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 imp\u00f4ts 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 ajout\u00e9e) 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-\u00e0-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.<\/p>\n
French corporate tax, called IS (imp\u00f4t sur les soci\u00e9t\u00e9s), does not stop at the border. The founding rule is Article 209 of the CGI (Code g\u00e9n\u00e9ral des imp\u00f4ts, the French General Tax Code)<\/a>: \u00ab les b\u00e9n\u00e9fices passibles de l’imp\u00f4t sur les soci\u00e9t\u00e9s sont d\u00e9termin\u00e9s d’apr\u00e8s les r\u00e8gles fix\u00e9es par les articles 34 \u00e0 45 , 53 A \u00e0 57 , 108 \u00e0 117 , 237 ter A et 302 septies A bis et en tenant compte uniquement des b\u00e9n\u00e9fices r\u00e9alis\u00e9s dans les entreprises exploit\u00e9es en France, de ceux mentionn\u00e9s aux a, e, e bis et e ter du I de l’article 164 B ainsi que de ceux dont l’imposition est attribu\u00e9e \u00e0 la France par une convention internationale relative aux doubles impositions. \u00bb 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?<\/p>\n Tax treaties add a second lock with the concept of permanent establishment, translated from \u00ab \u00e9tablissement stable \u00bb. Take the decision of the Marseille administrative court of appeal of 4 December 2025, Yachting Financial Solutions Ltd, no. 24MA02620<\/a>, which quotes the Franco-Irish treaty of 21 March 1968: \u00ab Le terme ” \u00e9tablissement stable ” d\u00e9signe une installation fixe d’affaires o\u00f9 une entreprise exerce tout ou partie de son activit\u00e9. \u00bb The same article lists examples \u2014 \u00ab Un si\u00e8ge de direction \u00bb, \u00ab Une succursale \u00bb, \u00ab Un bureau \u00bb \u2014 and carves out purely preparatory or auxiliary activity: \u00ab On ne consid\u00e8re pas qu’il y a \u00e9tablissement stable si : \/ (…) (ee) Une installation fixe d’affaires est utilis\u00e9e aux seules fins de publicit\u00e9, de fourniture d’informations, de recherche scientifique ou d’activit\u00e9s analogues qui ont pour l’entreprise un caract\u00e8re pr\u00e9paratoire ou auxiliaire \u00bb. 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.<\/p>\n 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<\/a>, quoted word for word: \u00ab Il r\u00e9sulte de ce qui pr\u00e9c\u00e8de que l’administration fiscale doit \u00eatre regard\u00e9e comme d\u00e9montrant que la soci\u00e9t\u00e9 Yachting Financial Solutions Ltd a au cours des ann\u00e9es en litige exploit\u00e9 une entreprise en France pour l’application de l’article 209 du code g\u00e9n\u00e9ral des imp\u00f4ts, sans qu’ait d’incidence la d\u00e9claration par la soci\u00e9t\u00e9 Yachting Financial Solutions Ltd de son chiffre d’affaires aupr\u00e8s des autorit\u00e9s fiscales irlandaises et le paiement de l’imp\u00f4t sur les soci\u00e9t\u00e9s en Irlande pour la p\u00e9riode en litige. \u00bb 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.<\/p>\n Draw the operational lesson before any inspector knocks. If your people in France only prepare \u2014 market studies, window displays, scientific liaison \u2014 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 \u00ab entreprise exploit\u00e9e en France \u00bb 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.<\/p>\n One more trap sits inside groups: the transfer of value between your French presence and the foreign head office. Article 57 of the CGI<\/a> provides: \u00ab Pour l’\u00e9tablissement de l’imp\u00f4t sur le revenu d\u00fb par les entreprises qui sont sous la d\u00e9pendance ou qui poss\u00e8dent le contr\u00f4le d’entreprises situ\u00e9es hors de France, les b\u00e9n\u00e9fices indirectement transf\u00e9r\u00e9s \u00e0 ces derni\u00e8res, soit par voie de majoration ou de diminution des prix d’achat ou de vente, soit par tout autre moyen, sont incorpor\u00e9s aux r\u00e9sultats accus\u00e9s par les comptabilit\u00e9s. \u00bb The Council of State (Conseil d’\u00c9tat, the supreme administrative court) confirmed on 21 December 2022, Bupa Insurance Limited, no. 450796<\/a>: \u00ab Elles sont applicables \u00e0 toute entreprise imposable en France, y compris une succursale fran\u00e7aise d’une soci\u00e9t\u00e9 dont le si\u00e8ge est \u00e0 l’\u00e9tranger, sans qu’y fasse obstacle la circonstance que la succursale n’a pas de personnalit\u00e9 morale. \u00bb And the court added: \u00ab Peut constituer une pratique entrant dans les pr\u00e9visions de ces dispositions, la cession \u00e0 une soci\u00e9t\u00e9 \u00e9tablie hors de France, \u00e0 titre gratuit ou \u00e0 prix minor\u00e9, de la client\u00e8le rattachable \u00e0 l’activit\u00e9 d’une succursale fran\u00e7aise d’une soci\u00e9t\u00e9 dont le si\u00e8ge est \u00e0 l’\u00e9tranger. \u00bb 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 \u2014 management fees, brand royalties, client transfers, cost recharges \u2014 at arm’s length and in writing, because the branch you thought was invisible is fully exposed to Article 57.<\/p>\n Once the taxable presence is established \u2014 or better, before it is imposed on you \u2014 choose the vehicle deliberately. The subsidiary (filiale) is a French company in its own right, most often a SAS (soci\u00e9t\u00e9 par actions simplifi\u00e9e, the flexible joint-stock company foreign founders prefer) or sometimes a SARL (soci\u00e9t\u00e9 \u00e0 responsabilit\u00e9 limit\u00e9e, the classic limited liability company). It has French legal personality, its own Kbis, its own RCS number (registre du commerce et des soci\u00e9t\u00e9s, 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<\/a>.<\/p>\n Registration is compulsory in both cases and runs through the same single window. Article L123-36 of the Commercial Code<\/a> states: \u00ab Il est tenu un registre national des entreprises, auquel s’immatriculent les entreprises exer\u00e7ant sur le territoire fran\u00e7ais une activit\u00e9 de nature commerciale, artisanale, agricole ou ind\u00e9pendante. \u00bb This RNE (registre national des entreprises, the national business register operated via the INPI, Institut national de la propri\u00e9t\u00e9 industrielle) replaced the old parallel registers: every creation, branch opening or modification now passes through the guichet des formalit\u00e9s des entreprises (the online single window for business formalities). The official service-public guide for foreigners creating a business in France<\/a> confirms the sequence \u2014 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<\/a> and how IS is computed, paid in instalments and challenged<\/a>.<\/p>\n 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 (int\u00e9gration 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 \u00e0 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 \u2014 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.<\/p>\n 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<\/a> (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 \u2014 for instance to second two engineers to a French client site for a fixed project \u2014 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 s\u00e9curit\u00e9 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.<\/p>\n 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<\/a>: \u00ab Le lieu des prestations de services est situ\u00e9 en France : 1\u00b0 Lorsque le preneur est un assujetti agissant en tant que tel et qu’il a en France : a) Le si\u00e8ge de son activit\u00e9 \u00e9conomique, sauf lorsqu’il dispose d’un \u00e9tablissement stable non situ\u00e9 en France auquel les services sont fournis ; b) Ou un \u00e9tablissement stable auquel les services sont fournis ; c) Ou, \u00e0 d\u00e9faut du a ou du b, son domicile ou sa r\u00e9sidence habituelle ; \u00bb 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<\/a> sets the principle \u2014 \u00ab La taxe sur la valeur ajout\u00e9e doit \u00eatre acquitt\u00e9e par les personnes qui r\u00e9alisent les op\u00e9rations imposables \u00bb \u2014 with the cross-border exception: \u00ab lorsqu’une livraison de biens ou une prestation de services mentionn\u00e9e \u00e0 l’ article 259 A est effectu\u00e9e par un assujetti \u00e9tabli hors de France, la taxe est acquitt\u00e9e par l’acqu\u00e9reur, le destinataire ou le preneur qui agit en tant qu’assujetti et qui dispose d’un num\u00e9ro d’identification \u00e0 la taxe sur la valeur ajout\u00e9e en France. \u00bb 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<\/a> details the numbers, returns and refund mechanics.<\/p>\n The trap springs when the foreign provider is itself established in France through a fixed establishment (\u00e9tablissement 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<\/a>, and the rule deserves a full quotation: \u00ab Il r\u00e9sulte de ces dispositions que lorsque le lieu des prestations de services se trouve en France parce qu’elles sont fournies \u00e0 des assujettis remplissant les conditions d\u00e9finies \u00e0 l’article 259 du code g\u00e9n\u00e9ral des imp\u00f4ts, le redevable de la taxe sur la valeur ajout\u00e9e aff\u00e9rente est le prestataire qui les fournit s’il est lui-m\u00eame \u00e9tabli en France. Doit \u00eatre regard\u00e9 comme tel le prestataire qui a en France un \u00e9tablissement stable depuis lequel les prestations sont fournies et qui pr\u00e9sente un degr\u00e9 suffisant de permanence et une structure apte, du point de vue de l’\u00e9quipement humain et technique, \u00e0 rendre possibles, de mani\u00e8re autonome, les prestations de services consid\u00e9r\u00e9es. \u00bb 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 \u2014 plus penalties.<\/p>\n 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 (soci\u00e9t\u00e9s par actions simplifi\u00e9e, 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 (activit\u00e9 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<\/a>: \u00ab pour juger que la soci\u00e9t\u00e9 Worldwide Euro Protection \u00e9tait redevable de la taxe sur la valeur ajout\u00e9e sur les prestations en litige, sur le seul constat de leur r\u00e9alisation par l’interm\u00e9diaire d’un \u00e9tablissement stable en France, sans rechercher par ailleurs si le si\u00e8ge de l’activit\u00e9 \u00e9conomique de la soci\u00e9t\u00e9 Worldwide Euro Protection serait situ\u00e9 en France \u00bb \u2014 the Luxembourg seat was simply irrelevant once the French establishment was proven to render the services autonomously.<\/p>\n 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<\/a>: \u00ab dans le cas o\u00f9 un contribuable n’a ni d\u00e9pos\u00e9 dans le d\u00e9lai l\u00e9gal les d\u00e9clarations qu’il \u00e9tait tenu de souscrire, ni fait conna\u00eetre son activit\u00e9 \u00e0 un centre de formalit\u00e9s des entreprises ou au greffe du tribunal de commerce<\/a>, son activit\u00e9 est r\u00e9put\u00e9e occulte s’il n’est pas en mesure d’\u00e9tablir qu’il a commis une erreur justifiant qu’il ne se soit acquitt\u00e9 d’aucune de ses obligations d\u00e9claratives. \u00bb And for a taxpayer claiming it complied in another State, \u00ab la justification de l’erreur commise doit \u00eatre appr\u00e9ci\u00e9e en tenant compte de l’ensemble des circonstances de l’esp\u00e8ce et notamment du niveau d’imposition dans cet autre \u00c9tat et des modalit\u00e9s d’\u00e9change d’informations entre les administrations fiscales des deux Etats. \u00bb 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 \u2014 and \u00ab we paid tax in Luxembourg\/Ireland \u00bb only helps if the foreign tax level and information exchange support good faith. Note the declaration duty itself: Article 286 of the CGI<\/a> requires that \u00ab Toute personne assujettie \u00e0 la taxe sur la valeur ajout\u00e9e doit : 1\u00b0 Dans les quinze jours du commencement de ses op\u00e9rations, souscrire au bureau d\u00e9sign\u00e9 par un arr\u00eat\u00e9 une d\u00e9claration conforme au mod\u00e8le fourni par l’administration. \u00bb Fifteen days from starting operations: every month of \u00ab testing the market \u00bb without registration feeds the future penalties file.<\/p>\n The reassessment always starts with paper, and the paper has strict forms you can exploit. After an audit (v\u00e9rification de comptabilit\u00e9 for a company, examen de comptabilit\u00e9 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 proc\u00e9dures fiscales, the statute governing French tax procedure)<\/a> commands: \u00ab L’administration adresse au contribuable une proposition de rectification qui doit \u00eatre motiv\u00e9e de mani\u00e8re \u00e0 lui permettre de formuler ses observations ou de faire conna\u00eetre son acceptation. \u00bb You then have, in the standard procedure, thirty days to file written observations, extendable by thirty more days on request made before expiry (\u00ab Sur demande du contribuable re\u00e7ue par l’administration avant l’expiration du d\u00e9lai mentionn\u00e9 \u00e0 l’article L. 11 , ce d\u00e9lai est prorog\u00e9 de trente jours. \u00bb). 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 \u2014 one that asserts a permanent establishment without identifying the premises, the staff, the contracts signed in France or the figures \u2014 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).<\/p>\n 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<\/a>: \u00ab Les inexactitudes ou les omissions relev\u00e9es dans une d\u00e9claration ou un acte comportant l’indication d’\u00e9l\u00e9ments \u00e0 retenir pour l’assiette ou la liquidation de l’imp\u00f4t ainsi que la restitution d’une cr\u00e9ance de nature fiscale dont le versement a \u00e9t\u00e9 ind\u00fbment obtenu de l’Etat entra\u00eenent l’application d’une majoration de : a. 40 % en cas de manquement d\u00e9lib\u00e9r\u00e9 ; \u00bb \u2014 40 percent for deliberate failure \u2014 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<\/a> held: \u00ab la soci\u00e9t\u00e9, qui ne pouvait ignorer qu’elle disposait en France d’un \u00e9tablissement stable \u00e0 partir duquel elle exer\u00e7ait l’ensemble de son activit\u00e9, a d\u00e9lib\u00e9r\u00e9ment \u00e9tabli son si\u00e8ge social en Irlande \u00bb, and concluded that, in the same ruling of 4 December 2025<\/a>: \u00ab L’administration doit ainsi \u00eatre regard\u00e9e comme d\u00e9montrant l’intention de la soci\u00e9t\u00e9 Yachting Financial Solutions Ltd d’\u00e9luder l’imp\u00f4t. \u00bb 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 \u2014 and register late rather than never, because spontaneous regularisation remains the strongest fact against intent.<\/p>\nB. Branch or subsidiary: what changes for registration, liability, accounts and the money sent home<\/h3>\n
II. VAT on your cross-border services and the battle against the French reassessment: reverse charge, fixed establishment and the defence from abroad<\/h2>\n
A. Who really pays French VAT when you invoice from abroad: place of supply, reverse charge and the fixed-establishment trap<\/h3>\n
B. Answer the French reassessment from abroad: the audit letter, the penalties and the court route<\/h3>\n