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France has long laid out a welcome mat to international firms looking to grow their business, but doing business abroad brings with it cross cultural challenges, and having local help on board can be a real asset when expanding overseas.
A raft of new measures aimed at kick-starting the economy by attracting foreign direct investment (FDI) and helping French firms expand abroad have been outlined by the French government and will be integrated into a draft 2014 budget, which will come into force in January. The changes put an emphasis on small and medium-sized enterprises (SMEs) as the lifeline of the economic recovery, showing the government is doing all it can to help domestic firms diversify and attract business from abroad.
France is already home to more than 20,000 foreign companies running under many different legal forms. The government has promoted R&D by consolidating innovation clusters and research tax credit, as well as supporting key projects through the National Investment Program, which is focused around five strategic priority areas (higher education and training, research, SMEs and the industrial sector, sustainable development and the digital economy). The establishment of single contact points for tax issues and new rules on residence permits has also facilitated the arrival in France of foreign companies, and the influx is expected to continue.
However, getting used to French working habits can be difficult and cross cultural awareness is essential in order to expand seamlessly across borders.
Starting a Business
France ranks 27th in the world for starting a business, according to the World Bank and International Finance Corporation (IFC). It takes five procedures and seven days to set up, including registering with the Centre de Formalités des Entreprises (CFE) and having company books stamped and initialed by the clerk of the commercial court.
Dealing with Construction Permits and Getting Electricity
Securing construction permits can be an arduous task in France, taking an average of 184 days to obtain and requiring a number of procedures to be completed. Companies must obtain an urbanism certificate, a building permit and a compliance certificate, as well as getting the required approval for opening a site and connecting it to water and electricity works. It can take over 79 days for the latter to be completed.
Owing to the historic nature of most French towns and vicinities, registering property can be a long-winded and complicated procedure. It takes an average of 59 days and businesses must obtain planning certificates, a cadastral certificate, a non-encumbrance certificate and mandatory environmental reports.
Access to credit is one of the most important requirements for expanding businesses, but is a notoriously tricky thing to achieve. France is home to a robust and contemporary financial system, but ranks 53rd in the world for ease of getting credit, highlighting the importance of having local help.
Common law countries have the strongest protection when it comes to outside investors (both shareholders and creditors) whereas civil law countries have the weakest protection. Therefore it should be no surprise that France ranks 82nd in the world according to the World Bank and IFC.
President Francois Hollande recently announced plans to cut capital gains tax to attract business investment to France and restore damaged relations that resulted from corporate tax hikes. Businesses are required to make seven tax payments per year and taxation can take a significant chunk of money from company earnings.
Trading Across Borders
It takes 11 days to import and nine to export, requiring two documents which can take between three and five days to prepare.
France has a modern legal system which is well equipped to enforce contracts in good time. It takes an average of 390 days to enforce contracts, which is well below the OECD average of 510.
Resolving insolvency is a streamlined procedure in France, although the recovery rate is a little lower than the OECD norm.
Adapting to French business culture is important when considering cross border moves. Formality is important and the French are extremely proud of their language. Their passion for good food and wine should be observed, and businesses which appreciate differences in etiquette, approach and style in business are most likely to succeed.
We have the local knowledge to help you navigate these minefields. Whether you want to set up in France or just want to streamline your French operations, talk to us.