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France: Market Profile

Picture: France factsheet
Picture: France factsheet

1. Overview

France is one of the largest and most advanced European economies. Key French companies have a strong reputation for technological sophistication and high research and development spend. The French economy has rebounded since the beginning of 2015. Soft oil prices and tax cuts for low-income earners have been favourable to private consumption. Easing credit conditions and the recent supportive economic strategies, such as the progressive reduction of the corporate income tax (CIT) rate from 33.3% to 25%, the increase of the tax credit for employment and competitiveness and the over-amortisation scheme, are conducive to private investment. Future growth will be aided further by a strong recovery in the housing market, increased reform momentum and improving exports.

Source: Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

April 2017
Former economy minister Emmanuel Macron beat the National Front's Marine Le Pen in the decisive second round of the presidential election. Neither of the two main parties (the Socialists and Republicans) made it into the run-off round.

June 2017
President Macron's new movement, La Republique En Marche!, won an overall majority in the parliamentary elections.

September 2017
President Macron signed into law changes to the labour code designed to make it easier for companies to hire and fire workers.

April 2018
Rail workers announced a three-month strike.

June 2018
National railway operator Societé National Chémin des Fers (SNCF) announced plans to revamp Gare du Nord station in Paris, with a view to prepare for the Olympic Games set to take place in 2024. The EUR600 million overhaul will be carried out in collaboration with real estate developers.

President Macron’s government plans to implement structural reforms in 2019 as outlined in the 2019 budget plan that includes a EUR6 billion cut in household taxes, with overtime pay and a housing tax set to be axed in September 2019.

Sources: BBC country profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: France real GDP and inflation
Graph: France real GDP and inflation
Graph: France GDP by sector (2017)
Graph: France GDP by sector (2017)
Graph: France unemployment rate
Graph: France unemployment rate
Graph: France current account balance
Graph: France current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: May 31, 2019

4. External Trade

4.1 Merchandise Trade

Graph: France merchandise trade
Graph: France merchandise trade

Source: WTO
Date last reviewed: May 31, 2019

Graph: France major export commodities (2018)
Graph: France major export commodities (2018)
Graph: France major export markets (2018)
Graph: France major export markets (2018)
Graph: France major import commodities (2018)
Graph: France major import commodities (2018)
Graph: France major import markets (2018)
Graph: France major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: May 31, 2019

4.2 Trade in Services

Graph: France trade in services
Graph: France trade in services

Source: WTO
Date last reviewed: May 31, 2019

5. Trade Policies

  • France has been a World Trade Organization (WTO) member since January 1, 1995, and a member of the General Agreement on Tariffs and Trade (GATT) since January 1, 1948. It is also a member state of the European Union (EU), which means that France incorporates EU regulatory norms. As an eurozone member, it has also adopted the euro as its legal tender from January 1, 2002. While developing new draft regulations, the French government submits a copy to the WTO for review to ensure that the prospective legislation is not inconsistent with its WTO obligations.

  • In December 2016, EU states agreed on a proposal to modernise the EU's trade defence instruments, with a view to shielding EU producers from damage caused by unfair competition. The proposed regulation amends current anti-dumping and anti-subsidy regulations to better respond to unfair trade practices, and furnishes Europe's trade defence instruments with more transparency, quicker procedures and more effective enforcement. In exceptional cases such as in the presence of distortions in the cost of raw materials, it will enable the EU to impose higher duties through the limited suspension of the lesser duty rule.

  • Trade bureaucracy and customs delays are a significant hindrance to foreign investors, particularly those outside of the EU. Though there are increasing efforts to reduce trade bureaucracy, paper-based procedures remain cumbersome and costs and connectivity issues add to market barriers.

  • In 2016, the European Commission (EC) introduced an import-licensing regime for steel products exceeding 2.5 tonnes. The regulation will be active until May 15, 2020. In early 2015, the EC issued regulations on trade restrictions on cattle, beef, watermelons and prepared tomatoes with Turkey. This will help to protect domestic agriculture and regional farming businesses.

  • In order to protect domestic industries, The EU has imposed various anti-dumping measures on a wide range of products, predominantly in the areas of textiles, machine parts, steel, iron and machinery coming from mainland China and a few other Asian nations. Currently, there are a number of mainland China-origin products subject to the EU's anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong and regional exporters. In November 2016, the EC imposed a provisional anti-dumping duty on imports of some primary and semi-processed metals from mainland China. The rate of duty is between 43.5% and 81.1% of the net, free-at-union-frontier price before duty, depending on the company. By way of comparison, the rate of duty for similar goods from Belarus is 12.5% of the net, free-at-union-frontier price before duty. As of February 2019, the EU is not applying any anti-dumping measures on imports from Hong Kong.

  • The EU is party to some 50 free trade agreements (FTAs) and, consequently, access to markets of the countries concerned is mediated through those agreements. The EU's scheme on Generalised System of Preferences (GSP) came into effect on January 1, 2014. Under the scheme, tariff preferences are removed for imports into the EU from countries where per capita income has exceeded USD4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the mainland China remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been graduated' from the preferential treatment. Hong Kong has been fully excluded from the EU's GSP scheme since May 1, 1998.

  • Nine types of goods imported into the EU are subject to licensing. These goods are (broadly): textiles; various agricultural products; iron and steel products; ozone-depleting substances; rough diamonds; waste shipment; harvested timber; endangered species; and drug precursors. No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the mainland China at present.

  • To combat the spread of the Asian long-horned beetle, in July 1999 the EU introduced emergency controls on wooden packaging material originating in China. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.

  • For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. The EU has also adopted a directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from January 16, 2007. In addition, the EU has adopted a Directive to prohibit the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.

  • The EU has adopted a number of directives for environmental protection, which may have an impact on the sale of a wide range of consumer goods and consumer electronics. Notable examples include the Waste Electrical and Electronic Equipment (WEEE) Directive implemented in August 2005, and the Restriction of Hazardous Substances (RoHS) Directive implemented in July 2006. On December 3, 2008, the EC presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive. The recast RoHS Directive was published on July 1, 2011, and entered into force on January 2, 2013. The new directive continues to prohibit electrical and electronic equipment that contains the same six dangerous substances as listed in the original RoHS Directive. From July 22, 2019, the new directive will widen the current scope of the previous directive by including any electrical and electronic equipment that will have fallen out of the old RoHS Directive's scope, with only limited exceptions.

  • Another important law for foreign companies to grapple with concerns the WEEE Directive. With formal approval on June 7, 2012, the recast WEEE Directive entered into force on August 13, 2012. The recast WEEE Directive subjects member states to higher collection and recycling targets (a 45% collection rate as of 2016 and 65% from 2019) and a wider scope of measure, essentially covering all electric and electronic equipment. The directive also establishes producer responsibility as a means of encouraging greener product designs. Following the recast RoHS and WEEE Directives, the EU's new framework directive for setting eco-design requirements for energy-related products (ErP) is now in place. The ErP Directive is no longer limited to electrical and electronic equipment (as it was under its predecessor, the energy-using product or EuP Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings as well as insulation and construction materials.

  • REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of one tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.

Sources: WTO - Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

As a member of the EU, France is party to the same trade agreements as its 27 peer states. The region negotiates and enters into trade agreements as a collective owing to the single market nature of the union.

6.2 Multinational Trade Agreements


  1. The EU Common Market: The transfer of capital, goods, services and labour between member nations enjoy free movement. The common market extends to the 28 member nations of the EU, namely: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

  2. European Economic Area (EEA)-European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway and Switzerland): While it enhances trade flows between these countries and the EU, only Switzerland is a fairly major trading partner.

  3. EU-Turkey: The customs union within the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers.

  4. EU-Canada Comprehensive Economic and Trade Agreement (CETA): CETA is expected to strengthen trade ties between the two regions, having come into effect in October 2016. Some 98% of trade between Canada and the EU is duty-free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

  5. EU-Japan Economic Partnership Agreement (EPA): In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the EC, the EU-Japan EPA will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and came into force on February 1, 2019 after the EU parliament ratified the agreement in December 2018. The total trade volume of goods and services between the EU and Japan is an estimated EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products and it seeks to open up services markets, particularly financial services, e-commerce, telecommunications and transport. Japan is the EU's second biggest trading partner in Asia after mainland China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery.

  6. EU-SADC EPA (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swatini): An agreement between EU and SADC delegations was reached in 2016 and is fully operational for SADC members following the ratification of the agreement by Mozambique. The remaining six member of SADC no included in the deal (the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe) are seeking economic partnership agreements with the EU as part of other trading blocs – such as with East or Central African communities.

Provisionally Active

The CETA: The CETA is an agreement between the European Union (EU) and Canada. CETA was signed in October 2016 and was ratified by the Canadian House of Commons and EU Parliament in February 2017. However, the agreement has not been ratified by every European state and has only provisionally entered into force. CETA is expected to strengthen trade ties between the two regions, having come into effect in 2016. Some 98% of trade between Canada and the EU will be duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

Ratification Pending

EU-Central America Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize and the Dominican Republic): An agreement between the parties was reached in 2012 and is awaiting ratification (29 of the 34 parties have ratified the agreement as of October 2018). The agreement has been provisionally applied since 2013.

Under Negotiation

  1. EU-Australia: The EU, Australia's second largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48 billion in 2017, and bilateral trade in services added an additional EUR27 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to or doing business in Australia on equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.

  2. EU-United States Trans-Atlantic Trade and Investment Partnership: This agreement was expected to increase trade and services, but it is unlikely to pass under the administration led by United States President Donald Trump against a backdrop of rising global trade tensions.

  3. EU-Vietnam FTA: In July 2018, the EU and Vietnam agreed on final texts for the EU-Vietnam FTA and the EU-Vietnam Investment Protection Agreement (IPA). As of January 2019, the final text of the agreement has been finalised and is awaiting signature and conclusion.

Sources: WTO Regional Trade Agreements database, European Commission, Breugel, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: France FDI stock
Graph: France FDI stock
Graph: France FDI flow
Graph: France FDI flow

Source: UNCTAD
Date last reviewed: May 31, 2019

7.2 Foreign Direct Investment Policy

  1. Foreign and domestic private entities have the right to establish and own business enterprises and engage in various remunerative activities. France is committed to encouraging foreign investment. In the current economic climate, the French government sees foreign investment as a way to create jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives are available to foreign investors. France’s membership of the EU and the eurozone facilitates the efficient movement of people, services, capital, and goods. Foreign firms account for one third of France’s manufacturing, 30% of goods and services exports, and have increased corporate R&D expenditures by 32%.

  2. The French investment regime is said to be among the least restrictive in the world. With a few exceptions in certain specified sectors, there are no statutory limits on foreign ownership of companies. Foreign entities have the right to establish and own business enterprises, and engage in all forms of remunerative activity. The government cannot legally expropriate property to build public infrastructure without fair market compensation.

  3. France welcomes foreign investment and has a stable business climate that attracts investors from around the world. The French government devotes significant resources to attracting foreign investment through policy incentives, marketing, overseas trade promotion offices, and investor support mechanisms. France has an educated population, first-rate universities, and a talented workforce. It has a modern business culture, sophisticated financial market, strong intellectual property protection, and innovative business leaders. The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive road networks and public transport, and efficient intermodal connections. High speed (3G/4G) telephony is nearly ubiquitous.

  4. In April 2015, France launched its programme for building its industrial future, with the goal to modernise France's production tools and provide support for manufacturers as the digital changeover transforms organisations, their business models and the way they design and market their products. The New Industrial France programme (La Nouvelle France Industrielle, NFI) is based on nine industrial solutions that provide real-world responses to key economic and social challenges:

    • Data economy
    • Smart objects
    • Digital trust
    • Smart food production
    • New resources
    • Sustainable cities
    • Eco-mobility
    • Medicine of the future
    • Transport of tomorrow

    These nine solutions will position French businesses for tomorrow's markets in a world in which digital technology is erasing the boundary between industry and services. The accompanying report, Key Technologies 2020, presented a list of 47 key technologies in which French companies need to be present within 5-10 years in order to maintain a competitive advantage and uphold the appeal of France in growth markets. These key technologies provide a medium-term direction for the development of NFI's solutions. The second phase of the programme was launched in May 2015 by the former Minister for the Economy, Industry and Digital Affairs and Emmanuel Macron (the current president).

  5. In January 2019, the French government, in association with the country's Electronic Communications and Postal Regulatory Authority (Arcep), put out calls for the creation of 5G trial platforms in the 26 GHz band. This portion of the spectrum has been opened to third parties by French regulators. The government encourages third party businesses in the health, energy and smart city industries to create solutions using 5G functionality.

  6. France updated the NFI programme in 2016 to define France's industrial policy priorities in the form of 34 sector-based initiatives that will be the focal point of France's efforts and the starting point for its industrial renewal. The initiatives include:

    • Developing the next generation TGV (high-speed train)
    • An affordable fully electric car for all
    • The first fully electric passenger airplane
    • Efficient, low-emissions ships
    • More powerful and longer-lasting batteries
    • Electricity charging stations
    • Intelligent fabrics
    • Thermally efficient building renovation
    • Nano-electronics
    • Augmented reality
    • Connected objects
    • Robotics
    • Electrically propelled satellites
    • Cloud computing
    • Cyber security

  7. The French government's Direction Générale des Entreprises launched the second phase of the Innovation 2030 programme in December 2016 via a global contest called the Worldwide Innovation Challenge, open to all entrepreneurs investing in France regardless of nationality. Up to 30 projects have been selected for the 2017 theme 'Risk Reduction' and they received between EUR1 million and EUR3 million in start-up funding.

  8. Business France and other government agencies are particularly nurturing of foreign investment in tech sectors. The French government has developed a brand – French Tech – to promote the development of France's tech sector and promote France as a location for start-ups and high-growth digital companies, with the goal of turning France into a 'Start-Up Republic'. The French Tech initiative includes an 'acceleration' investment by the French government of EUR200 million to foster start-up ecosystems in and outside France. In addition to offices in 17 French cities, French Tech hubs are established in 22 cities globally, including New York, San Francisco, Los Angeles, Shanghai, Hong Kong, Vietnam, Moscow and Berlin.

  9. French law stipulates that acquisitions in certain sectors deemed crucial to France's national interests relating to public order, public security and national defence are subject to prior notification, screening and approval by the Economy and Finance Minister. Other sectors requiring approval include energy infrastructure, transport networks, public water supplies, electronic communication networks, public health protection and installations vital to national security. As a recent example of how France's government remains engaged in strategic sectors, in January 2017 the government sold 100 million shares in the energy utility ENGIE. The French government now owns 28.7% of the energy utility and controls 32.6% of the voting rights. The French state owns 83.1% of Electricité de France and has reserved the right to retain a golden share in any restructuring of Areva, the French nuclear and renewable energy company.

  10. National security and defence are the main reasons given for why the French government must review any investment in specified sectors that involves the acquired control of a French firm, surpasses a 33.33% ownership threshold or involves any part of such a firm that has established headquarters in France.

  11. The French government imposes the same conditions on domestic and foreign investors in cultural industries: all purveyors of movies and television programmes (that is, television broadcasters, telecoms operators, internet service providers and video services) must invest a percentage of their revenues to finance French film and television productions. They must also abide by broadcasting content quotas (minimum 40% French and 20% EU).

  12. Investments in France by other EU member states are governed by the provisions of the Treaty of Rome and by EU Law. France has Bilateral Investment Treaties (BITs) with 95 countries around the world. BITs between France and the following countries have been signed but are not in force: Angola, Belarus, Brazil, Colombia, Ghana, Guinea, Iraq, Mauritius and Zimbabwe. France previously had a BIT with Syria. A new BIT has been signed but has not yet entered into force.

  13. While there are no mandatory performance requirements established by law, the French government will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives. Incentives such as Prime d'Aménagement du Territoire pour l'Industrie et les Services (PAT) regional planning grants and related R&D subsidies are based on the number of jobs created, and authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors. PAT has been revised to benefit SMEs with the objective of promoting the development of businesses in priority regional zones, including EUR30 million in direct government subsidies.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, UNCTAD, French Treasury in the US, Le portail de l'Économie, des Finances, de l'Action et des Comptes Publics

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Free Zone of Le Verdon - Port de Bordeaux (Zone Franche du Verdon - Port de Bordeaux)

The Port of Bordeaux is the focal point for agricultural and industrial trade in southwest France. Its imports include chemical and petroleum products, fertilisers, and animal feed. Exports are dominated by grains, forest products, and oilseeds.
The Port of Bordeaux has trade relationships with 300 world ports. It boasts modern facilities to serve the busy cargo volume including six dedicated cargo-handling terminals. Free economic zone, designated areas in which companies are taxed very lightly or not at all in order to encourage economic activity. Free trade zone, an area in which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of customs authorities.
Investment incentivesThe government provides corporate investors incentives for capital investment in small companies. Under the plan, a French company or French subsidiary of a foreign company that invests in a minority shareholding (less than 20%) in a SME, either directly or indirectly (ie through a fund), would benefit from a five year, linear amortization of their investment. To qualify, SMEs must allocate at least 15% of their spending on research.
R&D incentivesR&D continues to be a major component that attracts foreign investment. International companies may join France’s 71 innovation clusters increasing access to both production inputs and technical benefits of geographical proximity. The Research Tax Credit (Crédit Impôt Recherche), innovative new company status (Jeune Enterprise Innovante), the National Investment Program, and La French Tech form part of this innovation policy. Additional programmes include La French Tech Ticket and the French Young Entrepreneurs Initiative. The Research Tax Credit (Crédit Impôt Recherche - CIR) offsets R&D expenditures undertaken by both domestic and foreign firms operating in France, regardless of size or business sector, covering both R&D spending and innovation expenses incurred by SMEs.

The French government provides tax credits to support up to 30% of a firm’s first EUR100 million in R&D costs, and an additional 5% in credits above this threshold. Additionally an ‘innovation tax credit’ is available that reduces the cost of innovation expenditure by 20% up to EUR400,000. The research tax credit and innovation schemes have been set through 2017. La French Tech initiative supports the growth of start-ups and digital companies by providing funding under the umbrella of the National Investment Program. La French Tech accelerates the growth of start-ups throughout France, accrediting 17 French Tech cities in 2017, and investing EUR200 million in acceleration programmes for digital companies. Additionally, La French Tech aids in the internationalisation of start-ups and aims to attract foreign investors, corporations, start-ups, and talent.

French Tech Hubs in foreign cities help French companies to expand to the global marketplace. La French Tech Ticket is a Paris-based programme that focuses on bringing international start-ups to France by offering benefits which include a residence permit, a grant of EUR25,000 and free mentoring in a Parisian start-up incubator.
Other incentives: The use of patented or patentable technology in manufacturingCompanies that are involved in the manufacturing of products in France containing patented or patentable technology, or companies that incorporate such technology into goods that are manufactured in France, benefit from a reduced effective rate of tax. In the case of a licensing arrangement between connected French companies, the licensor will benefit from a reduced 15% tax rate on royalty income, whereas the licensee company will benefit from a tax deduction of 33.33%. In order for a licensee company to benefit from full deductibility for royalties paid, the rules require that the licensee company ‘effectively exploits’ the rights available to it. No particular incentives are available to foreign investors in France.

However, the government offers a comprehensive programme of tax incentives and development subsidies to encourage investment in underdeveloped areas. Capital investment is encouraged through the declining-balance method of depreciation as well as through exceptional depreciation for certain capital expenditures.

Source: Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: Standard rate 20%
  • Corporate Income Tax: Up to 33.33%

Source: EC Europa

8.1 Important Updates to Taxation Information

25 million public and private employees will have been assessed for whether witholding taxes should be deducted from their January 2019 payslips with 14.5 million individuals now having income tax deducted at source.

8.2 Business Taxes

Type of TaxTax Rate and Base
Resident company: CIT RatesThe company tax rate for France is 33.33%.

- the normal corporate tax rate will be 28% for 2019 (on income up to EUR500,000) and 31% for income exceding EUR500,000;
- 28.0% in 2020
- 26.5% in 2021
- 25% by 2022
Resident company: Capital Gains TaxTaxed as CIT
Withholding TaxThe withholding tax came into force on January 1, 2019. With the introduction of the withholding tax, credits and tax reductions continue to be considered in the calculation of tax on income. These are calculated on the basis of the expenses indicated in the annual declaration of income and paid with a year of shift. In 2019, households receive the tax credits for the year 2018 and in 2020 those due for the year 2019. The calculation made for tax returns is always provided by the tax authorities.

Dividends: 30% if share is owned by a non-resdient
Interest: NA
Royalties: same as the standard CIT rate (33.33%)
Value Added Tax (VAT)
Companies pay two installments in July (55% of the VAT due in July of the previous year) and in December (40% of the VAT due in July of the previous year). Any balance must be paid at the time of the teletransmission of the annual declaration of regularisation.
Real Estate TaxSince January 1, 2018, the solidarity tax on wealth (ISF) has been removed and a new tax, the tax on real estate assets (IFI) was established. The IFI concerns persons holding a net property portfolio of more than EUR1.3 million. Tax rate range from 0.5% for portfolios worth between EUR800,000 and EUR1.3 million up to 1.5% on portfolios worth more than EUR10 million.
Territorial Economic Contribution3% (capped to a certain amount of the value added by the company; maximum rate)
Social Contribution TaxThe normal social rate is 20%. There are two cases of reduced rates: Rate reduced to 16% for payments linked to a collective retirement savings plan (PERCO) subject to management conditions. The rate reduced to 8% for payments related to the financing of the supplementary benefits or as part of Scop's special reserves.

Sources: Le Portail de l'Économie, des Finances, de l'Action et des Comptes Publics, Fitch Solutions
Date last reviewed: May 31, 2019

9. Foreign Worker Requirements

9.1 Foreign Worker Permits

Non-EU citizens require a work permit in order to work within the country; EU citizens do not require a work permit, but their employer must inform the job office about their employment. Citizens of the EEA (with EU member states, Iceland, Norway and Lichtenstein) and Switzerland do not require a visa to enter, reside and work in the country. No work permit is needed by foreigners from outside the EU if they have a permanent residence or family reunion permit, have been granted asylum, study in France or have a Blue Card.

Employers must first apply for a permit to hire foreign workers. A permit is granted once no suitable candidate can be found in France or in other EU member states. The vacant position must be reported to the local district labour office and cannot be changed at a later stage to fit the profile of a potential employee. The candidate must then apply for a work permit. The government issues the permit for a maximum of two years, which can be repeatedly prolonged (always for a maximum of two years) and may be renewed as many times as needed. The permit process takes an average of one month.

9.2 The Blue Card

The Blue Card is intended for any stay associated with highly qualified employment. A foreigner holding a Blue Card may reside in France and work in the job for which the Blue Card was issued, or change that job under the conditions defined. High qualification means a duly completed university education or higher professional education, which has lasted for at least three years. The Blue Card is issued with the term of validity three months longer than the term for which the employment contract has been concluded, but for a maximum period of two years. The Blue Card can be extended. One of the conditions for issuing the Blue Card is a wage criterion – the employment contract must stipulate a gross monthly or yearly wage that is at least a 1.5 times more than the gross average annual wage.

9.3 Short-term Work Visas

Short-term work visas can be granted by the embassy upon application for a maximum period of 90 days, which must be used within 180 days. The visa must be for the purpose of employment and the application must be submitted, beside general requirements, with a work permit, employment contract and proof of having secured accommodation.

9.4 Localisation Requirements

In order to foster better integration of legal migrants, the French government has doubled the amount of free French language lessons available to new arrivals to 400 hours and it has extended civic training lessons to teach French values and offer practical support on finding a job.

9.5 Visa/Travel Restrictions

France is one of 26 countries in the Schengen Area, which means that there is one common visa and no border controls. All non-EU/EEA/Swiss nationals who wish to stay in France for longer than 90 days will need to apply for a long-term French visa. Holders of a long-stay visa need to contact the French Immigration and Integration Office immediately upon arrival in France.

Sources: France Diplomatie, France-Visas, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Aa2 (Positive)
S&P GlobalAA (Stable)
Fitch Ratings
AA (Stable)18/01/2019

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness31/6328/6331/63

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index RankN/A18/20217/202
Short-Term Economic Risk Score
Long-Term Economic Risk Score74.674.873.2
Political Risk Index RankN/A29/20229/202
Short-Term Political Risk Score
Long-Term Political Risk Score80.680.680.6
Operational Risk Index RankN/A22/20123/201
Operational Risk Score70.572.372.5

Source: Fitch Solutions
Date last reviewed: May 31, 2019

10.4 Fitch Solutions Risk Summary

Over the 2017-2018 period, the French economy grew at its fastest pace since 2011, aided by a cyclical upswing in the eurozone and strong business confidence, the latter of which is being supported by President Emmanuel Macron's structural reform agenda. Macron's reform drive is aimed at addressing factors that have largely been responsible for France's economic underperformance over the past few years. Many of the reforms will take a number of years to be implemented and fully filter through to stronger growth, but the president will remain committed to fiscal consolidation over the longer-term.

The French economic model, historically characterised by high levels of public spending and progressive taxation, generous welfare provisions and persistent fiscal deficits, is likely to persist over 2019 amid stalled reform momentum.

Source: Fitch Solutions
Data last reviewed: June 3, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: France short term political risk index
Graph: France short term political risk index
Graph: France long term political risk index
Graph: France long term political risk index
Graph: France short term economic risk index
Graph: France short term economic risk index
Graph: France long term economic risk index
Graph: France long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: May 31, 2019

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
France Score72.560.
Developed States Average73.564.671.376.381.8
Developed States Position (out of 27)181817522
Developed States Average73.564.671.376.381.8
Developed States Position (out of 27)1818175
Global Average49.750.349.849.049.8
Global Position (out of 201)23

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: France vs global and regional averages
Graph: France vs global and regional averages
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk
Crime and Security Risk Index
New Zealand77.773.775.772.189.4
United Kingdom77.671.479.0
United States77.581.375.382.970.5
Isle of Man65.869.162.449.382.3
Regional Averages73.564.671.376.381.8
Emerging Markets Averages46.048.146.544.744.8
Global Markets Averages49.750.349.849.049.8

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: May 31, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with France

Graph: Major export commodities to France (2018)
Graph: Major export commodities to France (2018)
Graph: Major import commodities from France (2018)
Graph: Major import commodities from France (2018)

Note: Graph shows the main Hong Kong exports to/imports from France (by consignment)
Date last reviewed: May 31, 2019

Graph: Merchandise exports to France
Graph: Merchandise exports to France
Graph: Merchandise imports from France
Graph: Merchandise imports from France

Note: Graph shows Hong Kong exports to/imports from France (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: May 31, 2019

Growth rate (%)
Number of French residents visiting Hong Kong204,130
Number of French residing in Hong Kong2,2281.5

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs - Population Division

Growth rate (%)
Number of European residents visiting Hong Kong1,929,824
Number of developed state citizens residing in Hong Kong65,6801.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs - Population Division, Fitch Solutions
Date last reviewed: May 31, 2019

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of French Companies in Hong Kong373
- Regional headquarters92
- Regional offices11917.8
- Local offices162-0.1

Source: Hong Kong Census and Statistics Department

11.3 Treaties and agreements between Hong Kong and France

  • Double Taxation Agreement (effective date: December 1, 2011)
  • Investment Promotion and Protection Agreement (effective date: May 30, 1997)
  • BIT (effective date: May 30, 1997)

Sources: Hong Kong Inland Revenue Department, Hong Kong Trade and Industry Department, UNCTAD

11.4 Chamber of Commerce or Related Organisations

The French Chamber of Commerce and Industry in Hong Kong
Address: 21/F, On Hing Building, 1 On Hing Terrace, Central, Hong Kong
Tel: (852) 2294 7721

Source: French Chamber of Commerce and Industry in Hong Kong

Association France-Hong Kong
Email: marc.allard@hktdc.org
Tel: (33) 1 4742 4150
Website: www.association-france-hongkong.org
Please click to view more information.

Source: Federation of Hong Kong Business Associations Worldwide

Consulate General of France in Hong Kong and Macau
Address: 25/F & 26/F, Tower II, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong
Email: informations@consulfrance-hongkong.org
Tel: (852) 3752 9900
Fax: (852) 3752 9901

Source: Consulate General of France in Hong Kong and Macau

11.5 Visa Requirements for Hong Kong Residents

Hong Kong residents do not need a visa to the Schengen area for a stay of up to 90 days in any 180-day period.

Source: Hong Kong Immigration Department
Date last reviewed: May 31, 2019

Content provided by Picture: Fitch Solutions – BMI Research
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