ou une prestation de services mentionnée à l’ article 259 A est effectuée par un assujetti établi hors de France, la taxe est acquittée par l’acquéreur, le destinataire ou le preneur qui agit en tant qu’assujetti et qui dispose d’un numéro d’identification à la taxe sur la valeur ajoutée en France. » Thousands of foreign groups invoice their French subsidiaries exactly this way, with the French subsidiary reverse-charging Luxembourg, Irish or German VAT. Our VAT registration and refund guide details the numbers, returns and refund mechanics.

The trap springs when the foreign provider is itself established in France through a fixed establishment (établissement stable for VAT purposes, a concept close to but distinct from the IS permanent establishment). The Council of State ruled on 15 June 2023, Worldwide Euro Protection, no. 465719, and the rule deserves a full quotation: « Il résulte de ces dispositions que lorsque le lieu des prestations de services se trouve en France parce qu’elles sont fournies à des assujettis remplissant les conditions définies à l’article 259 du code général des impôts, le redevable de la taxe sur la valeur ajoutée afférente est le prestataire qui les fournit s’il est lui-même établi en France. Doit être regardé comme tel le prestataire qui a en France un établissement stable depuis lequel les prestations sont fournies et qui présente un degré suffisant de permanence et une structure apte, du point de vue de l’équipement humain et technique, à rendre possibles, de manière autonome, les prestations de services considérées. » Once the services can be attached to such an establishment, the court adds, there is no need to ask whether attaching them to the foreign head office would be more rational. The reverse charge applied by your French client then collapses retroactively, and you, the foreign provider, become the person liable for the VAT — plus penalties.

The facts of that case read like a compliance checklist written backwards. A Luxembourg company supplied administrative, financial, tax, legal and IT services to two French SAS subsidiaries (sociétés par actions simplifiée, the French joint-stock vehicle) between 2012 and 2014; the French recipients self-assessed the VAT as intra-Community supplies from Luxembourg. On audit of one subsidiary, the administration reclassified the Luxembourg provider as liable and assessed the VAT against it with an 80 percent surcharge for concealed activity (activité occulte). The judges validated everything: the Luxembourg bureau of 12.5 square metres could not host the work, six employees were declared in France where they lived, four of them were simultaneously employees of the French subsidiary, and the disputed services had actually been performed from France by two named managers. The court concluded, in Council of State, 15 June 2023, no. 465719: « pour juger que la société Worldwide Euro Protection était redevable de la taxe sur la valeur ajoutée sur les prestations en litige, sur le seul constat de leur réalisation par l’intermédiaire d’un établissement stable en France, sans rechercher par ailleurs si le siège de l’activité économique de la société Worldwide Euro Protection serait situé en France » — the Luxembourg seat was simply irrelevant once the French establishment was proven to render the services autonomously.

The penalty doctrine in that same ruling is the passage every foreign founder should memorise, because it governs all undeclared French activity, IS included. Quoting the Council of State, 15 June 2023, no. 465719: « dans le cas où un contribuable n’a ni déposé dans le délai légal les déclarations qu’il était tenu de souscrire, ni fait connaître son activité à un centre de formalités des entreprises ou au greffe du tribunal de commerce, son activité est réputée occulte s’il n’est pas en mesure d’établir qu’il a commis une erreur justifiant qu’il ne se soit acquitté d’aucune de ses obligations déclaratives. » And for a taxpayer claiming it complied in another State, « la justification de l’erreur commise doit être appréciée en tenant compte de l’ensemble des circonstances de l’espèce et notamment du niveau d’imposition dans cet autre État et des modalités d’échange d’informations entre les administrations fiscales des deux Etats. » In practice: no French VAT registration, no RNE filing and no returns means presumed concealment and 80 percent, unless you prove a genuine, excusable mistake — and « we paid tax in Luxembourg/Ireland » only helps if the foreign tax level and information exchange support good faith. Note the declaration duty itself: Article 286 of the CGI requires that « Toute personne assujettie à la taxe sur la valeur ajoutée doit : 1° Dans les quinze jours du commencement de ses opérations, souscrire au bureau désigné par un arrêté une déclaration conforme au modèle fourni par l’administration. » Fifteen days from starting operations: every month of « testing the market » without registration feeds the future penalties file.

B. Answer the French reassessment from abroad: the audit letter, the penalties and the court route

The reassessment always starts with paper, and the paper has strict forms you can exploit. After an audit (vérification de comptabilité for a company, examen de comptabilité or simple documentary control), the administration must send a proposition de rectification (the formal notice of reassessment, sometimes still called notification de redressement). Article L57 of the LPF (Livre des procédures fiscales, the statute governing French tax procedure) commands: « L’administration adresse au contribuable une proposition de rectification qui doit être motivée de manière à lui permettre de formuler ses observations ou de faire connaître son acceptation. » You then have, in the standard procedure, thirty days to file written observations, extendable by thirty more days on request made before expiry (« Sur demande du contribuable reçue par l’administration avant l’expiration du délai mentionné à l’article L. 11 , ce délai est prorogé de trente jours. »). From abroad, this deadline is everything: instruct French counsel immediately, request the extension in writing on day one, and demand the full documents the inspector relies on. An inadequately reasoned notice — one that asserts a permanent establishment without identifying the premises, the staff, the contracts signed in France or the figures — is annullable before the administrative judge (tribunal administratif, TA, the first-level court; cour administrative d’appel, CAA, on appeal). Never let the thirty days expire in silence: silence counts as acceptance and the assessment becomes final (mise en recouvrement, the collection stage).

Next, attack the penalties separately from the tax itself, because they are often the larger half of the bill. The standard surcharge is Article 1729 of the CGI: « Les inexactitudes ou les omissions relevées dans une déclaration ou un acte comportant l’indication d’éléments à retenir pour l’assiette ou la liquidation de l’impôt ainsi que la restitution d’une créance de nature fiscale dont le versement a été indûment obtenu de l’Etat entraînent l’application d’une majoration de : a. 40 % en cas de manquement délibéré ; » — 40 percent for deliberate failure — rising to 80 percent for abuse of law, fraud or concealed activity. The Yachting appeal shows the administration’s deliberate-failure playbook: the company had continued in Ireland an activity previously run individually in France by the same man, set up its seat in Ireland, a country whose corporate-tax level was substantially lower than France’s, while exercising its entire activity from Antibes. The Marseille court of appeal, 4 December 2025, no. 24MA02620 held: « la société, qui ne pouvait ignorer qu’elle disposait en France d’un établissement stable à partir duquel elle exerçait l’ensemble de son activité, a délibérément établi son siège social en Irlande », and concluded that, in the same ruling of 4 December 2025: « L’administration doit ainsi être regardée comme démontrant l’intention de la société Yachting Financial Solutions Ltd d’éluder l’impôt. » To defeat the 40 percent, show contemporaneous evidence of good faith: foreign tax advice analysing the permanent-establishment risk, board minutes discussing French registration, prompt voluntary registration once the doubt arose. To defeat the 80 percent for concealed activity, prove the excusable mistake described in the Worldwide ruling — and register late rather than never, because spontaneous regularisation remains the strongest fact against intent.

Then fight the base itself with documents, not arguments. French tax litigation places the burden of proof on whoever holds the evidence, and the Yachting court restated the charges rule coldly: the taxpayer must justify, in the words of the Marseille court of appeal, 4 December 2025, no. 24MA02620: « tant du montant des charges qu’il entend déduire du bénéfice net défini à l’article 38 du code général des impôts que de la correction de leur inscription en comptabilité, c’est-à-dire du principe même de leur déductibilité », by « la production de tous éléments suffisamment précis portant sur la nature de la charge en cause, ainsi que sur l’existence et la valeur de la contrepartie qu’il en a retirée. » The Irish company produced only financial statements and an accountant’s say-so, invoked a sector-average expense ratio of 95.47 percent, and supplied no invoice — so every undocumented charge was disallowed, save 12,000 euros a year of Antibes rent the auditor had forgotten to include in the admitted totals, which the court ordered deducted. The lesson travels: from the first day of French operations, keep French premises’ leases, supplier invoices, employment contracts, client contracts showing where decisions are taken, and travel records. If you reconstruct accounts after the audit notice, the inspector lawfully taxes reconstructed turnover and rejects undocumented costs, and the judge will confirm.

Finally, organise the defence as a foreign litigant. The full route is: observations on the proposition de rectification, then réclamation (the formal claim to the tax office) after the collection notice, then appeal to the tribunal administratif within two months of the rejection, then to the cour administrative d’appel. Every step is delegable: a written power of attorney (pouvoir) to a French avocat, an address for service in France so no deadline is missed while mail crosses borders, and a complete file — leases, payroll, contracts, invoices, transfer-pricing documentation, treaty analysis. In parallel, regularise for the future: register the branch or incorporate the subsidiary through the single window, take a French VAT number, file the missing returns, and, if the parent sits outside the European Union, appoint a représentant fiscal (the accredited fiscal representative non-EU companies must designate for French VAT). For Paris and Île-de-France operations, the competent offices are the local SIE of the arrondissement, the tribunal administratif de Paris and, on appeal, the cour administrative d’appel de Paris — jurisdictions that see these files weekly and decide them on documents, not on distance. A foreign founder who answers fast, documents everything and registers voluntarily routinely halves the bill by killing the surcharges even when part of the base survives; the founder who ignores the French letter learns, months later, that a definitive assessment enforces itself across borders through European and treaty recovery assistance.

Conclusion

France does not need your permission, your registration or your office lease to tax you: an employee who closes deals in Lyon, a bureau near the port of Antibes that runs the whole business, or a team in Paris rendering the services your Luxembourg company invoices are enough to create a taxable presence for IS under Article 209 and a fixed establishment for VAT that destroys the reverse charge. The branch exposes the parent without limit while the subsidiary ring-fences the risk, but both must register through the single window, publish in the BODACC and carry the Kbis — and the branch’s lack of personality never blocks an Article 57 transfer-pricing assessment. When the inspector arrives, the procedure is your shield: a reasoned proposition de rectification you answer within thirty days, penalties of 40 or 80 percent you fight with contemporaneous proof of good faith, charges you save with invoices rather than ratios, and a documented appeals route from réclamation to the tribunal administratif and the cour administrative d’appel. Register before you are found, price every intra-group flow in writing, file VAT from the first fortnight of operations, and keep the file that proves where value is really created. Do this and France becomes a market taxed at known rates; ignore it and the first French letter will teach the same rules with surcharges.