France is defined as metropolitan France (excluding the overseas territories [TOM], but including the continental shelf), Corsica, and the overseas departments (DOM, i.e. French Guyana, Guadeloupe, Martinique, Reunion, and Mayotte).
As a general rule, a resident company is a company that is incorporated under French commercial laws.
Permanent establishment (PE)
The notion of PE is not defined by the FTC and has been specified by a court case of the French Administrative Supreme Court. The notion of PE refers to an enterprise exploited in France that can be materialised in one of the three following situations:
- Business activity conducted through an establishment (i.e. a fixed business installation operating with some degree of autonomy [e.g. a branch, sales office]).
- Business conducted in France by a dependent agent.
- Existence of a complete commercial cycle in France.
A ruling application can be submitted to the French tax authorities to get confirmation as to whether the presence in France of a foreign corporation is a PE.
In a decision dated December 11, 2020, the French Administrative Supreme Court overturned a Paris Court of Appeal decision dated March 1, 2018 (which had previously concluded in the absence of a PE under the France-Ireland Tax Treaty) and ruled against the Irish subsidiary ("Irish Co") of a US group.
Irish Co, a subsidiary of a US group and sister company of French Co, carried out digital marketing activities in Europe mainly consisting in selling marketing affiliation, media and technology services in these markets.
In France, French Co was remunerated by Irish Co on a cost plus 8% basis for various services including administrative and marketing activities & representation (e.g. identification, prospecting, targeting of clients on the French market, etc.). The contracts with French clients were signed by Irish Co.
The French Administrative Supreme Court ruled that French Co should be regarded as a dependent agent in France of Irish Co, even if it did not formally conclude contracts in the name of Irish Co, since it decided on transactions that Irish Co merely and routinely approved and as such became legally binding to Irish Co.
Consequently, the Court considered that the Irish Co constituted a permanent establishment for CIT and VAT purposes.