French Subsidiary or Branch

If you run a company outside France and you are weighing a presence here, the first question is not which form to file. It is what happens to your profit the day it is earned, and how much of it you actually keep.

25%

0

3

Default withholding on a branch’s presumed distribution

Euros that need to actually leave France for it to apply

Situations where the withholding does not apply

Two structures, two very different outcomes

A subsidiary is a separate legal person under French law. It carries its own liability, its own accounts, its own governance, even when your company owns every share of it. A branch carries none of that separation. It operates as an extension of the company you already run, and your parent company remains fully liable for what happens here.

Subsidiary, its own legal identity

SARL, SAS or SA. Liability stays inside the French entity. More independence, more setup, its own accounts and governance.

Branch, an extension of you

No separate personality, no share capital required. Faster to open, but every obligation flows back to the parent company.

On corporate tax, both forms are equal

Let’s clear up a common assumption first. Subsidiary or branch, profit made in France is subject to French corporate tax as soon as the foreign company is a capital company. The real difference does not play out on the tax rate. It plays out on what happens to the profit afterward.

The presumption of distribution, the real difference

A subsidiary’s profit only reaches the parent company when you choose to pay a dividend. You stay in control of the timing.

A branch works the other way. Profit made in France by a foreign company is presumed distributed, every year, to shareholders who have neither their tax residence nor their registered office in France. You decided nothing. The tax authority still treats the money as having left the country. This comes from article 115 quinquies of the French tax code, often called the French branch tax.

Example. Your branch generates 100,000 EUR in profit. Corporate tax takes its share. The remainder is presumed distributed and carries a 25% withholding, even when not a single euro has actually left France.

Three situations where it does not apply

Your place of effective management sits in the European Union or the European Economic Area, and you pay corporate tax there. The withholding disappears, even where a tax treaty would have said otherwise.
The tax treaty between France and your home country removes or reduces it. This is common. It is never automatic.
Your actual distributions are lower than the amounts taxed. In that case you request a new assessment.

The one question to settle before you open

A single question conditions everything else. Where is your place of effective management, and what does the tax treaty between France and that country provide. Depending on the answer, a branch is a light and neutral solution. Or it creates friction on every euro earned in France.

How we work with you before you file anything

Most firms hand you a checklist of registrations and move on. We start by understanding your business, your reporting obligations toward your parent company, and your plans for the French market over the next three to five years. Only then do we recommend a structure, because the paperwork is the easy part. Getting the structure wrong, or missing the tax treatment attached to it, is the expensive part. At CREO Conseils, we support directors running multiple structures, holding companies, real estate companies, operating entities. A French branch attached to a foreign company follows the same logic. An entity that never exists on its own, whose taxation always has to be read alongside the head office.

Running your French entity from a distance

Once the entity exists, the real work is keeping it visible to you without requiring your presence. Our clients manage their French operations with real time access to figures, documents and key indicators from wherever they are. The tool is not the service. What matters is that someone on our team reviews the numbers, flags what needs your attention, and reports back in a format your parent company can use directly.

A short glossary

Subsidiary

A separate French legal entity, majority or fully owned by a foreign parent company.

Branch

A French extension of a foreign company, with no separate legal personality and full liability resting on the parent.

Liaison office

A non commercial presence in France, used for representation rather than trading activity.

Preparing a French implantation, or already running a branch without having checked this?

Book a scoping call and we will qualify your situation together, before it costs you on the next distribution.