{"id":2152539,"date":"2026-10-19T21:02:47","date_gmt":"2026-10-19T19:02:47","guid":{"rendered":"https:\/\/kohenavocats.fr\/2026\/10\/19\/foreign-company-france-branch-vs-subsidiary-liability-tax-conversion-abroad\/"},"modified":"2026-10-19T21:02:47","modified_gmt":"2026-10-19T19:02:47","slug":"foreign-company-france-branch-vs-subsidiary-liability-tax-conversion-abroad","status":"publish","type":"post","link":"https:\/\/kohenavocats.fr\/en\/2026\/10\/19\/foreign-company-france-branch-vs-subsidiary-liability-tax-conversion-abroad\/","title":{"rendered":"Branch or Subsidiary in France: Liability, Branch Tax and Conversion for Foreign Companies"},"content":{"rendered":"

You run a company in London, New York, Dubai or Singapore and France is your next market. You need people on the ground in Paris, contracts signed locally, invoices carrying French VAT and a credible presence that French customers and suppliers take seriously, but you are not sure whether to open a branch of your existing company or to incorporate a full French subsidiary, usually a SAS (soci\u00e9t\u00e9 par actions simplifi\u00e9e, the flexible joint-stock company most foreign founders choose). The branch, called a succursale<\/em> in French law, looks like the perfect shortcut: no new company, no share capital to lock up, registration in weeks. That shortcut is real, and many foreign groups start that way. But a branch is not a light subsidiary. It has no legal personality of its own, so its debts are your debts. Its French profits pay French corporate tax, and on top of that tax a specific withholding called the branch tax can apply to profits regarded as distributed abroad. Its payroll triggers the full French social security system, and closing the branch later costs almost as much attention as opening it. This guide answers the two questions every foreign founder must settle in order: how do you lawfully open and operate each vehicle, who can commit your company once it exists and who pays if things go wrong, and then what the tax and payroll bills look like and when converting the branch into a French SAS becomes the smarter move. The general comparison of company forms is covered in our companion guide to choosing between SAS, SARL and branch<\/a>; what follows is the operating manual for founders who have narrowed the choice to branch versus subsidiary and want the liability, tax and conversion mechanics before they file anything.<\/p>\n

I. Opening and running a branch versus incorporating a subsidiary: what changes on day one?<\/h2>\n

A. How do you register a branch in France without creating a new company?<\/h3>\n

A branch is an establishment of your existing foreign company on French soil, not a new legal person. That single sentence explains the whole registration logic. Because no new company is born, you do not draft articles of association, you do not deposit share capital in a blocked bank account and you do not appoint a president or supervisory bodies. You declare the establishment of your foreign company to the French registers so that third parties know who they are dealing with. The legal basis is direct. Article L123-1 of the Commercial Code<\/a> (Code de commerce<\/em>) provides that the companies registered with the Trade and Companies Register (registre du commerce et des soci\u00e9t\u00e9s<\/em>, universally called the RCS) include \u00abLes soci\u00e9t\u00e9s commerciales dont le si\u00e8ge est situ\u00e9 hors d\u2019un d\u00e9partement fran\u00e7ais et qui ont un \u00e9tablissement dans l\u2019un de ces d\u00e9partements\u00bb (Commercial Code, article L123-1<\/a>). In plain English: any foreign commercial company with premises, staff or operations in France must register. There is no minimum size below which you can trade quietly through a Paris office without telling the register. If you have people signing deals, delivering services or holding stock in France on a stable basis, you register.<\/p>\n

The filing itself goes through the single online portal called the Guichet unique<\/em>, operated by the INPI (Institut national de la propriete industrielle, the French industrial property office that now runs the business formalities portal). The portal forwards your file to the court registry (greffe<\/em>) of the Commercial Court (tribunal de commerce<\/em>) where the branch sits, and that greffe<\/em> issues the branch’s Kbis extract. The Kbis is the official identity card of a French business: registration number, corporate name of the foreign parent, address of the French establishment, identity of the branch representative and declared activity. Banks, landlords, suppliers and the VAT office will all ask for it, exactly as they would ask a French company’s Kbis. Registration also feeds the RNE (Registre national des entreprises, the national business register that centralises company data) and gives the branch its SIREN and SIRET numbers. The SIREN identifies the business nationally and the SIRET identifies each establishment; you will quote the SIRET on payslips, invoices and every administrative filing. One practical consequence founders discover late: the file must be complete and consistent on day one, because the Guichet unique<\/em> rejects inconsistent filings and each rejection costs weeks. Our guide to fixing a rejected Guichet unique filing from abroad<\/a> walks through the cure procedure if your first attempt bounces.<\/p>\n

What you must declare depends on where your parent company comes from. If it is governed by the law of a European Union Member State or a European Economic Area state and takes one of the listed European company forms, article R123-57 of the Commercial Code<\/a> provides that only limited information is declared: \u00absont seuls d\u00e9clar\u00e9s les renseignements pr\u00e9vus aux 1\u00b0, 2\u00b0, 8\u00b0 et 9\u00b0 de l\u2019article R. 123-53 et \u00e0 l\u2019article R. 123-54, ainsi que le lieu et le num\u00e9ro d\u2019immatriculation de cette soci\u00e9t\u00e9 sur un registre public\u00bb (Commercial Code, article R123-57<\/a>). In practice that means the parent’s name, legal form, capital and home registration details plus the information on the people running it. If your company comes from outside the EU and EEA, for example the United States, the United Kingdom, the United Arab Emirates or Singapore, article R123-58 requires more<\/a>: beyond the standard information in articles R123-53 to R123-56, you declare \u00abla l\u00e9gislation qui lui est applicable, ainsi que le lieu et le num\u00e9ro de son immatriculation sur un registre public\u00bb (Commercial Code, article R123-58<\/a>). You must therefore produce evidence of the parent’s existence and good standing under its home law, usually a certificate of incorporation with a sworn translation, plus proof of the powers of the person signing the French filing. Non-EU founders should budget translation and legalisation time before they even open the portal: an incomplete home-country file is the most common cause of rejection for American, British and Gulf companies.<\/p>\n

Two further declarations surprise foreign founders. First, the branch must declare the people who can direct, manage or bind it. Article R123-54 requires the company<\/a> to declare the family names, given names, dates and places of birth, personal addresses and nationalities of managers, presidents, general directors and generally the members and third parties having the power to direct, administer or commit the company. Read carefully: the branch representative you appoint in Paris goes on the public register with full identity details, and the scope of that person’s powers matters because counterparties will rely on the Kbis to check who can sign. Second, the branch must identify its beneficial owners in the RBE (Registre des b\u00e9n\u00e9ficiaires effectifs, the French beneficial ownership register). The court registry checks that file under article L561-47 of the Monetary<\/a> and Financial Code (Code mon\u00e9taire et financier<\/em>): \u00abLes informations mentionn\u00e9es au premier alin\u00e9a font partie des inscriptions mentionn\u00e9es au II de l\u2019article L. 123-1 du code de commerce\u00bb (Monetary and Financial Code, article L561-47<\/a>). A branch of a foreign group does not escape transparency. If the ownership chain runs through several holding companies abroad, reconstruct it early, because the greffe<\/em> will ask for supporting documents for each layer, and banks will ask the same questions again when you open the branch’s professional account. Our walkthrough of the RBE declaration and the fines for getting it wrong<\/a> applies to branches exactly as it does to subsidiaries.<\/p>\n

Do not confuse the branch with the lighter option one rung below: the liaison office (bureau de liaison<\/em>). The French Ministry of the Economy describes it as a direct presence with neither its own legal personality nor its own tax personality, restricted to exclusively non-commercial activities such as prospecting, advertising, information, storage or any preparatory and auxiliary activity, with no RCS registration and no French taxation. A liaison office can explore the market, but the moment it negotiates and concludes contracts, delivers the company’s services or books revenue in France, it crosses the line into a taxable establishment and the whole branch analysis below applies retroactively, with penalties. Founders who want a person in Paris quickly sometimes start with liaison-style activity while the branch file is pending; that is acceptable only if the person genuinely does no commercial business until registration. Have them prospect, translate and prepare, but let nobody sign a customer contract or issue an invoice from the Paris address before the Kbis arrives.<\/p>\n

B. Who pays the branch’s debts and who can legally sign for the foreign company?<\/h3>\n

This is where the branch differs most brutally from the subsidiary, and where founders must make the decision with open eyes. A French subsidiary, once registered, is a separate legal person. Article 1842 of the Civil Code (Code civil<\/em>) states that companies \u00abjouissent de la personnalit\u00e9 morale \u00e0 compter de leur immatriculation\u00bb (Civil Code, article 1842<\/a>): they hold their own legal personality from registration. The subsidiary owns its assets, signs in its own name, sues and is sued in its own name, and if it fails, its creditors chase the subsidiary’s assets, not yours, except in narrow cases such as mismanagement or a court-ordered extension of insolvency proceedings to the parent. A branch has none of that. It is your company operating in France under your name. Every contract the branch signs, every salary it owes, every tax bill it incurs and every court judgment pronounced against it binds the foreign parent directly and without limit. There is no corporate veil between the Paris operation and the London, New York or Dubai balance sheet, because there is no second person in law. A French supplier who is unpaid by the branch sues the foreign company itself, and enforcement can reach the parent’s assets under the applicable cross-border enforcement rules. For a group testing an uncertain market, that unlimited exposure is the real price of the branch’s simplicity.<\/p>\n

The mirror image of that exposure is authority: whoever runs the branch can commit the whole company. The representative declared at the RCS under article R123-54<\/a>, typically titled representant legal de la succursale<\/em> or branch manager, is the face of the company in France. Landlords will demand that person’s signature on the commercial lease (bail commercial<\/em>), banks will demand it for the account, and customers will rely on it for purchase orders. Because the branch has no board of its own and no shareholders’ meeting, decisions do not follow French corporate formalities; they follow the parent’s governance, which means the parent must give the representative clear written powers, and must also set clear limits, because acts within the apparent scope of the branch’s business generally bind the company vis-\u00e0-vis good-faith third parties. Two precautions are non-negotiable. First, draft the representative’s powers in writing, have them translated, and keep a French version ready for counterparties; vague oral mandates produce disputes about whether a commitment was authorised. Second, remember that dismissing or replacing the representative is a registrable event: the RCS entry must be updated through the Guichet unique<\/em>, and until it is, third parties may in practice continue to rely on the published name. Our guide on appointing and replacing directors of a French presence from abroad<\/a> describes the filing mechanics, which work the same way for a branch representative.<\/p>\n

Employment works identically whether you hire through a branch or a subsidiary, and this surprises founders who assumed the branch would be lighter. The branch that employs staff in France is a French employer like any other. Article L1221-10 of the Labour Code<\/a> (Code du travail<\/em>) provides that \u00abL\u2019embauche d\u2019un salari\u00e9 ne peut intervenir qu\u2019apr\u00e8s d\u00e9claration nominative accomplie par l\u2019employeur aupr\u00e8s des organismes de protection sociale d\u00e9sign\u00e9s \u00e0 cet effet\u00bb (Labour Code, article L1221-10<\/a>): no hiring before the nominative declaration, the DPAE (declaration prealable a l’embauche<\/em>, the pre-hiring declaration), is filed with URSSAF (the social security collection agency). French employment contracts, trial periods, payslips, monthly DSN payroll reporting (declaration sociale nominative<\/em>), complementary health cover and termination protections all apply in full to branch employees. The branch must also withhold payroll taxes and remit employer and employee social contributions at French rates, which roughly add a substantial surcharge on top of gross salary that shocks first-time foreign employers. If the branch hires its first employee while the founder still lives abroad, the whole first-hire sequence, DPAE, compliant contract, trial period drafting, payslip setup and DSN registration, must be completed remotely before the start date; our manual for hiring a first employee in France from abroad<\/a> covers that sequence step by step. And when the employment relationship ends badly, the branch is the defendant before the French labour courts (conseil de prud’hommes<\/em>) under the same dismissal procedures and severance scales as a French company, with the parent’s assets standing behind any award. On disputes generally, a writ can be served at the branch’s French address and the branch’s activity founds the jurisdiction of the French commercial courts for claims arising from that activity, so choosing a branch does not keep you out of French courtrooms; our guide to answering a French writ from abroad<\/a> explains what to do when that envelope arrives in Paris.<\/p>\n

II. What tax bills come with each vehicle, and when should you convert the branch into a subsidiary?<\/h2>\n

A. How is a French branch taxed, what is the branch tax, and what do tax treaties save you?<\/h3>\n

A branch that carries on business in France pays French corporate tax (imp\u00f4t sur les soci\u00e9t\u00e9s<\/em>, universally shortened to IS) on its French profits under exactly the same territoriality principle as a French company. Article 209 of the General Tax Code (Code general des impots<\/em>, the CGI) taxes profits \u00aben tenant compte uniquement des b\u00e9n\u00e9fices r\u00e9alis\u00e9s dans les entreprises exploit\u00e9es en France\u00bb (General Tax Code, article 209<\/a>): only the profits made by businesses operated in France count. In practice the French tax administration treats the branch as a permanent establishment (etablissement stable<\/em>) of the foreign company and taxes the profits attributable to the French activity, at the standard IS rate, currently 25 percent, with the reduced 15 percent rate on the first 42,500 euros of profit for qualifying small and medium companies. The branch must therefore keep books that isolate the French results, file an IS return in France and pay instalments like any French taxpayer. Founders sometimes assume the branch’s profits can simply be pooled with the parent’s home-country results and taxed once at home; France disagrees, and the applicable double tax treaty allocates the French-source business profits to France. Keep the French accounting clean from the first euro, because reconstructing branch accounts two years later during a tax audit is where reassessments and penalties are born. The mechanics of rates, instalments, loss carry-forward and the CFE local business tax are detailed in our guide to French corporate tax for companies run from abroad<\/a>.<\/p>\n

On top of IS comes the charge founders least expect: the branch tax. Article 115 quinquies of the CGI provides that \u00abLes b\u00e9n\u00e9fices r\u00e9alis\u00e9s en France par les soci\u00e9t\u00e9s \u00e9trang\u00e8res sont r\u00e9put\u00e9s distribu\u00e9s, au titre de chaque exercice, \u00e0 des associ\u00e9s n\u2019ayant pas leur domicile fiscal ou leur si\u00e8ge social en France\u00bb (General Tax Code, article 115 quinquies<\/a>). In English: the profits made in France by foreign companies are deemed distributed, for each financial year, to shareholders who have neither their tax residence nor their registered office in France. The same article defines the base: \u00abLes b\u00e9n\u00e9fices vis\u00e9s au premier alin\u00e9a s\u2019entendent du montant total des r\u00e9sultats, imposables ou exon\u00e9r\u00e9s, apr\u00e8s d\u00e9duction de l\u2019imp\u00f4t sur les soci\u00e9t\u00e9s\u00bb (General Tax Code, article 115 quinquies<\/a>). The base is therefore the total French results, taxable or exempt, minus the IS paid, and a withholding tax (retenue \u00e0 la source<\/em>) is levied on that base at the rate set for distributions to non-residents. The logic is symmetry with the subsidiary: when a French subsidiary pays dividends to its foreign parent, France levies dividend withholding; since a branch pays no dividends, the law pretends it did. A subsidiary that retains its profits pays no withholding until it actually distributes; a branch is deemed to distribute every year, so the withholding bites annually whether or not cash leaves France. For a profitable branch that reinvests everything locally, that yearly deemed-distribution charge is a genuine cash cost the subsidiary would not bear. Compare the numbers before you choose: a subsidiary accumulating reserves in France defers the withholding, while a branch prepays it each year and can only recover the excess later through a reclaim procedure if actual distributions turn out lower, a slow administrative path nobody should rely on in a business plan.<\/p>\n

The courts have given this branch tax a precise and taxpayer-protective reading that your advisers should know. In its decision of 24 June 2019, no. 413156, concerning a Luxembourg company taxed in France on a permanent establishment, the Conseil d’Etat (the supreme administrative court) held that \u00abelle ne peut asseoir la retenue \u00e0 la source que sur des b\u00e9n\u00e9fices que les dispositions du 1 de l\u2019article 115 quinquies r\u00e9putent distribu\u00e9s par cette soci\u00e9t\u00e9\u00bb (Conseil d\u2019\u00c9tat, 24 June 2019, no. 413156<\/a>). The administration may base the withholding only on profits that article 115 quinquies deems distributed, and the court added the exact measure of that base: \u00abL\u2019assiette constitu\u00e9e de ces b\u00e9n\u00e9fices r\u00e9put\u00e9s distribu\u00e9s s\u2019entend du montant total des r\u00e9sultats r\u00e9alis\u00e9s en France par la soci\u00e9t\u00e9 \u00e9trang\u00e8re, qu\u2019ils soient imposables ou exon\u00e9r\u00e9s, apr\u00e8s d\u00e9duction de l\u2019imp\u00f4t sur les soci\u00e9t\u00e9s\u00bb (Conseil d\u2019\u00c9tat, 24 June 2019, no. 413156<\/a>). The administration cannot inflate the base with sums actually paid out that exceed the deemed-distributed profits defined by the statute; where it did, the court annulled the reassessment for error of law. Read the full decision on Legifrance, Conseil d’Etat 24 June 2019 no. 413156<\/a>. The same litigation shows the second lever: tax treaties. In that case the lower court had already reduced the withholding rate to 5 percent under the applicable treaty, a reminder that the treaty between France and the parent’s home state usually caps the branch-tax rate well below the domestic rate. Before choosing a branch, have your treaty checked: the France-United States, France-United Kingdom and France-Singapore treaties each contain provisions on permanent establishments and on the branch tax or its equivalent, and the effective rate changes the branch-versus-subsidiary arithmetic significantly. Note the formal references for your file: the IS territoriality rule is CGI article 209<\/a>, and the branch-tax statute is CGI article 115 quinquies<\/a>.<\/p>\n

VAT and payroll complete the fiscal picture, and here branch and subsidiary are treated alike. The branch that makes taxable supplies in France must register for French VAT, charge 20 percent on most goods and services, file CA3 returns (chiffre d’affaires<\/em> declarations) and can reclaim input VAT under the same rules as a French company; our manual on French VAT registration, returns and refunds from abroad<\/a> covers the numbers and the calendar. On payroll, the branch registers with URSSAF, pays employer contributions and files the DSN exactly like a subsidiary, and an URSSAF audit of the branch follows the same control, reassessment and challenge procedure described in our guide to surviving a URSSAF audit from abroad<\/a>. The takeaway for the choice of vehicle is therefore crisp: on VAT and payroll there is no branch discount, on IS the branch pays like a subsidiary, and on distributions the branch pays every year while the subsidiary pays only when it distributes. The branch’s fiscal advantage is timing and simplicity at entry, never a lower lifetime tax bill.<\/p>\n

B. Regulated sectors, sensitive investments, and the moment to convert the branch into a French subsidiary<\/h3>\n

Some activities change the analysis before you even file, because France screens foreign investments in sensitive sectors. Article L151-3 of the Monetary and Financial Code<\/a> provides that \u00abSont soumis \u00e0 autorisation pr\u00e9alable du ministre charg\u00e9 de l\u2019\u00e9conomie les investissements \u00e9trangers dans une activit\u00e9 en France qui, m\u00eame \u00e0 titre occasionnel, participe \u00e0 l\u2019exercice de l\u2019autorit\u00e9 publique ou rel\u00e8ve de l\u2019un des domaines suivants\u00bb (Monetary and Financial Code, article L151-3<\/a>), followed by public order, national defence, arms and the further sectors defined by decree, which in practice cover energy, water, transport, telecoms, health, semiconductors, artificial intelligence and other critical technologies. A decree defines precisely which operations need prior authorisation from the Minister for the Economy, and the authorisation can carry conditions. In current administrative practice, simply opening a branch is treated as exempt from that prior declaration, which is one more reason groups in a hurry start with a branch; but acquiring control of a French company in a listed sensitive sector, which is what incorporating or buying a subsidiary often amounts to economically, can require the authorisation. Check the sector lists before structuring: choosing a branch to sidestep a screening that your project actually triggers is not a strategy, it is a violation that can lead to the investment being unwound. When in doubt, the screening question should be put to counsel before the first filing, not after the first euro is spent.<\/p>\n

Assume the sector is free and the branch is running. The question becomes when to convert it into a subsidiary, usually a SAS, and the answer turns on four triggers. The first is liability growth: as long as the branch signs small contracts, the parent’s unlimited exposure is theoretical; once it signs multi-year leases, hires a team and takes customer deposits, that exposure becomes the group’s single largest uninsured risk, and a subsidiary with its own personality, acquired “a compter de leur immatriculation” under Civil Code article 1842<\/a>, ring-fences it. The second is profit retention: once the branch is durably profitable and you want to accumulate reserves in France without paying the yearly deemed-distribution withholding, the subsidiary’s distribute-only-when-you-decide regime wins the arithmetic. The third is credibility and operations: some counterparties, lenders and public buyers prefer contracting with a French company with its own capital, and employee profit-sharing, stock options and manager incentives are all easier to build inside a SAS than inside a branch. The fourth is exit and fundraising: selling a business or bringing in a French investor means selling shares, and there are no branch shares to sell; an asset deal out of a branch is slower, needs every counterparty’s consent and restarts due-diligence clocks from zero.<\/p>\n

Converting is straightforward but it is a two-track operation, not a transformation: French law does not turn a branch into a company. You incorporate the SAS from scratch through the Guichet unique<\/em>, with articles, capital deposit in a blocked account and its own Kbis, exactly as described in our setting-up guide for foreign founders<\/a>, and in parallel you transfer the business from branch to subsidiary. The commercial lease must be assigned or a new lease signed, because the tenant changes legal person. Supplier and customer contracts must be novated or assigned with each counterparty’s agreement; framework agreements with change-of-control or assignment clauses deserve a clause-by-clause review before anyone announces the move. Employees transfer with the business by operation of law: article L1224-1 of the Labour Code<\/a> provides that \u00abLorsque survient une modification dans la situation juridique de l\u2019employeur, notamment par succession, vente, fusion, transformation du fonds, mise en soci\u00e9t\u00e9 de l\u2019entreprise, tous les contrats de travail en cours au jour de la modification subsistent entre le nouvel employeur et le personnel de l\u2019entreprise\u00bb (Labour Code, article L1224-1<\/a>). Length of service, accrued rights and contractual terms survive the move, so dismiss-and-rehire schemes around a conversion are both unlawful and expensive. Once the transfers are done, the branch files for removal (radiation<\/em>) from the RCS through the Guichet unique<\/em>, settles its final IS and VAT returns, and keeps its records available for later audits, because closing the branch does not close the administration’s right to audit the years it operated. Budget the full sequence, incorporation plus transfers plus radiation, over several months, and keep the branch alive until the subsidiary’s bank account, VAT number and payroll are all running; a gap day between the two vehicles is where salaries bounce and invoices go nowhere.<\/p>\n

Conclusion<\/h2>\n

Branch and subsidiary are not a cheap option and an expensive one; they are a fast option with unlimited liability and yearly deemed-distribution tax, and a slower option with its own legal personality and tax paid only on actual distributions. Open a branch when you need a lawful French presence in weeks, when profits will be modest or repatriated anyway, when no sensitive-sector screening applies and when the contracts you will sign stay small enough that the parent can carry the risk. Incorporate the SAS from the start when you plan to retain profits in France, hire a team, sign heavy commitments or raise money beside the parent, and convert the branch the moment those four triggers appear rather than after a dispute teaches you their meaning. In both cases the formalities run through the same portal, the same registers and the same payroll system; what differs is who answers for the debts and when the tax falls due. Get those two answers right on paper before the first signature, and the French operation becomes what it should be: a growth decision, not a liability surprise.<\/p>\n","protected":false},"excerpt":{"rendered":"

Branch or French subsidiary? 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