Doing business in France
France is the world’s seventh largest economy. The country’s business-friendly environment, sophisticated financial market and highly skilled workforce have made it an attractive place to do business.
However, there are certain challenges that foreign businesses must overcome, including strict and complex regulations and a focus on maintaining traditional ways of working, such as the widespread use of the French language.
France, officially the French Republic, is the largest country in Western Europe covering 674,800 sq. km. The country is ranked as the world’s seventh largest economy by nominal GDP and is a highly developed market with notable state participation in strategic sectors. It is divided into 13 metropolitan regions, with Paris being the nation’s capital.
France is very active on the international stage and was a founding member of the European Union (EU). It is also a member of the G7, G20, the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organisation (WTO).
Fast Facts: France
- In 2024, France had a GDP of US$3.17 trillion [World Bank projection].
- Currency – Euro (Sign: €; Code: EUR).
- Language – French.
- GNI per capita – US$46,500 in 2024 [World Bank projection].
- Population – 66.6 million [Worldometer, February 2025].
- Capital – Paris.
- Key sectors: aerospace, automotive, luxury and fashion, pharmaceuticals, food, information and communications technology, logistics, medical equipment.
- Key cities: Paris, Lyon, Nice, Marseille, Bordeaux, Toulouse.
- Key regions: Ile-de-France, Auvergne-Rhone-Alpes, Provence-Alpes-Cote d’Azur (PACA).
TMF Group’s Global Business Complexity Index (GBCI) 2024 rated France as being one of the world’s most complex places in which to do business. The country’s unique accounting measures and French language requirements often come as a surprise to investors, adding to the complexity of its business environment.
Companies doing business in France should therefore thoroughly research the country’s economic landscape and ensure that they understand the rules and regulations that have shaped the market.
Advantages of doing business in France
There is a host of advantages associated with doing business in France. The country has a stable trading environment, largely driven by European regulations, and is therefore home to a high number of international companies.
As an EU member and OECD headquarters, France attracts professionals from all over Europe which gives companies access to a diverse talent pool. The costs of sending employees to work in France can also be offset through one of the most attractive expatriate tax systems in Europe.
The French government is committed to attracting foreign investment through policy incentives, marketing and overseas trade promotion. France boasts one of the world’s most generous research tax credit schemes and offers a comprehensive range of development subsidies to encourage investment in underdeveloped areas.
Despite these advantages, there are a number of complexities to consider when operating in the French market. These include navigating a strict and dense regulatory environment, accessing credit and overcoming the language barrier, where the use of French is required in business transactions.
Companies looking to enter the French market should read our article outlining the main challenges of doing business in France.
Cultural differences when doing business in France
France has long laid out a welcome mat for international firms looking to expand their business into the French market. However, adapting to French working habits can be difficult and cross-cultural awareness is essential.
French culture values politeness, punctuality and formality. These cultural norms are at the heart of business practices in France and it’s important to respect them. Building strong relationships is also highly valued., Taking the time to attend industry events, host meetings and dinners and nurture good working relationships with local clients and partners is essential.
The use of French is prevalent in the business environment, so knowing some of the basics will help you communicate more effectively and further strengthen relationships. It is worth taking a language course or working with a tutor to improve existing skills if you are looking to succeed in the French market.
Inadequate awareness of French culture can lead to misunderstandings and jeopardise business relationships. It’s therefore crucial to fully understand the cultural context of your business interactions and avoid being too casual or informal.
Compliance and the regulatory environment in France
It is essential to be fully aware of, and compliant with, the country’s regulations when extending business activities into the French market.
France has seen a rise in new regulations in recent years, including Ultimate Beneficial Ownership (UBO) identification and tax changes, which has increased compliance costs for many companies.
Compliance with the EU’s Non-Financial Reporting Directive (NFRD) and rising Environmental, Social and Governance (ESG) regulations have introduced additional reporting challenges - from disability and gender gaps to waste and other environmental concerns. While some of these challenges are offset by strides in the digitalisation of reporting, implementation is slow and requires upfront adaptation.
Additionally, the accounting profession in France is highly regulated and French GAAP (Generally Accepted Accounting Principles) are mandatory. These rules must be adhered to, which can be difficult for organisations unfamiliar with them.
Hiring and employment in France
French employment law is particularly complex, with a high level of protection for employees. The French Labour Code regulates employment-related issues such as working hours, overtime, paid vacation, conditions and procedures for dismissal and collective agreements. Over 95% of employees in France are covered by collective bargaining agreements, and – importantly – this is the case even when the employer operates in a unionised environment.
When it comes to hiring employees in France, workers from the EU, the European Economic Area (EEA) and Switzerland are required to hold a valid document, such as a passport, proving they are nationals of these jurisdictions. These employees do not require a work or residence permit. Nationals of countries outside these areas must hold a valid residence permit and work permit to live and work in France.
Individual employment contracts in France are generally for an indefinite duration, with fixed-term contracts only permitted in certain cases. The employment contract must be in French, but employees with a different native language may request a translation prior to signature.
According to the French Labour Code, employees must be paid on a monthly basis. The Code also mandates that employees receive a salary which is at least equal to the statutory minimum wage, or a more favourable wage mandated by an applicable collective bargaining agreement. In November 2024, the French minimum wage increased by 2% to €11.88 per hour.
France also has a mandatory social insurance programme financed by both employees and employers. The programme covers health, retirement, family allowances, housing benefits, occupational accidents and illness. Employers make social security contributions based on the size, type and location of the business; the average contribution amounts to approximately 45% of an employee’s gross salary.
The financial and tax environment in France
As previously mentioned, the French accounting system is based on French GAAP. As a member of the EU, French law is in accordance with European Commission (EC) Regulation No. 1606/2002, which requires the application of IFRS when preparing the consolidated financial statements of listed companies.
Taxes at a glance*
- VAT: 20%
- Corporate income tax: 25%
- Withholding tax: 25%
* Refers to general tax rates. Actual rates may vary.
Value Added Tax (VAT) is levied on the supply of goods and services within France, as well as on imports. The standard VAT rate in France is 20%. Reduced VAT rates of 5.5% and 10% apply to basic necessities such as food products, while a further reduced rate of 2.1% is applicable to some periodicals and medicines reimbursed by the social security system.
The standard corporate income tax rate is 25%. An additional social surcharge of 3.3% is levied on companies whose taxable income exceeds €763,000. The draft 2025 Finance Act also introduced a temporary surcharge for companies with revenues of €1 billion or more, effective for two fiscal years ending on or after 31 December 2024.
Dividends paid by a French corporation to a non-resident shareholder are subject to a withholding tax of 25% on the gross amount unless reduced by a tax treaty or the EU parent-subsidiary directive. The rate is increased to 75% with respect to dividends paid to a recipient established in a non-cooperative jurisdiction. France and the UK have a tax treaty in place to provide double taxation relief and prevent tax avoidance and fraud concerning taxes based on income and capital gains.
The French Tax Administration is working on the simplification and improvement of digitised services. Electronic billing, for example, may present an upfront challenge but in the long term will simplify accounting and tax processes.
Starting a business in France
French corporate structures typically fall into two categories: limited liability companies and unlimited liability companies.
However, there are many different entity types, with the most common being simplified joint-stock companies (société par actions simplifiée, SAS), public limited companies (société anonyme, SA) and property investment companies (Société civile immobilière, SCI). It is therefore important to review your company’s strategy to ensure you choose the best entity for your business activities in France.
Once you have chosen your entity type, you will need to follow a series of steps to set up your business in France, starting by checking your chosen company name for uniqueness with the French Patent and Trademark Office (INPI) and registering the name.
To find out more about the incorporation process, read our article on the factors influencing company incorporation in France.
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