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Doing Business in France Ⅱ

Gide Loyrette Nouel From Lex Mundi | June 01,2007

Investment in France is free. However, investments in certain economic sectors require specific authorizations from the Ministry of Economy (i.e. activities relating to public authority, public health and safety, and the production and sale of weaponry). The French Agency for International Investment (Agence Française pour les Investissements Internationaux – AFII) integrates all offices responsible for promoting investment in France. The agency combines the  overseas offices of the Invest in France Agencies (IFA), with the Invest in France Network (IFN) association.

Foreign, as well as French investors, may benefit from incentive programs, the purpose of which is to encourage investment which are beneficial to the French  economy by creating new jobs, increasing the sale of French goods and promoting ailing regions. The program will be determined by the characteristics of the project at stake (productive investment, new position openings, innovation, training, etc.), its location (priority development areas, etc.), and the type of Company that runs it (large corporation, small or medium-size Company).

Incentive programs are organized both on the European level and by the State and the different local authorities. Subsidies granted by the State or local authorities must comply with European regulations in terms of maximum intensity, eligible expenditures, etc. Most of the time, an investor must file an application with the competent authority, giving various information relating to himself, the contemplated investment, the modalities of implementation and financing of the project and, if needed, the beneficiary of the investment. The application process may require several months.

Usually, incentives take the form of either:

- subsidies, such as cash grants for regional development (primes d’aménagement du territoire), regional employment subsidies (primes régionales à l’emploi) and regional subsidies for the creation of businesses (primes régionales à la création d’entreprises);

- loans and financing guarantees, such as subsidized long term loans granted by lending institutions supplementing the action of the Treasury (such as the Crédit  d’Equipement des Petites et Moyennes Entreprises), equipment credit for small and medium-size enterprises, or other banks which offer stabilized rate loans thanks to the Natexis Banque;

- special tax treatment As a rule, any kind of incentive is negotiated on a case by case basis with the different governmental authorities.

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