Query re setting up a new business

[jrudwell]

Hello, I'm a newcomer to the forum, which I happily discovered yesterday during my desktop research on starting up a new business in France.

I have several queries which I will detail below. I have done a quick search and did not see any previous threads covering the topics, so apologies if this has already been covered, and many thanks in anticipation of forthcoming advice!

The business I would like to start up involves shipping French goods overseas to the UK and to the US, for onward sales. I am currently based in France, and my preference is to spend the majority of my time here to assist in local operations. I have dual citizenship with the UK and US, so if needed I could spend part of the tax year in either country.

Question 1 - Regulated activity
Is the purchase and export of French goods a regulated activity, and if so what licenses or qualifications would be required?

Question 2 - Legal structure
I have found through my research a number of possibilities for the legal structure of the company. My aim is maximising tax efficiency, and I am aware that the French tax system can put a strain on new businesses. I see one of my options may be to set up as a "Bureau de Liaison", which allows local negotiation and presence, but with all commercial activity (e.g. billing / conclusion of contracts with suppliers), being handled by a parent company based outside of France. This could be based in the UK according to the information I have seen. All earnings would be declared in the UK. Setting up a Bureau de Liaison requires registration with the Chambre de Commerce, but from what I understand there is no liability to pay French taxes, including VAT.

Is this correct based on what other people know?

Is the Bureau de Liaison structure a possibility for the export business, and is it the most appropriate structure to be considering?

If it is the most appropriate structure, which is the most tax efficient setup for the location of Parent Company? i.e. could the parent company alternatively be located in the US, or possibly in Jersey, Delaware, or some other "tax haven"?

Question 3 - Employment
My aim is to run a small operation, whilst avoiding complex employment law and corresponding tax contributions. This in mind, my potential partners in this venture are an American currently with papers to work in France, but under the category of Carte de Sejour Temporaire. She does not have a European passport at the moment, but is gainfully employed in France. The second potential partner is a French national.

Using the Bureau de Liaison setup, how are local negotiators / "liaisons" treated under French law?

In short, what is the most tax efficient way to treat my partners under the Bureau de Liaison setup? Is it to directly employ them under the UK or US parent, in which case the American would require (I think?) sponsorship. Or is it possible for the partners to set up an entity not directly employed by the parent but working on behalf of the parent and still under French law. How would they be paid and would that payment be subject to French tax?

Again many thanks again for any advice. My aim is to find out as much as possible using this forum and other resources, and then to speak with a local accountant who is familiar with international (and specifically UK / US) tax regulations. I welcome any suggestions / recommendations for good accountants of this type who may be located in Paris or London.

Thank you!
Justin

[frogblogger]

At first glance your main problem will be that the bureau de liaison is a 'testing the water' set-up, and no one working under its auspices is supposed to conclude any commercial contracts in the name of the parent company (I doubt it would be able to settle bills on its behalf either). I suppose if you yourself are an employee of the parent company, you could 'role switch' between both.

But as you are a British passport holder, and if the parent company is based in the UK, and if you spend less than six months per annum in France, and if the business can be proved to be at least as dependent on UK/US buyers as on the French side, then there's an argument for you to be employed directly by the British parent company maybe? In fact I'm not sure that you would even need a French commercial entity under those circumstances. You could simply be part-time resident in France, working directly for a British set-up.

But if you are resident in France, ie more than six months, with or without a bureau de representation you are obliged to contribute to the French system as would a standard French employee, as far as I can see, on the basis of whatever income you pay yourself. The foreign-based company would do the billing etc, profits and tax declarations being made in the UK, but you personally would have to be declared in France. Again, not sure of the usefulness of a bureau de representation under those circumstances (seeing as it can't interract commercially with suppliers etc)... Bev, any ideas??

Useful info on the URSSAF site... Entreprise étrangère sans établissement en France

[Bevdeforges]

Hi - just off the plane back from the US this morning, so excuse any "fuzzy" answers while I de-jet lag.

I have not heard of the Bureau de liaison as a business structure here in France, and from a quick skim of the URSSAF page Frogblogger provided, you don't seem to avoid any of the bureaucratic stuff (particularly as regards employees) you were looking to avoid.

But to answer your questions in order:
Question 1: Just exporting French goods per se doesn't fall under the heading of a regulated activity - though depending on what sort of goods you're dealing in, some sort of special regulations might kick in. Foods and wine are probably more heavily regulated by the US, so if you're exporting to there you need to check the regs on that end. (Alcohol taxes, restricted imports, like lait-cru cheeses or foie gras which is banned in several states on animal cruelty grounds, etc.)

Question 2: Why mess with a complicated legal structure for tax avoidance purposes? As a US citizen, you have to declare and possibly pay US taxes no matter where you're set up. And exporting goods from anywhere within the EU to outside the EU, you don't pay VAT anyhow. Exporting things first to the UK involves declarations regarding export so that the UK company can properly handle VAT. It might just be easier to just bill directly from the French company and avoid the added paperwork.

As far as business taxes, it's your tax residence that is going to determine where you pay your personal income taxes anyhow. You can't just limit your time in country to "less than half a year" and avoid the residence issue. Having business interests in France will factor into the determination of your tax residence, no matter where else you spend your time.

Your American friend's participation won't give him or her any additional claim on the right to remain in France if the current job goes away for any reason. To "hire" them over an EU national, you'd have to go through a justification process just like any other French employer.

Speaking from experience, French business law and taxation isn't as onerous as some would have you believe - but it does take some time for the "learning curve." It's actually easier to do things on the up and up rather than to find your way around the laws, especially if you wind up having to follow the French standards in the end.
Cheers,
Bev

[jrudwell]

Thank you both for your very helpful responses.

I am certainly interested in keeping things as simple as possible, and I subscribe to the ethos of approaching any business on the up and up. I am also interested in finding the most economical way of setting up the business given I have the flexibility to set up shop in a number of countries.

It feels like the easiest thing for me to do would be to set up a company in the UK, and be a UK tax resident. My market for imported French goods would be the UK to start, and expanding to the US at a later time once the model is proven (either through the UK company or a US equivalent or partner). I could set up a company in France but I believe (please tell me if I am wrong), that I would pay lower taxes on the whole if I were based in the UK. Naturally I will still have to declare in the US regardless of where I earn.

The primary question then becomes how to source the local product. I could do it myself, splitting time between the UK and France. However, I want to get my American partner involved in the business without having to sponsor her through the UK company. The good news, I think, is that my partner has a Carte de Sejour to live and work in France. Her temporary residency is tied to her PACS status with her partner (a Frenchman). I believe this leaves her the flexibility to leave her current employer and start up her own company. Is my understanding of the law correct in this circumstance?

Based on the following assumptions...

a) Corporate and personal tax liabilities are lower in the UK than in France
b) My American partner could set up a local French company based on visa status

... I am wondering if the following might be an efficient solution.

I establish a UK company that will work with a partner company based in France. As primary investor I would ideally want to be part or even majority shareholder in both the UK and French companies. Not sure if a "foreign" interest in a French company such as this would be allowed? The local company establishes contacts and negotiates contracts with French suppliers on behalf of the UK company. All contract signatures, billing, import levies, VAT, are handled by the partner company in the UK. As such all profits are declared in the UK, which if my assumptions are correct means that profits are subject to lower taxes - both personally and from a company perspective.

Anyone employed by the French company would be subject to French tax law as tax residents of that country. Salary would be derived from payments for services by the UK company to the French company.

Does this sound like a workable solution, or have I made incorrect assumptions or overcomplicated things?

Many thanks again in advance for your help and advice.
Kind Regards
Justin

[Bevdeforges]

If your American partner's carte de sejour is based on her being PACS'd with a Frenchman, it should say on it somewhere if she has permission to work anywhere in France and in any profession. If it does, then she's good.

Setting up a French company with you or your UK company as a major/majority owner may be complicating the situation a bit more than necessary. Depending on your anticipated level of trading, you could consider setting her up as an auto-entrepreneur, in essence free-lancing and selling goods and/or services to your UK company. That vastly simplifies the bookkeeping and her tax and social insurances situation. (It also avoids having to get into the VAT regime - at least until turnover hits the threshold point.)

If she winds up setting up a full blown French company, her social insurances will be based on an assumed minimum "profit" if she is considered the company head, no matter how you handle the books between the two companies. (In France, there has to be a physical person as declared "gérant" of any company and they are subject to a special regime for social insurances and sometimes income taxes.)

You may want to contact (or have your French business partners contact) the chambre de commerce in their departements to see what information they can find on the various types of business structures. There are a number of special programs opening up for small businesses now in France that might be of interest for your venture.
Cheers,
Bev

[jrudwell]

Thank you very much Bev.

I will double check my partner's Carte de Sejour status, and will look into the auto-entrepreneur option, which sounds very sensible. I will also seek out some additional advice on business structures at the local chambre de commerce as per your advice.

Thanks again for your help!
Justin