Branch vs Subsidiary in France: A Practical Guide for Foreign Companies

The branch vs subsidiary in France decision is one of the first a foreign company has to make when it starts doing real business in the French market. It affects who is liable for debts, how profits are taxed and brought home, what accounts must be kept and how easily you can change course later.

In the branch vs subsidiary in France debate, neither option is better in every case. A branch keeps things inside your existing company. A subsidiary creates a separate French company. This guide compares the two in practical terms so you can go into the decision with the right questions.

Branch vs Subsidiary in France: The Short Answer

A branch (succursale) is a French establishment of your foreign company. It has no legal personality of its own, so your foreign company stays directly responsible for what happens in France.

A subsidiary (filiale) is a new French company, usually an SAS or SARL, owned by your foreign company. It has its own legal personality, its own accounts and its own tax return. The parent’s exposure is generally limited to what it has invested.

First Check: Do You Need a Branch or Subsidiary in France at All?

Some foreign companies start with a representative or liaison office. This can suit preparatory work such as market research or relationship building, but it is not a route for selling in France. Once you negotiate contracts, invoice French clients or run a commercial activity locally, you need to look closely at whether you have a taxable presence.

The risk works in both directions. A team working in France without registration can create a permanent establishment for tax purposes, even if nobody has filed anything. If staff are already on the ground, it is worth reviewing this before choosing a structure. If you only need to hire one or two people and have no establishment, read our guide to hiring in France without a French entity.

How a Branch in France Works

A branch suits companies that want to operate in France as themselves. There are no new articles of association to negotiate and no share capital to pay in. Registration still takes preparation: expect to supply the parent company’s constitutional documents, translated into French where needed, and to appoint a person authorised to act for the company in France. Formalities go through the online one-stop business portal, the guichet unique.

The main advantages are speed and simplicity at the legal level. The main disadvantage is liability. Because the branch is not a separate person, a French creditor is effectively dealing with your foreign company.

Accounting and Tax for a Branch in France

Having no separate legal entity does not mean having no French compliance. A registered branch is normally a permanent establishment, and its French profits are subject to French corporate income tax. It needs accounts that identify the French activity, a French tax return, VAT compliance and, if it has staff, French payroll. The foreign parent’s accounts generally also have to be filed with the French commercial registry, which surprises groups that prefer to keep them private.

Costs charged by head office to the branch also deserve attention. The allocation must be supportable, and it is one of the first areas a tax auditor will test.

How a Subsidiary in France Works

A subsidiary gives you a local company that can sign contracts, open bank accounts and employ staff in its own name. Most foreign groups use an SAS because its governance rules are flexible. The founding documents take more work than a branch registration, but they let you set out exactly who decides what.

For a new market entry, a subsidiary often sends a stronger signal. Banks, landlords, distributors and larger clients tend to be comfortable with a French company, and a subsidiary also makes it easier to bring in a local partner or sell the French business later. You can see the steps in our guide on how to register a company in France.

Limited liability is not absolute. A parent may have given guarantees, and directors have their own duties, so the protection should not be treated as automatic.

Branch vs Subsidiary in France: Where Tax Guides Oversimplify

Corporate Income Tax

Both structures are generally taxed in France on French profits at the standard 25% corporate income tax rate. The reduced 15% rate on the first €42,500 of profit is reserved for small companies that meet strict conditions, including ownership conditions. A subsidiary wholly owned by a larger foreign group will often not qualify. For the wider picture, see how corporate tax works in France.

Bringing Profits Home

You may read that a French branch can send profits to its parent without any French withholding tax. That is too simple. Under French rules, profits made in France by a foreign company can be treated as distributed and subjected to withholding tax under articles 115 quinquies and 119 bis of the French General Tax Code, as the French tax authorities’ guidance explains. Exemptions exist, in particular for qualifying EU companies, and many tax treaties reduce or remove the charge.

Dividends paid by a subsidiary to a foreign parent can also face withholding tax, with relief available under the EU Parent-Subsidiary rules or a tax treaty if the conditions are met. The real answer depends on where the parent is based, who ultimately owns it and what the relevant treaty says. It should be modelled for your group before you commit.

Transactions With the Parent

Management fees, royalties, loans and intra-group sales must be priced on arm’s length terms. This applies to both structures, but a subsidiary makes these flows more visible because it deals with its parent by contract. Put the agreements and supporting documents in place from the start rather than rebuilding them during a tax audit.

Branch vs Subsidiary in France: Which Fits Your Situation?

A branch may make sense when:

• your French activity is closely tied to the parent’s operations;
• the activity carries limited liability risk;
• you are comfortable with the parent’s accounts being filed in France;
• the tax result after any treaty relief works for your group.

A subsidiary usually makes more sense when:

• you plan a long-term presence or several hires;
• you sell to consumers or take on significant contracts;
• French clients, banks or landlords expect a local company;
• you may bring in investors or sell the French business;
• you want to keep French risk away from the rest of the group.

You can change your branch vs subsidiary in France decision later, but converting a branch into a subsidiary is not just paperwork. Assets, contracts, employees and tax positions all have to move, so it pays to choose with your three-year plan in mind.

Common Mistakes to Avoid

• Starting commercial activity first and looking at registration afterwards.
• Choosing a branch only because it looks cheaper, without pricing the accounting and tax work.
• Assuming a subsidiary fully isolates the parent after signing a parent guarantee.
• Forgetting that French VAT rules apply from the first taxable sale.
• Leaving intra-group pricing undocumented.

Frequently Asked Questions

Is a branch cheaper than a subsidiary in France?

Set-up can be simpler, but annual compliance is not necessarily lighter. Compare the total cost over several years, including accounting, tax work and any withholding tax.

Can a French branch employ staff?

Yes. A foreign company with an establishment in France declares and pays social contributions for that establishment under the normal rules, as URSSAF confirms.

Is a branch or subsidiary in France better for a US or UK company?

There is no universal answer. The tax treaty, the way the parent is treated at home and the size of the French project all matter, so the comparison should be made on your numbers.

Choose Your French Structure With Confidence

A structure that looks simple on day one can become expensive once profits, staff and contracts grow, so compare a branch vs subsidiary in France early. ESCEC International helps foreign entrepreneurs and companies compare their options and set up their French accounting, tax and payroll in English.

Planning to enter the French market?

Book a session with an ESCEC International expert to review your project and choose between a branch and a subsidiary before you commit.

This article gives general information as of November 2026 and does not replace advice on your specific situation.