International Company Relocation Opportunities: France and Monaco
The business environment of France is conducive to investments and attracts a significant amount of FDIs. The French parliament offers a variety of incentives, an improved labor market, and a tax reform, which simplifies the environment for foreign investors.
The country is investing seriously in its education system, producing a highly qualified, productive and adaptable labor force. It is an open, diversified financial market, a nation of innovation with strong IP protection. France is recognized for its exceptional infrastructure due to a fast and efficient connection with the rest of the world, as well as a high speed network coverage and high quality communications infrastructure.
Multinational companies invest primarily in manufacturing activities which account for 30 percent of all goods produced in France. The corporate R&D expenses is 32 percent.
France ranked number 7 in world’s top economies in terms of 2016 FDI inflows. The number of foreign investments in France is around 22,500. In a globally competitive environment, France is the 21st most competitive nation ranked in 2016’s edition of the Global Competitiveness Report published by the World Economic Forum.
The French investment system is very favorable to investors from the United State. There are 4800 United States corporations in France that sustain more than two million jobs for more than 460,000 citizens.
A satisfaction survey of American investors was conducted by the American Chamber of Commerce in 2016. The AmCham Bain Barometer marks it at 81 percent, a favorable turning point for French attractiveness to U.S investments in terms of innovation through digital technology. Paris supports many IT engineers from outside Silicon Valley while new waves of engineers are more into entrepreneurial activities.
However, there have been challenges U.S financiers faced in spite of perceived hopes and positivity towards the economy of France. France managed to weather the crisis and has done much in terms of growth since 2008 and 2009. But, recovery has been rather slow due to the high unemployment rate, which was at 9.7 percent in 2016. The nation’s 2017 budget deficit stands at 2.7 percent compared to 3.4 percent in 2016.
Investors from America pointed to the necessity for transformation of France’s tax code and for complex labor laws to make the country more competitive in the global market. Between 2015 and 2016, in a survey published by Bain, 80 percent of U.S companies in France responded they are not affected and will not change their plans of investment due to terrorist attacks.
- France is ranked as the 23rd least corrupt nation out of 175 countries in 2016’s Corruption Perception Index reported by Transparency International.
- France is ranked 29 among 190 economies in the ease of doing business in 2017, reported by the World Bank’s Doing.
- France is ranked 18 among 128 countries and economies in 2016’s Global Innovation Index.
Amenability to and Limitations on International Ventures
Regulations on international direct financing: Offshore investments are supported by the government of France. In its present financial environment, it considers international financing as a means to secure more jobs and incite progress.
Offshore financiers are impressed by the country’s strategic economic location in Europe, its commendable structures and facilities, technology, as well as its skilled and competent workforce. Policies on investments are straightforward, and offshore financiers offer a variety of commercial stimuli.
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France is a member of the EU. The Eurozone provides assistance with efficiently transferring services, people, goods, and investments. Despite France’s attempts to develop its economy via free enterprise and enticing international investors, the country’s tax system contributes to the hindrance of valuable investments in the region, alongside expensive labour costs (14480 is the minimum salary in euros), as well as periodic intense negative perceptions toward offshore entrepreneurs contemplating to lay off people, close, or reorganize and restrict employment markets.
Considered one of the most lenient investment systems worldwide, France has no judicial restrictions with regard to foreign commercial proprietorship, with only a few specific districts experiencing some form of limitation. International companies are legally permitted to build their own financial institutions and participate in any transaction they deem profitable.
Financial Promotion Entities
France’s administrative bureau is Business France, tasked to bolster the expansion, purchase, and incorporation of emerging foreign capital, and to seek out profitable technological alliances and business investments. The bureau offers reciprocal programs to aid entrepreneurs in comprehending the law, taxes, work concerns, local and national investment stipends, and France’s support services. It also assists entities to subsidize businesses, possible investment procurements, and payoffs.
Additionally, the country established the New Industrial France service in 2016 intending to target 47 important commercial zones, which include: harnessing advanced high speed railroad cars (TGV), completely electric, low-cost public vehicles and commercial aircrafts, powerful environmentally-friendly ships, potent long-running batteries, charging posts for electric vehicles, “smart” textiles, thermally-powerful infrastructures, Nano technology, virtual reality, artificial intelligence, electric-powered spacecrafts, shared online software development platforms, and online security.
France’s Direction Generale des Enterprises inaugurated the next stage of the 2030 Innovation agenda at the end of 2016 through an international competition called “Worldwide Innovation Challenge” that was accessible to all business persons and investors of all nationalities in France. A selection will be made to include up to thirty proposals for the “Risk Reduction” theme in 2017 and will be awarded a start-up capital of at least one to three million euros.
International investments within the tech industry are supported widely by Business France as well as by other administrative sectors. France has launched the “French Tech” brand to advertise the growth of the tech industry in the country and to endorse it as the perfect “Start-Up Republic”, the prime region of emerging digital and tech corporations.
This program involves a “speeding up” of investments by France via a 200 million euro funding to help develop emerging companies within and beyond the country. Seventeen cities have set up offices and continued to expand. Additional French Tech centers have been launched in twenty-two cities around the world, including Los Angeles, New York, Hong Kong, San Francisco, Berlin, Vietnam, Shanghai, and Moscow.
Restrictions on International Authority and License to Private Partnerships and Institutions
With very little exclusions, there are currently no legal restrictions imposed on foreign control and proprietorship of entities. International corporations are permitted to institute their own commercial companies and participate in all types of profitable ventures.
However, France requires prior notice in matters of investment activities considered critical to the country’s national policies and interests related to social order and defence. It will be screened and approved by the Minister of Finance and Economy.
Other agencies that require prior approval are transportation systems, energy industries, public works and water reserves, communication over electronic systems, healthcare, and infrastructures crucial to national defense. Recent examples of the country’s engagement in decisive strategies include its selling of one hundred million investments in Engie around January 2017.
France now controls 28.7 percent of energy utilities and governs 32.6 percent of voting licenses in the region. The state also manages 83.1 percent of EDF (Electricite de France) with exclusive rights to preserve a considerable investment in Areva’s regulation, the country’s renewable energy and nuclear agency.
To safeguard national defence and security, France reviews all forms of investment involved in industries that purchase licenses to own a French company, exceeds 33.33% in proprietorship scale, or includes any aspect of entities with a base of operations in the country.
Other Reviews on Financial Regulations
Recently, France was not included in any financial regulatory reviews by foreign institutions, and this is due to its relative progress and security of its investment environment. Since 1996, the country’s financial climate has not been subjected to any reviews by the OECD.
Individual state constituents of the EU also do not receive business regulation assessments from the WTO (World Trade Organization), although the entire EU does receive one. France’s economic and financial environment has not been publicly reported by UNCTAD, but the agency does offer a mathematical information report on both France’s outward and inward direct investments.
All businesses may utilize the online trade course designed to streamline business enrolment procedures. The website page on France by the World Bank titled “Investing Across Borders” outlines perceptible barometers of state legislations, policies, and processes impacting the way international entities invest in emerging business ventures through the purchase of commercial lands, and the mediation of dispute cases.
The CFE (Centre de formalites des enterprises, or roughly translated “center of business formalities”) is made up of the Chambers of Commerce and analogous institutions located across France, and is capable of processing enrollment registrations. It is noted that CFEs do not handle any mandatory prerequisites, especially with regard to the accommodation of entities, security of the business name, and corporate insurance. Enrolment may be completed within a week at best.
Companies in France have more investments in the US than they do in any other nation, reaching a total of 234 billion dollars in 2015, and assisting nearly 574,000 US jobs. France is the United States’ largest business ally, with roughly a hundred- fifteen billion dollars in mutual investments. Business France, the business advertising company, also aids French institutions to expand beyond France. No limitations are imposed on overseas investments.
Mutual Financial Investments and Tax Regimes
The Treaty of Rome and the European Union Law’s directives supervise investments established in the French Republic by other members of the European Union. The country conducts BITs (Bilateral Investment Treaties) with ninety-six countries: Algeria, Armenia, Albania, Azerbaijan, Argentina, Bahrain, Bulgaria, Bosnia and Herzegovina, Bangladesh, Cambodia, China, Chile, Congo, Croatia, Costa Rica, Cuba, Djibouti, Czech Republic, Dominican Republic, Egypt, Ecuador, El Salvador, Estonia, Equatorial Guinea, Ethiopia, Guatemala, Georgia, Haiti, Hong Kong, Honduras, Hungary, Iran, India, Israel, Jordan, Jamaica, Kazakhstan, Kuwait, South Korea, Laos, Kyrgyz Republic, Latvia, Laos, Lebanon, libya, Liberia, Lithuania, Madagascar, Macedonia (FYRM), Malaysia, Mexico, Malta, Moldova, Mexico, Mongolia, Morocco, Montenegro, Mozambique, Nepal, Namibia, Nicaragua, Oman, Nigeria, Pakistan, Paraguay, Panama, Philippines, Qatar, Poland, Romania, Saudi Arabia, Russian Federation, Senegal, Seychelles, Serbia, Singapore, Slovenia, Slovakia, Sri Lanka, Tajikistan, Sudan, Trinidad and Tobago, Turkey, Tunisia, Uganda, Turkmenistan, Ukraine, Uganda, United Arab Emirates, Uzbekistan, Uruguay, Venezuela, Yemen, Vietnam, and Zambia.
The following nations and France have signed BITs, although not in effect: Brazil, Belarus, Chad, Ghana, Colombia, Iraq, Zimbabwe, and Kenya. Previous BITs existed between France, Syria, and Mauritius; new BITs between these two nations have been approved but have yet to take effect.
France and the US have benefited from a Commerce and Navigation treaty beginning in 1822, which accords French taxation benefits to American citizens.
Administration of Laws
Regulation of different sectors of the government: For the last 10 years, France has been showing consistency in being transparent and provided ease of access to its constituents with regard to different sectors in the community. France's administration has always been involved in various industries and created mandates depending on the sector that required its presence.
In relation to this, the proposed policies are not published immediately. They release them after they get approved. France has come up with different ideas for regulating consultancies online which is relevant to the recent European Union and Japan Free Trade Area proposals that started around the third quarter of 2016.
The French government's regulatory commission on creating mandates has been transparent in creating laws by making each and every sector participate in drafting the policies which may impact their services. The SGG makes sure researches are tackled during the first part of the legislation steps. The government's council (Conseil d'Etat) is authorized to review the proposed bills and also has the authority to decline any bills which do not have the complete requirements for evaluation.
Some companies in the US decided to be involved in relevant organizations to give them ease of access to any sector in France's administration that is part of the legislative department. As a foreign industry, they find it helpful to see favorable circumstances to invest and to be part of state-related programs.
France established a sector which simplifies any laws they propose to implement. The Secretary of State works with corporations in creating policies which may have an impact on their businesses, as well as with 2 other sectors supervised by the PM (Prime Minister). This course of action was enforced to show incentives in terms of the EU's REFIT project.
There were a lot of recommended proposals which reached around 400 processes to enhance the online services of the government as well as provisions on reducing costs to newly approved policies. Furthermore, any effects on the newly approved policies are carefully studied by professionals or at least by a representative from the industry to come up with reduced costs for their benefit. France's Secretary of State is assigned in publishing this information.
France's administration also has a Competition Authority which paved the way in widening its scope of authority, particularly in making decisions. This sector releases details on how penalties are calculated on corporations with violations of the policies mandated to them. They provide necessary publications regarding corporate competition policies.
In regards to administrative officers, corporations, customer affiliations, and business organizations, they can demand an investigation if there are violations of these agreements. This sector has to facilitate the merging process within corporations. The Ministry of Economics has authority for further investigations and the ability to revert any decisions in cases where they may compromise the development of industrial companies and in order to save workers’ jobs.
The government of France complies with the European Union's policies. The country also started creating new policies and the WTO secures a copy making sure they are consistent with the missions and visions created by the World Trade Organization.
Both the European Union and the US agreed to have specific standards in evaluating and certifying goods. France, on the other hand, implements certain standards where the EU does not have any. Stringent processes are observed when products are brought to the US and eventually get forwarded to the French community. There are some international corporations which showed concerns regarding how France creates standards for their products.
Laws and its Jurisdictions
France's government policies are translated into a reference called the French Civil Code. This is divided into the Private and Public Law, each one pertaining to its own jurisdictions. In the Private Law are included all the concerns of people within companies, job-related sanctions, etc. The Public Law contains anything related to the administration, mainly violations of the constitution, criminal cases, and administrative cases.
The French government established a judicial order to appeal any decisions made by domestic districts, called the State Council. The country also participates in international courts having a representative before the TGI (Tribunal de Grande Instance) in making lawful decisions for any foreign cases submitted to them.
The French government has its own unique way of protecting intellectual property rights. Its scope is not just creativity and artistry rights, but pertains to designs, patents, etc. Corporations are encouraged to seal the registration of their innovations within France with help from the relevant authorities in terms of IP rights (Industrial Property). The country’s lawyers are very knowledgeable in the field of IP rights. French judicial courts are usually mandated to make decisions on such issues.
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In terms of patent problems, lawsuits are forwarded to the Supreme Court. France has been exemplary when it comes to independence, reliability, competence, and fairness of the entire judicial process. Corporations have the needed protection, particularly in EU locations. Disputes relating to IP rights which involve an EU business may be endorsed to the EU Court of Justice. France’s judicial system respects and gives recognition to foreign rulings and treaties.
The French Government has a Corporate Tribunal that handles corporation-related lawsuits. Corporate litigations are usually administered by lay judges, who have a huge representation from a certain industry in the community.
They are usually influential and have established popularity in their own field. The resolution of the corporate court may still be called for an appeal, which is where the Court of Appeals comes in. The French government's judicial process has the impression of being credible and unbiased, and has independence from the administration.
Regulating International Investments
Both local and international corporations can be engaged in the business community. However, the U.S. still needs to adhere to a consensus between them and France. This was witnessed in 1959 and is still in effect.
The provisions made for US citizens and corporations include the following: same rights as French individuals to all corporate-related affiliations, airline transport, water transport, the financial industry, the environmental aspect, utilities production and professional aspects which are associated with educational attainment.
Foreign investors are treated the same way as the locals. In addition to this, investors are assured that corporate properties are protected from being expropriated. A company will be well-compensated if the government takes it for public use.
Business Competition and Antitrust Regulation
Huge developments were seen in terms of regulating businesses with the help of the French Government and its authorities. The French administration is stern enough in implementing sanctions to companies that will violate the rules created in their community.
The government created a mandate which specifies each act and its corresponding penalty to establish a fair and calibrated business practices. Even though the French authority has the ability to see and decide on litigations, the department of economy still has the authority to override any previous rulings and request to conduct new investigations if the litigation may compromise the development of industries, competition, and employment stability.
The Macron Law which took effect in 2016 had the French Authority discuss merging retailers’ business interests. With this agreement, a smooth process of switching from one network to another is guaranteed. In relation to this, there are some prohibitions to contractors on limiting negotiations after the contract ended. A portion of the French government’s income comes from the penalties obtained from those who violate civil laws (approximately 5 percent).
France has formed an authority which regulates most industries in the country. The energy commission and the Competition Authority produce reports every 5 years to inform the administration of the implemented rules and its results. It also includes the effects of the regulation to both retailers and wholesalers in different industries. In 2016, some proposed this authority should be abolished since it does not promote an efficient way of making businesses as competitive as they should be.
Seizure and Remuneration
The French administration does not take any properties without the affected individual or community being properly compensated. So far, there were no reports indicating disputes happened until this article was published.
Reimbursement of disputes: The French government has been part of ICSID affairs and a member of the Enforcement and Recognition of Foreign Arbitral Awards. Domestic courts are compelled to follow this system and carry out its principles.
The country was a pioneer in terms of modernizing approaches to settling disputes in the early 80s. In 2011, France's Department of Justice implemented Decree 2011-48. It paved way to resolving disputes as part of the legal process.
As part of this ruling, both parties may come to an agreement verbally through the settlement of their disputes. However, there will be a due process to pursue.
The High Civil Court of First Instance acts to resolve settlement concerns, and the French government is positioned at the center in terms of the ICC's International Court of Arbitration. There are around 90 representatives coming from different nations, and the administration has authority over investments and corporate issues.
International Courts and Foreign Corporate Settlements
It was previously mentioned that resolving any disputes is one of the French administration's policies that allows both parties to have consensus in the court, verbally. The due process is relatively easy and it ensures efficient and fair judgment to each side of the party.
In terms of timeliness, the settlement process can take about 2 years, which already includes appeals. If there are any urgent matters, a referee process is imposed should there be any damages to one of the related parties. In this situation, the time to resolve it is limited.
Rules on Filing Insolvency
The French government has created a thorough and specific rule on filing bankruptcy. An individual who owes money to a finance company or other may file charges against his debtor through a bankruptcy court.
The currency used in the judiciary is always Euro. In cases like faking bankruptcy, any involved individuals are considered a criminal liability in the rule of law. The French government has formed a plan to help debtors re-establish their credit history through other financial institutions while making sure businesses are secured from any possible losses.
Incentives for investment: The French government provides an array of monetary incentives, which are evenly available for both foreign and French investors. In 2007, France continued the competitiveness and workers’ tax credit (CICE) where companies pay a lower payroll tax and receive temporary exemptions based on their geographic location (tax-free urban zones, countryside regeneration zones, and so on) or based on their creative start-up standing. The program Responsibility & Solidarity Pact helps companies founded in France to decrease their payroll taxes amounting to €41 Billion in 2017 and gradually reducing the corporate tax rate on SME’s.
France recognizes its high corporate taxes compared to some leading industrial nations. The government aims to slowly reduce its minimal corporate tax percentage from 33% down to only 28% by the year 2020 and reduce SME’s corporate tax further to 15% in addition to existing applicable tax credits.
The French government offers corporate investors inducements for a small company’s capital expenditure. In this scheme, a French subsidiary or a French company of an international enterprise with a minority stock holding (under 20%) for a small and innovative SME, be it indirectly or directly (for instance, through funding) will benefit from a 5 year direct amortization of its investment. To be eligible, the SME must allocate for research approximately 15% of its spending.
Research & Development
The French government is prioritizing incentives provided for research & development and for innovation. Business France reported the rate of international R&D investments in 2016 increased to 32%, accounting 10% for all international investment outcomes, and 37% of jobs generated by international investors.
Recent innovation expenses from foreign establishments created about 2,700 jobs in research and development in France. Inbound R&D investments were raised to 5% in key areas, like biotechnologies and pharmaceuticals, agriculture, electronics software, and alternative energy. Research and development continuously became an essential component that captivated foreign investors.
Foreign companies may affiliate with France’s 71 innovative clusters that increase access to both technical advantages on geographical proximity and production inputs. Some of the companies that take part in this innovative policy include young, innovative companies (Jeune Enterprise Innovante), Research Tax Credit (Crédit Impôt Recherché), La French Tech and the National Investment Program. It also includes the programs French Young Entrepreneurs Initiative and La French Tech Ticket.
France’s Research Tax Credit (CIR - Crédit Impôt Recherche) counteracts R&D expenditures initiated by both foreign and domestic firms running in France, no matter what business sector or size, and also covers both innovation expenses and R&D spending incurred by medium and small companies.
The government offers supporting tax credits amounting to as much as 30% of the company’s first €100 million of R&D costs, with additional 5% credits beyond this threshold. Furthermore, the “innovation tax credit” also applies to reduce the price of innovation expenditures by 20% to €400,000. The innovative scheme and tax credit research were set to 2017.
Under the initiative of La French Tech, it supports the development of digital and startup companies through funding under the National Investment Program. It helps in the expansion of startups all across France, by investing €200 Million programs meant to accelerate the growth of digital companies and certifying 17 Tech cities in 2017.
Also, La France Tech helps the globalization of startups that aspire to attract more foreign investors, startups, corporations, and talents. The French Tech centers in foreign countries help French firms expand in the international marketplace. The Paris based scheme, La French Tech Ticket focuses on ushering international companies by providing benefits including a residence permit, free counseling in the Parisian startup development and a €25,000 grant. Subsequent to the March 2016 1st choice of winners, the program’s coverage extended to 200 chosen startups from the seventeen French cities.
Data Localization and Performance Requirements
While France does not impose obligatory performance requirements set by law, the government generally calls for commitments when it comes to research and development or employment of both domestic and foreign capitalists looking for a financial incentive from the government. An incentive, such as the PAT regional planning endowment and affiliated R&D grants are given depending on the amount of created jobs.
Officials have sometimes looked for commitments as one of the authorization processes to acquire international investors. The amendment of PAT was for the benefit of SMEs aiming for the progress of companies within prioritized regional zones, which includes €30 Million of direct government endowments.
France imposes same conditions in ethnic industries for both foreign and domestic investors. All stewards of television and movie productions (for example, TV broadcasters, telecom operators, video services, and internet access provider) are required to invest an allotment from their revenue to fund French television and film productions. They also must abide by the broadcasting content allocation (at least 20% EU, 40% French).
Property Rights Protection
Real property: France’s civil code regulates and enforces real property rights. According to the DBR (Doing Business Report) of the World Bank, France ranked 100 among the 190 registering properties.
The Justice Ministry appoints Civil Law Notaries, expert lawyers practicing in private, as public officials that handle commercial and residential conveyances and registrations, drafting contracts, company formation, estate and succession planning. The main system for registration of land “Cadastre” is managed by France’s general land registry supported by the tax authority (DGFiP) accessible at http://www.cadastre.gouv.fr. Loan agreements commonly have up to a 15-year duration.
France strongly supports rights for intellectual property. Within the French network, trademarks and patents protect property, and the artistic/ literary property is copyright protected. As a result of the Washington Treaty and the Paris Convention about industrial property, United States nationals have a priority time frame for filing a US trademark or patent application, wherein a parallel application should be made in France: 12 months on patents and 6 months on trademarks.
One costly problem French companies encounter is Counterfeiting. The French government continues its strong reinforcement and distinct legal protection to fight the counterfeit goods business, from fake medication to imitation of luxury merchandise, including stealing and using intellectual property illegally.
Over the years, the Intellectual Property Code of France has been updated time and again to deal with this challenge. Recently, a law was passed by the French parliament to strengthen the anti-counterfeiting act and implementation of the EU’s directive about IP rights.
New bills increased the financial cost for damages on businesses victimized by counterfeiting and broadened the trademark protection on smart card technology, various geographic indications, agricultural seeds, and plants. The rule of limitation was heightened for civil cases from 3 years to 10 years and fortified the capability of customs officers to confiscate fake merchandise sent by express freight or mail.
The government reports the confiscated fake goods. UNIFAB, the finest private organization against counterfeiting, committed its 2016 report on exposing the connection between counterfeiting, crime, and terrorism. The report signifies criminal groups and terrorist networks are selling counterfeit items to raise funds from both legal and illegal e-commerce websites.
France also has a powerful online piracy law. The agency called HADOPI administers the “graduated response” scheme of fines and warnings for unlawful file sharing.
It has implemented actions against some online piracy sites like Megaupload. HADPOI and USPTO (The US Patent and Trademark Office) work closely following voluntary agreements to go after mediators that fund or promote piracy sites. Part of a HADOPI’s task is ensuring technical measures taken do not avert the individual’s right to create personal copies of TV programs for private use.
However, regardless of HADOPI’s efforts, the EY global accountancy and consultancy group calculated about 13 million individuals accessed piracy correspondence in France which resulted in the loss of €1.35 Billion ($1.42 Billion) in tax profits and revenues in 2016.
Investment marketplace and indirect financing: France does not impose any legal constraints on indirect investments in the country, nor is there any governing agency tasked to manage indirect investments. This openness to commercial marketplaces gives international companies the opportunity to expand their businesses within France and abroad. Commerce is continually being modernized in the country, and both foreign and local indirect investments are gradually becoming indispensable as marketplaces grow.
Consequently, France, along with many member states of the European Union, is expected to satisfy global accounting requirements. Certain aspects of France’s regulatory, legal, and accounting agencies are seen as more complicated than its American counterpart. However, there’s consistency with adhering to international standards.
France’s leading stock Exchange firm Euronext Paris (or Paris Bourse) had launched Alternext, which, depending on the regulatory interpretation of the rules relating to European financial services, offers small to medium-sized entities a more advanced approach to getting a listing on a free marketplace, as well as more security for consumers compared to Marche Libre that is currently being used by numerous small enterprises in their initial stock listing.
NYSE-Euronext must first grant status on a sponsor sought out by a business wishing to acquire a contract on Alternext; a prepared syllabus of the French language is then presented to file for an AMF (Autorite des Marches Financers) or for a Financial Markets Authority permit, which is equivalent to the United States’ Securities and Exchange Commission. Medium-sized and small businesses can also list through Enternext, which is a new Euronext Group supplementary.
Commerce is continually being modernized in France, and both foreign and local indirect investments are gradually becoming critical as marketplaces grow. Consequently, France along with many member states of the European Union, is expected to satisfy global accounting requirements. Certain aspects of France’s regulatory, legal, and accounting agencies are seen as more complicated than its American counterparts. However, there’s consistency with adhering to international standards. Banking institutions in France are permitted to build operations and branches in the country and will be subjected to multinational economic standards.
The worldwide financial catastrophes of 2008 and 2009 have impacted France’s financial entities, but the country’s banking system has eventually recovered. In 2015, the total investments of the biggest banks in France reached 6.3 trillion euros, or 5.4 trillion US dollars.
International investors are not restricted to prototypical investing methods, such as short, medium, or long-term investments, small to medium-term resources of credit, and secure or non-secure liquidation provided by financial institutions. They facilitate public donations of dividends and organizational debts, mergers, procurements, and expropriations, and provide risk management services related to interest rates and variations in currency. International entities can access all financial services, and even though subsidies are accessible for small-business investments and house mortgages, the majority of loans are offered at market values.
FOREX and Restitutions
International financiers are permitted to convert, transfer, or remit funds in relation to an investment. Revenue linked to an investment can be converted freely into US dollars from euros or other currencies. France is part of the Eurozone which uses the euro as its currency.
The European Central bank in Frankfurt oversees policies governing the exchange rate. Between the first of January 2015 and the 31st of March 2017, the euro had a trading range of about 1.2 -1.067 US dollars.
Protocols regarding Remittances
France has a secure and transparent remittance protocol for investments. Outward and inward profits must go through select financial brokers via bank transfers. The recovery of capital is not restricted and no similar limitations exist over dividend transfers, royalty payments, service fees, and profits. Corporate entities in France, that are controlled overseas, are obligated to establish a local financial account and subjected to similar protocols to other French corporations. Residents are allowed to own and use foreign financial accounts.
In order to control FOREX, the country’s government considers outsiders legal residents during the period they set foot in the country. Both French people and foreigners are governed by the same policies: they are allowed to establish bank accounts overseas and open a financial account in a different currency in a French bank.
They are encouraged to report foreign bank accounts’ yearly income tax reimbursement. Profits generated from France can be relocated to other countries.
A co-founder of the Financial Action Task Force, or FATF, which consists of thirty-four countries’ inter-government task forces, France provides inclusive funding to fight anti-terrorism and money laundering, and actively participates in global efforts to prevent illegal financial transactions, according to the Department of State’s Report on Terrorism. France’s financial intelligence agency, Tracfin, has subscribed to new mutual pacts with foreign entities and is currently active within multinational corporations.
Independent Wealth Capital
France does not have a sovereign wealth capital in itself, or at least not one that uses that distinction, although it does facilitate funds in a similar manner. The role of Bpifrance, or the Public Investment Bank, is to assist medium-sized and small businesses, as well as large corporations, and to participate in innovation enterprises.
Structured at a federal level, this government scheme is designed to complement local systems. Bifrance deals primarily with domestic investments and offers insurance on exports. It may also directly hold company shares and maintain indirect investments through sector or general-based revenues, development, transfer, or venture capital. Bifrance has also occupied minor investments in corporations and 250 financial assets, which include ninety investment firms investing in local companies.
France maintains shares in thirteen listed companies: EDF at 84.94 percent, Aeroports de Paris at 50.63 percent, Air France-KLM at 17.58 percent, Airbus Group at 10.94 percent, Areva at 28.83 percent hold and 86.52 control, Dexia at 5.73 percent, CNP Assurances at 1.22 percent hold and 66% control, Orange at 13.35 percent stake and at 9.60 percent share via BPI Finance, Renault at 19.74 percent, Engie at 28.7 percent, PSA at 13.68 percent, Thales at 25.97 percent, and Safran at 14 percent share and also 21.9 percent voting rights. Unlisted State-owned entities include La Banque Postale, CDC, RATP, and SNFC. The French government also holds minority as well as majority shares in small companies across several districts.
Private companies can access the same financing as SOE’s, which includes government-owned financial institutions or investment entities. Subject to similar tariff duties and tax refund regulations as private companies, SOEs may acquire funding and financial aids from the French state.
As a participant of the EU, France facilitates the GPA (Agreement on Government Procurement) structured from the WTO. State-owned and controlled entities operate similarly to other French companies and face similar tariff policies.
SOE’s Board members behave according to standard corporate administrative procedures as indicated in the AFEP-MEDEF Corporate Governance Code. SOEs are legally mandated to publish a yearly report, and France’s Court of Audit performs audits on financial companies owned largely by the government. France delegates appointees to all companies’ Board of Directors, for which it invests significantly and controls its portfolio via a specific unit associated with the Ministry of Economics, the APE shareholding firm.
Recently, a yearly report has been released focused on France’s strategy of maintaining a considerable level of jurisdiction on strategically critical entities. This is done while retracting from conventional industrial regions to establish investments in emerging companies across key industries for economic development. France sold a portion of its shares in Engie in 2015-2016, as well as the aircraft engine company Safran, and used its revenues to pay public deficit and acquire investments for the BPI (Public Investment Bank).
Private ownership program: France has privatized fully or partially numerous large corporations, including France Telecom, Thales, Renault, and Air France. The government, however, maintains a vigorous presence in several districts, specifically in public transport, the defence industries, and power. In 2016, France had sold its shares of Lyon and Nice airports.
Maintaining Business Ethics
France has maintained an excellent reputation when it comes to business ethics. The government formed a committee called NCP for OECD policies (Organization for Economic Cooperation and Development) to guide corporations. This committee is under the authority of France's Ministry of Finance and Economy.
Authorities who are representatives of different government institutions, are the Energy Commission, the Labor Commission, the Ministry of Finance and Economy, some of France's Trade Organizations, and the MEDEF. Corporations are obliged to submit an application and the NCP ensures policies are observed.
Any details relating to business policies are part of their authority, and the NCP also answers queries from investors. There might be instances where the NCP must mediate to fix minor disputes which may arise.
One prominent building collapsed in Asia (Bangladesh) which made the French government regulate and impose strict standards in approving textile industries. The National Contact Point established a committee to facilitate certain issues and to publish a final resolution that relates to the policies mandated by the NCP. This committee closely checks any post resolution activities which were agreed upon by both parties to make sure these issues were addressed privately with both of the concerned parties.
The policy complies with guidelines set by shareholders and the EU commission. In terms of remuneration, the guidelines are in line with how they perform as an independent sector.
Employees' unions as well as business groups have participated at National Council Points. Policies imposed by the OECD can be viewed online. For the record, marketing procedures are similar in nature and on par with the European Union's standards.
In addition, the EU was anticipated to propose a law in 2017 against prohibited metals and minerals brought to the European market. There were several reports indicating abusive actions against its workers. The French government does not tolerate such violations of the law.
In 2016, the HATVP was formed by the Anti-corruption and Modernization law. This policy emphasizes on being transparent to society by releasing the revenue and each asset the government has.
This information is legal and shared to everyone. In addition to this, the revenues of each and every region is also be included. As for the members of the Parliament, a statement showing their assets will only be available in some public offices, not online.
The French government participates in the discussion regarding the criteria of ISO 26000, Foreign Finance Corporations Standards, the policies of OECD for foreign corporations, as well as the UN's Guide in Basic Principles about Human Rights and Business.
The country was a pioneer in Europe by showcasing EITI (Extractive Industries Transparency Initiative), introduced in 2003 at the Evian Summit. However, the initiative is yet to be enforced. Corporations are obliged to submit a yearly report regarding any Corporate Social Responsibility events.
The French parliament adopted its “Loi Sapin II” or the Transparency, Economic Modernization, and Fight against Corruption Bill on November 2016, with key aspects that include:
- Building a new agency that fights corruption;
- Starting “deferred prosecution” on corruption case defendants;
- Suing both foreign and French companies presumed of bribing offshore foreign public officers;
- Urging lobbyist to enlist with national organizations;
- Providing whistle blowers through expanded lawful protection.
The US consulate based in Paris hasn’t received any specific complaints against US firms based in France. According to Transparency International (TI), France placed 23rd among 168 on the corruption perception listing. TI asserts France still faces corruption issues in some locations.
Corruption practices are mostly found within the defense and public works sectors. TI France, along with all kinds of French companies, works to avoid and discourage corruption on any investments abroad.
Report Corruption Resources:
In 2017, a new national agency against corruption was established that replaced the SCPC. The CPDA or Corruption, Detection, and Prevention Agency is in charge of preventing corruption through anti-corruption agendas, making recommendations, consolidating, and distributing information gathered to hamper and uncover corrupt company executives and officials. The CPDA works under the management of the Ministry of Finance together with the Ministry of Justice.
Security and Political Environment
As a politically stable nation, political fights are unusual in France. There are large demonstrations occasionally and protests occur (sometimes simultaneously in several cities), but they normally end without violence.
When confronted with inevitable business closure, France’s labor unions have recourse on confrontational techniques, like setting factories on fire, bomb threats, or kidnapping managers and executives – like the 2014 incident at the Goodyear factory in North France (Goodyear’s former employees were sentenced to jail in January 2016).
The dispute between the unionist and Air France’s management ended in an assault to an Air France official, although with no severe injuries. To amend the problem and change the confrontational way of labor disputes, so they’ll become more compromise-oriented and placid, the French government launched a new labor bill in 2014 aiming to encourage arranged settlements rather than hostility.
Labor Practices and Policies
France’s utmost asset in encouraging foreign investors is its private sector work force, despite its comparatively expensive labor costs and rigid work regulations.
After the economic crisis in 2018, unemployment increased sharply. From 3.5 million unemployed in 2014, the record rose to 3.84 million (3.59 Million for Metropolitan France) in 2015, which is the highest unemployment number recorded. The rate remains high, though it has significantly improved in Metropolitan France, reaching 9.7% and 10% in total (overseas territories included). A regional difference is notable, with rates varying between 8.8% and 14%.
The Youth unemployment rate is 25% (an unemployment rate of 22% or above, since 2009 for ages between 20 and 24). Most academic youths in the age bracket of 20 - 24 have taken up apprenticeships or temporary employment contracts, yet are unable to find a stable job that may lead them to the path of paying taxes or owning a property, a French standard for decades. Job searchers over the age of 50 almost doubled in number since 2008 and reached 592,000 people, while the underemployment rate in 2016 (described as part timers not able to get full time jobs) was 6.3%.
Management and Labor Relations
Despite the fact the union membership rate in France is declining steadily (approximately 8% overall), more than half of the U.S. union membership rate, France’s labor law offers an extensive bureaucratic role for organized labor and employee representatives. This is because labor unions speak for all employees (members or non - members alike).
Additionally, for companies with more than 50 employees, their management teams are obliged to create and meet with the labor’s council and with the worker’s health & safety council regularly regarding managerial decisions. The result showed most SMEs choose to employ up to 49 or less employees. When they encounter challenges, labor unions play important roles on labor and management relations.
In fact, the 3 leading employer associations and the top 5 labor unions (also called the Social Partners or Partenaires Sociaux) have statutory duties in national level discussions. Organized protests are a common element in the French community, but they don’t pose any deliberate commercial risks to local or foreign investors.
Labor courts (which play a role similar to the National Labor Relations Board of the United States that helps resolve labor arguments) are composed of a balanced number of employer and union representatives. Petitions are possible up to the highest French civil court, Cour de Cassation.
France followed a substantial labor reform in August 2016, commonly called the “El Khomri” bill, named after Myriam El Khomri, one of France’s Ministers of Labor. The act intends to amend the French Labor Code that aims to make the labor market flexible. The law limits provisions for businesses to dismiss workers’, reductions on overtime pay for hours rendered beyond the 35-hour statutory workweek, as well as cutting back workers’ severance pay if their employer made them inessential.
France has generally excellent working conditions and well protected workers. The labor law sets minimal standards of working conditions which include a work week, overtime, layoffs, personal leaves, and vacations. The standard work week is 35 hours (time spent beyond these hours should be compensated as overtime pay).
The French retirement age is 62. Labor contracts follow the requirements specified in collective agreements throughout the industry. For example, a laid off employee from a big company due to economic grounds may get aid from temporary contracts, training, or transfer to a new company.
Other work standards are included in collective agreements, normally negotiated at a regional or national level by different trade union coalitions and employer organizations. Also, safety committees and occupational health are compulsory in large and medium companies according to French law. When a business grows above 10 employees, it should start to complete comprehensive administrative requirements, while companies with more than 50 employees deal with a greater number of health and administrative regulations.
Overseas Private Investment Corporation (OPIC) and coverage for investments: There is no provision of insurance or guarantees from OPIC to any investment in France due to the nation’s high average income.
Monaco is the 2nd smallest country in the world, but it delivers a stimulating environment for foreign investors. There is an exceptional quality of life in Monaco. However, it also has an unemployment rate of 2%.
Occupants in the Principality and Monegasque nationals, with French nationals’ exception who are residents of Monaco, do not receive an income tax. Commercial enterprises and companies are subject to a Business Profit Tax.
Multinationals and nonresidents are entitled to open a bank / brokerage account as well as acquire property in Monaco, which is quite straightforward because there are no restrictions on foreigners. The nation is recognized for its political stability and surety.
Note: The Heritage Foundation's Economic Freedom Index Report, the World Bank’s Doing Business Report, and Transparency International’s Country Corruption Report do not cover the Principality of Monaco.
The economic and political relations between Monaco and France are closed and strengthened after a monetary convention was signed by the two nations, introducing the euro in Monaco. Monegasque and French territories as well as territorial sea were taken under one customs union created by a Convention on the 1st of May 1963 whereas French customs rules in the principality were implemented.
The Principality of Monaco is a constituent of the EU customs territory, but not a complete affiliate of the EU. The state directly participates and complies with international and European laws and regulations. Therefore, the transmission of services and goods from Monaco within a European Market is guaranteed.
The parliament stringently monitors the economic activity in Monaco, as well as industrial and commercial craft activities. Establishing an administrative unit or branch in Monaco and any economic activities conducted by foreign investors must be approved by the Direction de l'Expansion Economique.
Consent and endorsement from the authorities of Monaco is based on the business type. The permit is non-transferable and personal. The process of approval has been simplified by the parliament, and the number of documents for individual authorization was reduced to 6 (there were originally 9 documents).
The new investors in Monaco are accommodated and assisted by the Espace Entreprises Monaco Business Office. The MWBO is the point of entry and fulfills the role of welcoming everyone who wants to settle in Monaco either professionally or privately.
Both Monegasque financial supervisory authorities and the Paris Committee for Credit and Investment are assigned in the financial sector to issue approval for the forming of any financial organization. The same rules apply to offshore companies.
Monaco has promoted their economic activities and maintained several policies and principles, including the following:
- They legalized the LLC (Limited Liability Company);
- The principality has pursued combating corruption, organized crime, and money laundering;
- New taxable businesses and R&D are exempt from profit tax.
There is a total absence of any direct taxes in Monaco, but there are 2 exceptions to this principle:
- Businesses / companies generating more than 25 percent of their income outside of Monaco and corporations whose business in Monaco consists of getting income from artistic property rights, patents, and literary works are subject to a tax profit of around 33 percent.
- For French citizens, only those who can affirm they lived in Monaco for 5 years before 10/31/62 are subject to the same scheme.
New companies in Monaco receive a 2 year holiday exemption from paying corporate taxes, and the rate will increase after the first 2 years, 25 percent on the 3rd year, 50 percent on the 4th year, and 75 percent on the 5th year.
On 12 of July 2016, Monaco and the EU signed a treaty. The agreement calls EU member states and the Principality of Monaco to exchange information automatically in order to improve tax compliance and to access information on the fiscal accounts of each other’s populaces.
The treaty will be enforced in 2018. The Principality of Monaco claimed to have implemented a foreign policy (OECD) related to fiscal transparency together with Germany and the United States. The principality desired to cooperate in tax matters and signed 32 TIEA which include one with the U.S on 8 September 2009.
The Monegasque Economy
In 2014, the Gross Domestic Product (GDP) of the Principality of Monaco was 5.32 billion euros and went up to 5.4 percent or 5.64 billion euros in 2015. Monaco benefits in revenue from the tourist industry, famed gambling casinos, and government business enterprises. Around 50 percent of the revenue comes from the application of VAT in Monaco influenced by the government of France.
The Principality of Monaco has a strong financial market and stable institutions run by high level professionals. Banks in Monaco are subject to the same operating and supervision rules as French banks.
There are three finance corporations, thirty three banks, fifty five financial institutions dealing with portfolio management companies and sixty mutual investment funds operating in the principality. Monaco’s financial sector is managing an estimated amount of 750 billion euros for clients that are 46 percent nonresidents.