Setting up a French subsidiary: the checklist for foreign groups

Quick answer. Opening a French subsidiary means a standalone French company (usually a SAS), a dedicated bank account, a VAT number, the registration of its director and the filing of beneficial owners. A subsidiary is not, in principle, a permanent establishment of the parent, and is taxed on its French profits only.

A subsidiary is a company governed by French law, with its own legal personality and assets, whose capital is held by the foreign company. It ring-fences the group's legal risk: the subsidiary's commitments do not bind the parent beyond its contribution.

A branch, by contrast, has no separate legal personality. It extends the foreign company and, for tax purposes, forms a permanent establishment whose profits are taxable in France. A subsidiary is not automatically a permanent establishment of the parent: under the OECD model convention and French tax doctrine (BOFiP, the French tax database), a company controlled by another does not, by that fact alone, constitute a permanent establishment of the latter.

Choosing between the two depends on the autonomy you want, on liability, on the treatment of start-up losses and on commercial image. We cover that trade-off in our comparison of a subsidiary, a branch or a liaison office. This checklist assumes the decision is made: you are setting up a subsidiary.

In foreign-group files, the SAS (or SASU when the parent is the sole shareholder) dominates by a wide margin. Its statutory flexibility lets you mirror the group's governance standards: a foreign legal entity as president, a supervisory body, reporting clauses and approval rights over major decisions.

The SARL remains relevant for family or wealth projects, but its formalism and the social status of a majority manager make it less readable for a foreign shareholder.

A SAS has free share capital: it can be set at 1 euro, and at least half of the cash contributions must be paid in at incorporation, the balance within five years (Article L227-1 of the Commercial Code, referring to the joint-stock-company regime). We nonetheless recommend capital consistent with the real financing need, because symbolic capital weakens banking credibility and the shareholder loan quickly becomes the only source of cash.

Incorporation follows a precise sequence. Every registration formality now goes through the electronic single window (formalites.entreprises.gouv.fr), mandatory since 1 January 2023, which replaced the former business formality centres.

1. Draft the bylaws of the subsidiary in line with the group's shareholder agreement and the president's delegation of powers.
2. Gather the parent's documents: a recent extract from the foreign register, translated bylaws, the decision of the competent body authorising the creation and the capital subscription.
3. Appoint the president and, for a foreign director, obtain proof of identity and, where applicable, the required residence permit.
4. Deposit the capital in a blocked account with a bank or a notary, then obtain the certificate of deposit of funds.
5. Publish the incorporation notice in a legal-announcements outlet.
6. File the application on the single window, which feeds the National Business Register (RNE) and the Trade and Companies Register (RCS).
7. File the beneficial owners, a mandatory formality for every company.

The time to open the business bank account is often the first point of friction: banks apply reinforced compliance checks (anti-money-laundering) when funds come from abroad. Anticipate collecting the group's supporting documents several weeks before the target date. Our company formation support in Paris secures this sequence end to end.

This is a common confusion. Because a subsidiary is a French company, it registers for VAT in its own name and needs no fiscal representative. The fiscal-representative requirement targets the foreign company that itself carries out taxable transactions in France without being established there.

According to impots.gouv.fr, a company established outside the European Union with no permanent establishment in France that carries out a VAT-taxable activity there must appoint a fiscal representative established in France. A company established within the EU identifies directly, with no representative. If your group invoices in France even before the subsidiary exists, this point must be handled upfront: we explain it in our article on the fiscal representative for a foreign company.

Once registered, the subsidiary falls under the ordinary VAT regimes, files its returns and, for its intra-EU trade, holds an intra-Community VAT number that you should be able to check on your partners through the VIES database. The VAT base-rate exemption (37,500 euros for services, 85,000 euros for trade in 2026) rarely applies to a group subsidiary, which usually invoices from the first euro.

The subsidiary keeps French accounts under the General Chart of Accounts, prepares annual financial statements and files them with the registry. It is liable to corporate income tax on its French-source profits only, under the territoriality set out in Article 209 of the French Tax Code (CGI). The reduced 15% corporate tax rate applies to the portion of profit up to 42,500 euros, subject to turnover and ownership conditions.

On the payroll side, hiring the first employee triggers, through the pre-hire declaration (DPAE), the opening of the employer account at URSSAF, then the monthly nominative social declaration (DSN). Our payroll and HR administration team in Paris handles this strand, which is particularly useful when group employees are posted to France.

Intra-group agreements deserve specific attention. A subsidiary paying management fees, brand royalties or interest to its parent exposes the group to a reassessment risk if those flows are not supported by a real counterpart and an arm's-length price. The transfer-pricing documentation obligation applies to entities whose turnover or gross assets reach 150 million euros (a threshold lowered from 400 to 150 million by the 2024 Finance Act, article 116), with form 2257-SD. Below that, justification is still required in the event of an audit.

The parent's shareholder loan is another sensitive point: it often funds the start-up phase, but the deductibility of its interest and its treatment in case of losses must be framed from the outset. For groups aiming at a broader structure, the interaction with a holding company and EU subsidiaries changes the trade-off.

Several mistakes recur in setup files. The underestimated risk is almost never legal: it is operational.

• Under-capitalisation: capital of 1 euro topped up by a shareholder loan weakens both the bank relationship and cash.
• Banking delays: opening the account and depositing capital often take several weeks for a foreign shareholder.
• Misaligned reporting: French accounts and group reporting must be reconciled from the first month (currency, chart of accounts, standards).
• Undocumented transfer pricing: parent-subsidiary flows with no contract or justification are the first target of an audit.
• Forgotten beneficial owners: omitting this filing blocks registration and exposes the company to penalties.

Access to the beneficial-owners register has also been restricted since 31 July 2024 to persons demonstrating a legitimate interest, which changes the confidentiality of the ownership chain.

We were recently approached by a Northern European industrial group to open its sales subsidiary in the Paris area. The legal file was simple; the real work lay elsewhere. Opening the bank account took nearly six weeks because of compliance checks on the source of funds, and the parent underestimated the gap between its home accounting and the French Chart of Accounts.

Our reading is consistent on this type of file: incorporating the company is the fastest part. What determines success is preparing the group's supporting documents, framing the intra-group agreements and setting up reconciled reporting from the first month. As a firm registered with the French Institute of Chartered Accountants and a statutory auditor, we also stress a clean separation between the subsidiary's accounts and the parent's, the very condition of limited liability.

Our usual trade-off: SAS rather than SARL for international readability, capital sized to the twelve-month financing need, and a timeline that puts the bank account opening first, not last.

Hayot Expertise tip. Before filing, gather the foreign register extract, the parent's investment decision, the translated bylaws and the director's documents. Make the business account opening your first priority. Have the intra-group agreements validated upfront, not after the first financial year.