When expanding to France, there are certain things you need to put into consideration if you want your business to succeed. It goes beyond having the capital and the zeal to do business; you must know this new economic, cultural and social context like the back of your hand.
France is one of the highest-GDP nations in the world, and has one of the highest HDI (Human Development Index) in the world. It’s a leading, innovative and developed country with a highly-educated population and one of the most vibrating startup scenes in Europe.
France is the third largest European economy, falling behind the United Kingdom and Germany. And, with the election of President Emmanuel Macron in 2017, the French economy has experienced what The Wall Street Journal has labeled as a “pro-business overhaul”, redefining the role of the State in the economy, and replacing the role of passive stakeholder with that of an active promoter of the private sector, with initiatives such as innovation funds.
[Aren’t you 100% on board with France yet? Discover 7 Reasons Why You Should Be Doing Business in France]
In this post, we’ll go over some key points you’ll need to have in mind when planning to expand your business to France:
Setting up a Business
When expanding your business to France, one of the very first things to decide is what will be the “shape” of the company’s presence in this new country, will it be through a branch, a subsidiary, or a liaison office?
A liaison office is a representative office that has no separate legal entity from the company it represents, and cannot engage in direct commercial activity. It can conduce partnerships, advertisement and other operations, but business has to be conducted with the company, not with the liaison.
As legal entities, branch offices aren’t separated from their parent company. Subsidiaries, on the other hand, are separate legal entities with their assets separated from those of parent companies and with the capacity to receive management fees and commissions from the parent company.
Smaller businesses might do well with just the assistance of sales agents. Sales agents are, to put it in terms you’re probably familiar with, independent contractors that act as a connection between a company (or set of companies) and the French market.
Human Resources
- Labor laws that allow businesses the versatility they need to thrive, a sensitive approach to labor.
- Highly-trained human resources: 44% of 25 to 34-year-old have a tertiary education. 30.5% in Germany and 25.6% in Italy.(OECD, Education at a Glance, 2017)
- Leader in international academics, with three out of the sixth most prestigious institutions where to conduct Master studies, being located in France.
- [I covered the issue of employment in our “7 reasons…” post]
Tax Regime
The French tax regime is quite complex. Getting specialized financial consultancy is key.
In very basic terms, there are three main types of taxes you need to know about:
The CIT, the PIT and the VAT.
The VAT (Value-added tax) is applicable all over the European Union, as per the 2006-112-EC directive. The VAT is paid by the consumer and added to the price of taxable goods. According to a PwC report,
“France’s standard VAT rate on sales of goods and services is 19.6% (increased to 21.2% starting from 1 October 2012). Reduced rates are applicable on food and certain agricultural products (5.5%), books, public transport, newspaper and magazines (7%).”
The French Corporate Income Tax is not applied to the income of their permanent establishments in foreign countries, but the income they generate within the French territory. Dividends from parent companies are subjected to the CIT, ad well as capital gain. As of January 2010, the CIT tax rate starts at 28%, with up to a rate of >31% for multi million-euro companies.
The PIT is a personal income tax. It’s progressive, with rates from 0% to 45%, plus a 3% surtax on the portion of the income that exceeds 250 thousand euros for a single person (or 500 thousand euros for a married couple), and a 4% surtax for income exceeding 500 thousand euros for a single person, (or 1 million euros for a married couple).
Tax incentives are available across the board, for companies of all sizes that donate to local charitable organizations, invest in renewable energies and sustainable methods of production, or invest in technology and research. According to BusinessFrance, “the French tax system actively encourages [research and development] through France’s research tax credit. The number of private-sector researchers rose 30% between 2007 and 2014, as 37,000 high value-added jobs were created.”
You can learn more about tax deductions here.
Marketing & Communications
If you could only take away one piece of advice from this article, make it this one: if you want to expand to France, do it digitally.
With a 90% rate of internet penetration, customers are used to making their purchases online. In fact, there are over 120 thousand active e-shops in France to date. And this doesn’t mean that there’s not room for more. According to Statista, the Revenue in the eCommerce sector is expected to experience 8.0% of annual growth in the next four years.
But though the market is promising, the challenges are plentiful: Do you have what it takes to expand your online selling experience to this market? The French consumer is known to be language-sensitive. This means that to be appealing, you need to be showcasing a grammatically sound communication strategy. This is where the help of a localization company becomes indispensable. You want to adapt your platform’s language, format, prices, and even design.
And after you adapt your product, your promotion needs to be localized, as well. Because even if your website is portraying its message in impeccable French, your customers are not going to shop in it if they cannot find it. So how do you make them see it?
- In the beginning, most of your website’s traffic will come through paid advertising. The good thing about digital advertising is that it’s highly targeted, and you’re able to spend as much or as little as you want in it. So properly translating your advertising copy, choosing the right keywords through international market research, and adapting your display advertising’s design is imperative to become the number one position on your French customer’s search engine results.
- Independently of your paid advertising strategy, you should always invest your time and efforts in organic rankings. This means that your website should be properly optimized to appear on search engines, without having to spend money on them. What does global SEO require? Thorough market research, keyword analysis, on-page optimization, multilingual linkbuilding, and a solid content strategy to make sure search engines position you as high as possible for your target keywords.
- Don’t underestimate the power of social media. According to a 2018 study, 94% of French people report using social media, among the 18-24 age group. The number drops to 82% among the 25-39 age gap. This means that France is one of the markets with the highest social media penetration, so a solid multilingual strategy for these channels is imperative.
We understand how daunting this might sound.
You might be thinking: I already have to work on logistics, international business meetings, taxes, partnerships, the legal aspects of the French market… and now I have to think about multilingual marketing too?
Luckily, there’s an easy and cost-effective way of outsourcing all your international digital marketing efforts to experts in the field. At Day Translations, we take care of everything: the market research, the global SEO, the multilingual social media, the localized web design, and the global paid advertising strategy and execution.
If you want to test out the new market for yourself, however, a couple of last tips:
- Whether in meetings, on sales calls, or in copy, avoid using an informal tone. Use vous, not tu. Feel free to make an exception if your product is aimed at teenagers.
- For your social media and advertising efforts: Be patient, go for a data-based approach and don’t engage in aggressive selling tactics.
More Resources
- “Business France is a public institution, under the auspices of the Ministry of the Economy and Finance, the Ministry for Europe and Foreign Affairs and the General Commission for Territorial Equality. It is present in France and 70 countries around the world to promote the attractiveness of France, its businesses and its territories.”
- Statista has some great data when it comes to French internet and social media use.
- If you’re based in the United States, Export.gov might be a great resource
- If you’re in need of communication, marketing and linguistic assistance, don’t hesitate to contact us. Our representatives are available 24/7.