Subsidiary Office/Branch Office

Do you want to develop your business but you can’t decide between a branch office and a subsidiary office ?

Why opt for a subsidiary Office ?

A subsidiary is an autonomous fiscal and legal entity and is therefore subject to income tax in the country where it is situated. It also owns property and acts in its own name. It is a traditional enterprise whose decisions are made by the parent company because of its participation of more than 50% of its capital. A subsidiary office has the same obligations as any other company such as the keeping of accounts, the payment of VAT etc.

In general, a subsidiary office is an option recommended to companies and groups of companies that are well established in their country of origin with solid financial and organisational structures.

How do you create a subsidiary office in France ?

The parent company has the choice between :

Buying or financing 50% of the capital of a company which has its registered office in France ;

Creating a new business.

For the creation of a new subsidiary company in France, the parent company is required to choose the legal status and tax regime beforehand.

Generally, the creation of a subsidiary requires: the drafting of the company statutes, description of funding whose eventual release will depend on the legal status and the official notification of creation published in the relevant county journal of legal announcements by the subsidiary company representative.

A file must be constituted later with the Business Start-Up Centre (CFE, Centres de formalités des entreprises) or the Commercial Court with :

– 3 copies of the signed statutes

– 1 CERFA MO form

– A proof of the registered office (Domiciliation contract)

– The act nominating the company officers if they are not listed in the statutes.

Why opt for a branch office ?

Legally, the branch office is not a separate entity from the parent company. It has neither independent legal liability nor dedicated funding. The branch office accounts belong to the parent.

It does not pay corporate tax. When the parent company and its branch office are both located in France, the results of the branch office are included in those of the parent company and are not subject to VAT. When opening a branch office in France, the financial results will not be taxable in the country of origin (France) but in the country of its creation and therefore subject to the same tax regime as the parent company.

When developing a business in a foreign country for the first time, the branch office option is the least risky because it is not tax independent. A branch office can be beneficial to the parent company when its business is developing.

How to create a branch office in France ?

To create a branch office of a foreign company in France is relatively simple: no statutes, no share capital and no distinct legal relationship with the parent company.

Documents that are needed to set up a branch office in France :

– 1 CERFA MO form notifying the creation of a company CERFA MO

– 1 proof of identification (ID card, passport) for the manager

– The address of the registered office (Domiciliation contract)

– 1 updated copy of the statutes of the parent company and 1 original of its notification of creation (Documents translated into French and certified as a true copy by the company representative in France)

– if the form is signed by a person other than the company representative in France, attach the original of the power of attorney signed by the representative in France, unless the previously supplied documents already include the power of attorney given to the form signatory.