France welcomes foreign investment and has a secure business and political climate that attracts investors from around the world. President Macron's election in 2017 has boosted foreign investors' trust in France's economy and France's increase in attractiveness for foreign investment has been spectacular. France is once again a leading European country for foreign direct investment (FDI), particularly in the industrial sector.

France has an educated population, first-rate business schools and a talented workforce. It boasts sophisticated financial markets and strong intellectual property protections. The country is also well known for its high-speed passenger rail, maritime ports, road networks and public transportation infrastructure.

In February 2019, France enacted a charter between the French central government and the French regional governments. Under the terms of this charter, the French national and local authorities agreed to make every effort to encourage foreign investment, and to facilitate and support foreign investment projects. The charter mobilises local and national actors to support foreign investors through from the identification of projects to their realisation.

Increasing foreign investment in France is of paramount importance for both the French state and the regions. It is a key driver of economic and social reforms, as foreign companies based in France make up 21% of employment in industry, 20% in research and development (R&D), and account for 30% of French exports.

France is one of the top ten world economic powers and has many attractions for foreign investors, including:

The main obstacles to attracting foreign direct investments in the French economy are the persistence of relatively high corporate tax rates and labour costs.

French law has many tax incentives to attract new businesses and foreign investors. These take the form of tax credits and exemptions at both a national and regional level, and include:

Although France is reputed to have a complicated and constraining labour market, labour costs have been significantly reduced thanks to recent reforms simplifying employment laws, including in relation to dismissal procedures. Dismissal procedures now include a scale of mandatory termination damages that provide security and transparency to both employees and companies. These reforms have also improved industrial relations by merging different employee representative bodies and restructuring business sectors. This allows for better collective negotiations and greater scope for collective agreements at the micro level.

Many recent reforms have been aimed at revitalising the national economy and attracting foreign investors. The most significant reforms include the following:

According to the latest available data from the 2019 Ernst and Young European Attractiveness Survey, France is ranked second (after the UK) in the Top 20 European foreign direct investment destination countries in 2018.

France is a very innovative country. With domestic research and development spending equal to 2.2% of GDP, France ranks sixth in the world according to the World Competitiveness Yearbook 2018 (behind the US, China, Japan, Germany and Korea). The five main R&D investment sectors are:

France specialises in growth areas such as biotechnology and environmental technologies.

In 2018, seven French actors featured in the ranking of the world's 100 top innovators (the Atomic Energy Commission, Alstom, Airbus, Safran, Saint-Gobain, Thales and Total).

France hosted 144 R&D centres in 2018 (up 85% on 2017), making it the most attractive destination for innovation investment in Europe. France is taking on a key role in the European R&D and innovation economy according to the 2019 EY Attractiveness Survey, and attracts more projects than Germany and the UK combined. France was the leading recipient of R&D activities in Europe in 2017. It attracted 16% of the R&D centres on the continent, compared to 15% in the UK and 12% in Germany. France was also Europe's leading recipient of foreign investment in industry, particularly in:

In 2017, the government set itself the goal of making France a "Start-up Nation", and, on 15 January 2018, created a fund of EUR10 billion to finance innovation, which will be funded by sales of public assets.

The most attractive sectors for foreign investment in France are the following (www.businessfrance.fr):

The banking and financial market is also very important for France's appeal. Since Brexit was announced, 41 firms have chosen Paris as their post-Brexit location. However, different cities have different strengths. While 43% of Luxembourg's new residents are asset management firms, 41% of the new residents in Paris are banks.

The election of President Macron has undoubtedly boosted the French economy. French economists anticipate a sharp increase in purchasing power in 2019 thanks in particular to measures obtained by the "yellow vest" popular movement, which will expand purchasing power. The drop in the price of oil will further increase these gains. The latest Organisation for Economic Cooperation and Development (OECD) projections anticipate economic growth to continue at around 1.5% in 2019 and 2020. These projections are consistent with those of the International Monetary Fund (IMF), who forecast a GDP growth of 1.5% for France in 2019, compared to 1.3% for Germany. Surveys and reports reveal that positive financing conditions and business tax cuts will boost investment despite slowing external demand. Lower labour taxes, a more flexible labour market and improved training opportunities will help job creation, notably for low-skilled workers, which will support household consumption. Core inflation will improve, underpinned by the strengthening of the economy and an increase in wages.

The current constitution, the Fifth Republic, was enacted by referendum in 1958. The political system is semi-presidential. The President, elected by universal and direct vote, chooses and revokes members of the Government, including the Prime Minister. Parliament is composed of the National Assembly and the Senate. The National Assembly is elected by universal and direct vote and the Senate is elected by indirect vote. The Government is composed of a cabinet of various other ministers (appointed by the President, on being proposed by the Prime Minister) who supervise various public departments.

The Prime Minister is responsible for the Parliament. The President has the power to dissolve the National Assembly and the Government, and has a great deal of power over the legislative procedure. If the President and the Parliamentary majority are not in line, the French concept of "cohabitation" applies where the system works as a Parliamentary system, where the Prime Minister takes precedence over the President, including in the appointment of members of the Government.

The separation of powers extends to the existence of a dual judicial system, where there is a judicial system for criminal and civil matters, and an administrative justice system for matters between public authorities and private parties.

The French legal system is based on civil law. While case law is not generally considered to be as important as in common law systems, the role of case law in the French legal system has grown, and is used to interpret and adapt statutory law.

The French legal system is organised into a dual judicial system that includes:

A special court deals with conflicts between both judicial systems.

French civil law is based on the Code Napoléon originally drawn up in 1804, and is known as the Civil Code.

French business and economic laws and regulations are governed by the Civil Code and the Commercial Code.

The French government maintains legal monopolies through public service companies in sectors such as:

Investments in French companies are unrestricted other than in these legal monopolies and in certain sectors where authorisation is required. There are two national authorities for foreign investment:

EU or EEA foreign investors. An investment carried out by a EU/EEA foreign investor requires prior authorisation from the French government when it concerns one of the following sectors:

Non-EU/EEA foreign investors. An investment carried out by a non-EU/EEA foreign investor requires prior authorisation from the French government when it concerns one of the following sectors:

Both EU/EEA and non-EU/EEA foreign investors. Both EU/EEA and non-EU/EEA investors require prior authorisation from the French government for investment in the following sectors:

If in doubt, a potential investment can be sent to the Minister of Economy to verify whether it is subject to authorisation or other special requirements.

France has signed bilateral and multilateral trade agreements within the framework of international organisations such as the:

France has also concluded various bilateral investment treaties (BITs) securing foreign investments. Its most important network of treaties are those administered by the EU.

Under Article 3 of the Treaty on the Functioning of the European Union (TFEU), the EU has jurisdiction over:

The EU has signed international trade treaties with emerging countries and regions such as:

In the past few years, the EU has focused on signing the next generation of free trade and investment pacts with industrialised countries. These agreements aim to cover additional fields of international trade law such as intellectual property and environmental law.

The main example of these further agreements is the Comprehensive Economic and Trade Agreement (CETA) signed by the EU and Canada in 2016 and ratified in France on 23 July 2019.

France has signed bilateral tax treaties with more than 100 countries.

Foreign investors can benefit from the International Centre for Settlement of Investment Disputes established by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID Convention). This treaty allows foreign investors to settle investment disputes between contracting states and nationals of other contracting states.

Non-EU nationals intending to work in France must obtain a work permit, a visa authorising them to work or a residence permit.

Investors can benefit from a specific permit known as the Talent Passport for Economic Investors. To obtain this permit the investor must:

Individuals are considered residents for French tax purposes if they:

Unless otherwise provided by an international tax treaty, French resident individuals are taxed on their total global income.

Unless otherwise provided by an international tax treaty, non-residents are taxed on their French income only.

Non-EU and non-EEA nationals must obtain an authorisation to invest in certain types of activities, see Question 5.

The government maintains control over sectors considered to be public services or relevant to national sovereignty such as national defence, justice, civil protection, social security, public hospital services and education.

If these services are not fully state-run or part of the administration, the government can sign a public service delegation contract with a private company and maintain control under the terms of that agreement.

There are no restrictions on foreign companies owning real estate in France. However, foreign investors must meet some tax obligations.

Foreign companies with registered offices outside the EU/EEA that own and use real estate in France can be requested by the French tax authorities to appoint a fiscal representative in France. If the business qualifies as a "real estate property company" (société à prépondérance immobilière), this representative is necessary when the real estate or the shares of the company are sold.

There are no specific requirements for foreign investments. A joint stock company (société anonyme) (SA) must have a minimum share capital of EUR37,000. The share capital of a simplified joint stock company (société par actions simplifiée) (SAS) and limited liability company (société à responsabilité limitée) (SARL) can be freely determined by the company bye-laws and can amount to a symbolic EUR1.

There are no exchange control or currency regulations under French law nor any restrictions on the remittance of profits abroad.

The following products are subject to an import ban:

Imports are not subject to customs or import duties within the EU. However, commercial goods acquired from another EU member are subject to Value Added Tax (VAT).

Imports from outside the EU are subject to VAT and are payable in accordance with the Common Customs Tariff in force in the EU, decided at the EU level.

France is one of the leading countries in the world in terms of product quality and product safety.

As France is a member of the EU, the safety regulations and standards applicable to commercial goods are drawn from the relevant EU legislation, including:

As such, French safety regulations regarding commercial goods are compatible with EU regulations and are recognised internationally.

There are no restrictions on providing services into another EU country.

However, for certain professional services (professions réglementées), such as legal, medical, or financial/banking services, individuals must demonstrate that they have the same level of qualification in their home country before pursuing their profession in another EU member state.

Foreign companies commonly use a representative office as a first step in establishing a presence in France. The foreign company may then wish to establish a branch in France before incorporating a subsidiary, that is, a legal entity separate from the parent foreign company that takes one of the legal forms offered by French law.

There are numerous company structures under French law, but trading companies generally take one of the following forms:

Other options for foreign investment include contractual agreements such as:

A corporation is considered to be a French tax resident if its headquarters, as set out in its articles of incorporation, are in France, or its place of effective management is in France.

A corporation is considered to operate a business in France if it has any of the following:

The income tax base is territorial. Profits are subject to French CIT only if derived from:

For 2019, the standard rate of CIT is 28% for the part of net income under EUR500,000 and 31% for the part of the net income over EUR500,000. If the company has a turn-over higher than EUR250 million, the standard rate of CIT is 33.33% for the part of the net income over EUR500,000. For 2020 the standard rate of CIT will be 28% and will be 25% by the end of 2021.

Four quarterly instalment payments are mandatorily scheduled throughout the financial year. The final payment is scheduled on the 15th day of the fourth month following the closing of the financial year.

Companies engaged in a business in France are subject to the territorial economic contribution (CET) consisting of two distinct taxes, capped at 3% of the added value of:

Supplies of goods and services in France are subject to the VAT at a standard rate of 20%, unless reduced rates or exemptions apply. As a general rule, if a business (resident or non-resident) makes taxable supplies in France for which it is liable to pay the VAT, it will be required to register and account for the French VAT.

As a general rule, a taxable person can recover input VAT charged on goods and used for business purposes by offsetting the VAT against output VAT charged on supplies made.

Unless tax treaties provide otherwise, dividends are subject to:

However, most tax treaties provide either a reduced rate or a withholding tax exemption.

Under Directive 90/435/EEC on the taxation of parent companies and subsidiaries (Parent-Subsidiary Directive), dividends distributed by French subsidiaries to EU parent companies are exempt from withholding tax, if, among other conditions, the recipient holds 10% or more of the shares of the subsidiary for at least two years (the 10% threshold is lowered to 5% if the effective beneficiary cannot receive credit for the French withholding tax in its country of residence).

France has transfer pricing legislation under which the correct transfer price for a transaction between related parties must be that which the parties would have agreed at arm's length.

To determine the tax owed by companies that depend on, or control, enterprises outside France, any profits transferred to those enterprises indirectly through increases or decreases in purchase or selling prices or by any other means must be added back into the taxable income shown in the companies' accounts.

The same procedure applies to companies that depend on an enterprise or a group that also controls enterprises outside France.

To enforce these rules, the French tax authorities must prove both that:

French legislation requires certain companies to provide significant documentation to the French tax authorities in relation to transfer pricing.

For French tax purposes, the deductibility of interest paid by a French borrowing company is capped at:

Specific rules apply where the company has opted for the tax integration regime.

The main incentive provided by French tax legislation is the R&D tax credit (crédit d'impôt recherche), which is a corporate tax incentive for R&D expenses incurred by trading companies located in France, regardless of sector or size.

This mechanism allows companies to benefit from a:

The mechanism was extended to "innovation" expenditure (as defined) incurred by small and medium-sized companies, offering a yearly tax credit of 20% on up to EUR400,000 of expenses (that is, a yearly tax credit of up to EUR80,000).

The French Code of Expropriation ensures that expropriations can only happen where they are in the public interest, and must be compensated.

Most investment treaties contain expropriation provisions setting out a principle of non-discrimination and asserting that compensation must meet fair market value.

At the end of the 1980s, France made a public policy shift toward privatisation. Since then, expropriation has no longer been an issue.

There are no particular issues in relation to the enforcement of intellectual property rights in France, except marginally in certain copyright and related-rights matters in relation to the ownership of such rights in some international situations. These issues generally relate to the favourable treatment given to authors and performers by French law and French courts.

Authors benefit from a "moral right" that cannot be transferred and may be in conflict with the owner of the rights, for example, if that owner wishes to modify the protected work.

Foreign performers can also challenge that their neighbouring rights have been properly assigned in France under French law, even though their contracts are valid under their originating laws.

Some courts are specialised according to the types of intellectual property rights in question. For instance, the courts of Paris have sole jurisdiction over matters of patents and European trade marks.

Foreign litigants are not treated differently under French law.

Court proceedings are free of charge except for some small fees (stamps and so on), but parties must be represented by a lawyer, whose fees they must bear.

Lawyers' fees are not generally regulated under French law.

Parties usually must bear the cost of arbitral proceedings, depending on the applicable arbitration rules.

Enforcement is carried out by special bailiffs (huissiers de justice).

No lawyers are required at the enforcement stage, but it is advisable to retain one in case of a challenge or enforcement issues.

Foreign judgments and arbitral awards are not tried anew under French law but must be recognised by a French court before enforcement can be sought in France.

Following new regulation, an International Chamber was created in 2018 within the Court of Appeal of Paris (Chambre Internationale de la Cour d'Appel de Paris) (CICAP). CICAP has jurisdiction to hear appeals on decisions relating to international commercial and financial disputes, and allows for the use of evidence in English without any French translation.

Judgments from other EU states are automatically recognised under Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation).

France has also executed a number of bilateral treaties with foreign countries setting specific conditions for recognition in those cases.

If a judgment originates from outside the EU and there is no bilateral treaty as to recognition, there are some general conditions to be met for the foreign judgment to be recognised.

Once foreign judgments or arbitral awards are recognised, they can be enforced as if they originate from France.

Paris is home of the International Chamber of Commerce's International Court of Arbitration, established in 1923. This is probably the most widely known international commercial arbitration institution, and its arbitral awards are effectively and efficiently enforced in France and abroad.

The Loi Pacte law and Action Plan for Business Growth and Transformation (Plan d'Action pour la Croissance et la Transformation des Entreprises) (PACTE), enacted on 22 May 2019, aims to:

The major PACTE measures include:

Several treaties were signed in 2018 and came into force in 2019, such as the EU-Japan Partnership Agreement, which entered into force on 1 February 2019, and the Free Trade Agreement concluded with Singapore, which entered into force on 13 February 2019.

The EU also engaged in unsuccessful negotiations with the US to conclude the Transatlantic Trade Investment Partnership (TTIP) on setting up a free trade area. The negotiations were reopened on 15 April 2019 on a more limited agreement covering the elimination of tariffs on industrial products only, and excluding agricultural products.