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3.1. Corporate Tax Residence

The French tax code does not define residence for companies (although it refers to companies with their seat in France or abroad on various occasions), because the tax liability under the applicable territorial system is based on whether the business operations are carried within or outside France. Generally, however, France follows the real seat doctrine, under which the nationality of the company is important.

The nationality of a company allows the determination of:

  • the law applicable to the company, and, therefore, the rules governing its formation, operation and dissolution;  
  • the ability of a company to benefit from the rights bestowed on the nationals of a given State; and
  • the exercise of the diplomatic protection offered by a given State.

  

There is no general and uniform criterion for determining the nationality of a company. On the contrary, the nationality criterion changes depending on whether it is meant to determine the applicable law or the enjoyment of rights.

More specifically, under French law, the criterion used for determining the law applicable to a company is that of the localization of its head office. Companies whose head office is located on the French territory are, therefore, submitted to French law (Art. L. 210-3 al. 1 of the French Commercial Code, and Art. 1837 al. 1 of the French Civil Code). The head office must be genuine and real. If it is fictitious, third parties, particularly the tax authorities, might then choose between the statutory office and the real seat (Art. L. 210-3 al. 2 of the French Commercial Code).  

Indeed, French courts will look at the place of effective management and control (POEM) to determine the corporate residence status. In this respect, the registered office (as stated in the articles of association) is only relevant insofar as it coincides with the POEM. If it does not, only the POEM is taken into account. There is a presumption that the localization of the real seat is the same as that of the registered office, but this presumption is rebuttable. Therefore, a company with a French registered office will only be regarded as a French company if its POEM is effectively located in France. Otherwise, the company will lose its French corporate residence status.

Moving the POEM from France to another country does not trigger the automatic liquidation of the company.

Provided that the decision is validly taken, a French company can also transfer its corporate seat abroad without being liquidated. It is, however, important that under the law of the foreign jurisdiction to which the transfer is made, the continuation of the legal personality of the transferring company be authorized. If this is not the case, the company will need to be incorporated once again. This also means that, from a French perspective, the company is deemed to have been liquidated.