FRANCE

Source: IMF, International Financial Statistics, June 2021.

• The French central bank is the Banque de France (www.banque-france.fr).
• The Banque de France is a member of the European System of Central Banks (ESCB) and operates certain activities, such as issuing currency, under the authority of the European Central Bank (ECB – www.ecb.europa.eu).

Bank Supervision

• In November 2014, the ECB, via the Single Supervisory Mechanism (SSM), assumed responsibility for supervising the financial stability of banks operating within the euro zone. However, while the ECB has final supervisory authority over all banks operating within the euro zone, it will only directly supervise those banks classified as ‘significant’ under the terms of the SSM (115 significant banking groups have been recognized to date). ‘Less significant’ banks will continue to be supervised by the national supervisory authority, i.e. the ACPR.
• French banks and other credit institutions are also supervised by the Autorité de Contrôle Prudentiel et de Résolution (ACPR – acpr.banque-france.fr).
• The Ministry of Economy and Finance (www.economie.gouv.fr) is responsible for the regulatory regime for banks and insurance companies.
• The Comité Consultatif du Secteur Financier (CCSF) supervises relationships between credit institutions and users (CSSF – www.ccsfin.fr).
• New regulations must first be scrutinised by the Comité Consultatif de la Législation et de la Réglementation Financières (CCLRF – www.tresor.economie.gouv.fr/CCLRF).

• Lifting fees are rarely applied on payments between resident and non-resident bank accounts.
• Item-based charges and/or subscription fees are applied on payments between resident and non-resident bank accounts.

• DISCLOSED / UNDISCLOSED 

Undisclosed programmes are possible subject to a satisfactory audit (based on factorability and performance of ledger management) and a good counterpart (rating 7 and lower on BNPP scale). 

• RECOURSE / NON-RECOURSE 

Mainly non-recourse (95%) of which 40% based on a pledge of a credit insurance policy (co-insurance). 

• STRUCTURED PRODUCTS 

Reverse factoring and syndications are possible. No maturity factoring. Tax credit financing: Tax credit for Research (CIR), including dedicated products for SMEs. and Ehpad (retirement homes). 

• EXPORT / IMPORT 

Direct export is used for Spain, Italy, Germany, Switzerland, Belgium, UK, Luxembourg, Portugal and the Netherlands – the two-factor system is used for all the other countries. 

• CONCENTRATION REQUIREMENTS 

No concentration limits are applied. Concentration is a factorability issue but can be managed. 

• HOLD BACK RESERVE (HBR) 

Retention operated on outstanding defined as a percentage of the total ledger may be applicable. The HBR is included in the FIU (discounting charges base calculation). 

• MAX. PREPAYMENT % 

Usually 90% but can be increased up to 95%. 

• CREDIT COVER % 

Maximum credit cover is 100 %, VAT included. 

• USUAL FUNDING PERIOD 

In general, 45 to 60 days after due date. 

• OFF-BALANCE SHEET SOLUTIONS 

Off-balance sheet solutions are marketed to large corporates. 

• INVOICE TRANSFER 

Transfer of invoices is automated (over 99%) through a website or a bank protocol. If needed, a specific solution is provided to transform data from the client’s IT system according to the BNP Paribas Factor template. 

• ON-LINE APPLICATIONS 

The client can consult whatever kind of portfolio information through Co-Pilot (which offers different axis of analysis of the portfolio) and Gestion des opérations (transfer, withdrawal, debtor limit, dunning actions,etc.) plugged to Niu Viu (real time). Mobile App, MyView, is also available both for consultation and for basic transactions. A full digital onboarding journey is available for 2 products (Reverse and Impulsion) 

• DELAYED DUNNING 

When a management mandate is given to the client, the usual period before the factor takes over the collection is 60 to 90 days. 

• DATA FACTORING 

Both Ledger assignment (“cession de balance”) and Data Factoring are possible. 

• CURRENCIES OF FINANCE 

EUR, USD, GBP, CHF, SEK, PLN, DKK, CZK, CAD, JPY, NOK, SGD, AUD, RON and CNY. The “liquidity premium” differs from one currency to another. 

• LOCAL RETAIL OFFERS “IMPULSION” 

A range of products which evolve with the needs of professional clients and SME’s, with a turnover up to EUR 1.5 million.

• Credit transfers are used by companies to pay salaries and suppliers, to make tax payments via the transfert de données fiscales et comptables procedure) and for treasury payments.
• SEPA credit transfers can be settled via CORE, STEP2 or via correspondent banking networks. STET has plans to migrate SEPA credit transfers (SCTs) from CORE to SEPA.EU. Unlike the current system used by CORE, in SEPA.EU the cycle concept will be replaced by continuous settlement with a prefunding model.
• Approximately 268 banks in France participate in the SEPA credit transfer scheme.
• High-value and urgent domestic and cross-border (within the euro zone) credit transfers can be settled in real time via TARGET2-Banque de France.
• High-value and urgent cross-border credit transfers can also be settled with end-of-day value via the Euro Banking Association's EURO1 system. Fourteen banks in France participate directly in EURO1.
• Cross-border transfers can be made via SWIFT and settled through correspondent banks abroad.
• The European Payment Council’s SCT Inst scheme (a pan-European 24/7 instant payment scheme for SEPA credit transfers) enables the transfer of funds (the maximum threshold value is EUR 100,000) to another account in less than ten seconds. There are 126 participants of the SCT Inst scheme in France.
• The SEPA.EU platform hosts STET’s Instant Payments CSM, which launched alongside the launch of the EPC’s SCT Inst scheme.
• EBA Clearing and Italy’s SIA Group have developed and implemented a pan-European platform for instant EUR payments called RT1. It is fully compliant with the SCT Insts scheme and is in line with the ISO 20022 global messaging standards for instant payments.
• TIPS is a pan-European service for the settlement of instant payments in central bank money. The service enables payment service providers and ACHs with access to TARGET2 to offer fund transfers 24/7, 365 days a year. TIPS is aligned with SCT Insts. It is primarily focused on EUR payments but is technically capable of settling payments denominated in other currencies.

• Direct debits are used for regular payments, such as utility bills.
• SEPA direct debits can be settled on a same-day basis via CORE or STEP2.

• The cheque as a cashless payment instrument is in decline. In 2019, cheque volume and value fell 9.2% and 8.6% respectively to 1,586 million, with a value of EUR 814.52 billion.
• Cheques are truncated into electronic items before being settled on a next-day basis via CORE.
• A small number of cheques cannot be truncated. These, and cheques with a value greater than EUR 5,000, are physically exchanged within four days of presentation.
• Cheques are valid for just six months.
• Negotiable, transferable bills of exchange are also available in France. These are truncated into electronic items before being settled on a five-day cycle via CORE. There are two forms which remain out of the scope of SEPA:
  • The lettre de change relevé (LCR): an electronic trade bill, which is usually discounted to finance trade.
  • The billet à ordre (BOR): a promissory note.

• Card payments, particularly debit cards, are increasingly popular, especially for retail transactions.
• In 2019, debit card payments increased 9.1% and 6.4% respectively in volume and value terms, to 12,561 million, with a value of EUR 521.7 billion. Credit card volume and value increased 15.6% and 10% respectively to 2,047 million transactions, with a value of EUR 87 billion.
• Groupe de Cartes Bancaires (GCB) is France’s national payment card operator. It has 120 member institutions.
• There were 69.1 million debit cards and 15.4 million credit cards in circulation at the end of 2019.
• Most cards issued in France are co-branded with GCB and either MasterCard or Visa.
• American Express and Diners Club credit cards are also available.
• There are also two domestic credit card issuers: Cofinoga and Cetelem.
• Domestic card payments are processed by CORE.
• Contactless card technology is available in France.
• All cards issued are SEPA-compliant with EMV chips.

• There were 52,969 ATMs in France at the end of 2019.
• There were 2.09 million POS terminals in France at the end of 2019.
• All payments are settled via CORE.
• All ATMs and POS terminals are EMV-compliant.

• Electronic wallet schemes are available via reloadable pre-paid cards.
• Mobile payment schemes such as YouPass, Lydia, Lyf Pay, Samsung Pay and Apple Pay are available and increasingly popular.
• In 2020 Societe Generale partnered with Apple Pay to launch an instant digital card. This ‘virtual’ payment card can be issued on a permanent or temporary basis.
• E-money payments are settled via CORE.

• BNP Paribas is a key trade finance bank in France with 18 trade centres incorporating 50 senior trade managers and trade advisors to address the full range of clients' trade finance needs. A centralised competence centre supports the trade centre network providing a high level of expertise, innovative solutions and advisory services. In addition, the trade development team supports clients' international expansion ambitions by providing bespoke solutions such as tailor-made market studies, prospecting missions and research into potential partners, amongst others. Corporates benefit from high quality electronic trade finance solutions and ISO-certified documentary operations platforms.

• The EU has trade agreements in place with over 30 countries.
• The EU is currently in free trade negotiations with a number of countries, including the Association of Southeast Asian Nations (ASEAN), Australia, Indonesia, Mercosur (the Southern Common Market), Uruguay, and the USA. The EU-UK Trade and Cooperation Agreement entered into force on 1 May 2021.

Source: IMF, International Financial Statistics, June 2021.

• Import licences are required for specific products and for items from certain countries.
• Import licences are required for items with quantitative restrictions from outside the EU and for items from within the EU that are deemed to be of national interest or of a strategic nature.
• Various imports from outside the EU require administrative visas from the relevant ministry or the customs authorities. These visas are required for imports from outside the European Coal and Steel Community (ECSC) which are listed in the ECSC Treaty.

• Tariffs are set according to the EU customs code for all imports from outside the EU, with higher tariffs for agricultural imports.
• There are currently two free zones (the Free Zone of Verdon – Port de Bordeaux and the Free Zone of French Guyana) operating in France.

• None 

• None 

• France prohibits the import of certain items in line with EU regulations and UN Security Council resolutions.
• Specific imports are prohibited in order to protect fauna and flora, for health and safety or moral reasons, and/or for national security.

• Licences are not required for most exports. In some instances, prohibited items can be exported under a special licence.

• None

• None 

• France has implemented the EU directive on export credit insurance.
• Compagnie Française d’Assurance pour le Commerce Extérieur (Coface), France’s national export credit agency, provides state-supported export credit insurance in conjunction with the Ministry of Economy and Finance.
• Export credit insurance is also available from private insurance companies.
• Coface finances exports from its own account and on the state’s behalf. Export financing is also available privately from commercial banks.

• France prohibits the export of certain items in line with EU regulations and UN Security Council resolutions.

• France has been a member of the eurozone since 1 January 1999. 
• Restrictions apply to investors from non-EU states establishing branches of an insurance company or agricultural business, or acquiring a vineyard.
• Investors from non-EU states cannot acquire control of French airlines or French flagged ships.

• None

• None

• None

• Rulings are becoming a regular practice. A special ruling procedure exists to confirm whether a foreign entity has a PE in France.

• Capital gains from the disposal of movable assets (e.g. securities, bonds) are subject to a 30% tax rate (i.e. 12.8% income tax and 17.2% social contribution). Capital gains from the disposal of immovable property are taxed a special flat rate of 19%, plus special social security surcharges..

• Withholding tax applies to dividends, royalties and payments to non-resident companies for services rendered in France.
• Dividends paid  by a French corporation to a non-resident shareholder are subject to a 26.5% withholding tax (reduced from 28% in 2020), unless a tax treaty provides for a lower rate or the EU parent-subsidiary directive applies. Under the directive, dividends paid by a French corporation to a qualifying EU parent company are exempt from withholding tax. The 26.5% rate should be reduced to 25% in 2022, in line with the reduction in the standard corporate tax rate.
• Royalties paid to a non-resident entity are subject to the corporate income standard tax rate of 26.5%, regardless of the entity’s annual income. The rate may be reduced or eliminated under a tax treaty or where the royalties qualify for the benefit of the EU interest and royalties directive. The rate should be reduced to 25% in 2022, in line with the reduction in the standard corporate tax rate.
• The branch remittance tax should be reduced to 25% in 2022, in line with the reduction in the standard corporate tax rate.

• France has exchange of information relationships with 144 jurisdictions through 115 double tax treaties and 29 TIEAs (www.eoi-tax.org,).
• France, as part of the OECD/G20 Base Erosion and Profit Shift (BEPS) initiative, has signed a multilateral co-operation agreement with 30 other countries (“the MCAA”). Under this multilateral agreement, information is exchanged between tax administrations, giving them a single, global picture on some key indicators of economic activity within multinational enterprises (MNE).
• With Country-by-Country reporting tax administrations of jurisdictions where a company operates have aggregate information annually relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It also covers information about which entities do business in a particular jurisdiction and the business activities each entity engages in. The information is collected by the country of residence of the MNE group, and then exchanged through exchange of information supported by such agreements as the MCAA.

• Interest expense deduction limitation rules apply in line with the EU Anti-Tax Avoidance Directive (ATAD 1). Net borrowing costs (“exceeding borrowing costs”), such as interest expense, guarantee costs or foreign exchange losses on borrowings, are deductible only up to the greater of 30% of the tax EBITDA (i.e. earnings before, interest, tax, depreciation and amortisation, restated with tax exempt income) or EUR 3 million.
• For companies that are considered to be thinly capitalised, (i.e. where the related party debt-to-equity ratio exceeds 1:5), the portion of deductible financial expenses will be determined based on the application of two sets of rules:
  • External debt: The standard 30% EBITDA test will apply to the portion of interest deemed to derive from external debt, calculated as total interest multiplied by the amounts put at the disposal of the company by unrelated parties increased by 1.5 x equity/total amounts put at the disposal of the company.
  • Related party debt: Interest on related party debt will be subject to stricter rules, with a 10% of tax EBITDA limitation applying to interest expense deemed to derive from related party debt, calculated as total interest multiplied by the amounts out at the disposal of the company by related parties/total amounts put at the disposal of the company.
• Financial expenses that are deemed to be non-deductible based on the external debt rule may be carried forward indefinitely to be deducted in a subsequent financial year. However, only one-third of financial expenses that are deemed to be non-deductible based on the related party debt basis rule may be carried forward.
• A specific safeguard clause applies to consolidated groups for financial accounting purposes, whereby the reinforced mechanism provided for in the case of thin capitalisation will not apply if the company can demonstrate that the debt ration of the consolidated group to which it belongs, is higher than or equal to its own debt ratio. In that case, the company will continue to benefit from the application of the standard thresholds (i.e. 30% of the tax EBITDA or EUR 3 million), as well as from the general safeguard clause allowing an additional deduction (if certain conditions are fulfilled)..

• French entities controlled by entities established outside France are taxable in France on profits transferred, directly or indirectly, to the entity located abroad through an increase or decrease in the purchase or sales prices or by any other means. Companies exceeding certain thresholds must maintain contemporaneous transfer pricing documentation.
• Rates on interest paid by French corporate taxpayers to related parties are deemed to be arm’s length if they do not exceed an index corresponding to the average annual floating rate applied by banks to two-year loans granted to businesses. If the interest rate exceeds that index, the taxpayer will have to demonstrate that it would have paid a similar or higher rate to a bank in a comparable situation.

• Stamp duties apply, but they are nominal.
• No stamp duty is levied on loan agreements.

• A French company entering into a cash pooling agreement is not subject to thin capitalisation rules in relation to the deduction of interest incurred to finance the cash pool. Other participants to the cash pooling arrangements are subject to thin capitalisation rules on interest remitted to the French company holding the cash pool header acount.

• A financial transaction tax at 0.3% applies to transactions involving shares of publicly traded companies established in France, the capital of which exceeds EUR 1 billion. The tax is calculated based on the value of the shares.

All tax information supplied by Deloitte Touche Tohmatsu and Deloitte Highlight 2021 (www.deloitte.com).