The Audit
With very few exceptions businesses registered on French soil must present an annual audited statement to the local commercial court.
The requirements are:
- A detailed balance sheet. This lists fixed assets, current assets and pre-paid expenses. Loss provision, accounts due, accrued expenses and deferred credits appear on the debit side.
- A statement of income. This details expenses and revenues that come from trading and financial transactions.
- An auditor’s statement. This includes familiar phrases about ‘the true and fair view’ of the business’s financial situation.
All registered companies are required by law to appoint an approved statutory auditor. He has to be independent of the client company and may not be involved in preparing the financial statements on which he reports. Auditors are normally appointed for a six-year term.
The following organisations can offer help with detailed enquiries:
Société Accredité de Representation Francais
2 Rue des Petits Peres
75002 Paris
Initial Tax Liability
Initial tax liability depends on whether you are starting a new business or taking over an existing one.
Starting a new business normally involves the purchase of a
fonds de commerce. The transfer duties apply to all assets transferred apart from goods subject to VAT (TVA).
The existing scale of charges is:
Transfer Duty (Droits D’enregistrement)
In the case of a business takeover there is a one-off transfer duty charge of 4.8%. If, however, the new company is formed as a Society Anonyme (one form of limited company) there is no duty payable – as long as the legal transfer took place outside France.
Capital gains tax is not applied to business purchases.
Business Licence Tax (Taxe Professionnelle)
In many ways this is similar to the business rate system formerly applied in the UK.
It is based on an agreed rental value of fixed assets. This includes a notional market value of a rented property. A distinctly French feature of the tax is that the fixed assets figure is taken to include 18% of salaries paid in the tax year before last.
The tax is abated in the first year, then generally on a sliding scale for up to five years.
The amount levied can vary enormously in percentge terms according to local incentives given to attract business. To complicate matters further taxe professionelle is a political hot potato. The policy, and therefore the amount charged, can change considerably following each round of local government elections.
Recently the lowest rate of taxe professionnelle levied in France was 11%. The highest was 26% and the median national average was 17.14%.
A typical small business bill may work out like this: