Liaison office: how to obtain VAT exemption?

When a company wants to expand abroad, setting up a liaison office may be the right thing to do.

This is an observation post that acts as a relay between customers and the parent company in another country. This liaison office will enable contact to be made with various local contacts to pass on various types of information.

Under no circumstances may this office be used for commercial purposes, and it has no specific legal structure. Accordingly, the assets of the liaison office are linked to those of the parent company, as are its corporate and commercial name, and its legal status.

its capital.

In the case of France, can the liaison office benefit from VAT exemption? Let's find out!

VAT exemption: special tax considerations

The specificity of the liaison office is that it has no commercial activities, so it makes no sales and works on behalf of its parent company. It is therefore not subject to VAT.

In addition, the parent company can claim a partial or total refund of the VAT that has been charged on the financing and/or installation of the liaison office.

However, it is liable for council tax on its premises, and will also have to pay social security contributions on the salaries of its employees.

Obligations

Much more flexible than a branch office, the liaison office is a relatively simple structure from a legal point of view. It is the absence of commercial activities that makes this flexibility possible. And in the case of commercial services, however minimal, the

liaison office will be directly reclassified as a branch. As a result, it will be subject to the same financial, tax and legal obligations.

All liaison office employees are covered by the general salaried workers' scheme, with the exception of expatriates, who are covered by a separate scheme.

Social obligations are identical to those of French companies

How do you create it?

Depending on the country in which you are based, the simpler procedures for setting up a new business may vary

It is therefore advisable to find out about the standards in force in the country of anchorage.

Here are the formalities to consider for a liaison office in France:

• Liaison office registration

Registration is with the RCS (Registre du Commerce et des Sociétés), but is not compulsory as the liaison office does not carry out commercial activities.

It may still be necessary to register your company if you intend to open a bank account. The bank will ask for a Kbis extract, which is the only way to receive this administrative document.

To do this, a simple declaration proving the existence of the liaison office must be filed with the CFE (Centre de Formalités des Entreprises) of the relevant chamber of commerce and industry.

• Hiring formalities

There are two possible scenarios: the presence of an employee in a liaison office that is registered with the RCS, or one that is not.

If employees work in a liaison office that is not registered with the RCS, it is the employer who will be responsible for all reporting formalities, as well as payment of social security contributions. These procedures must be carried out by a single body. The employer can delegate this responsibility to a legal representative residing in France.

If, on the other hand, employees work in a liaison office registered with the RCS, while providing commercial services, the formalities will be carried out at the URSSAF where the office is located.

In addition, if the liaison office has no registration or employees, it will be obliged to register with the business tax department.

In order to set up officially, it is quite possible for the liaison office to use a domiciliation company to obtain theaddress of its head office, while enjoying considerable advantages.

Leasing commercial premises is obviously a feasible solution, albeit a much more expensive one.

Conclusion

The liaison office is therefore an interesting solution for setting up a foreign company in France. To find out all you need to know before setting up a liaison office, we suggest you consult specific websites, such as Business France, Sources d'Europe (an information center on European formalities), or the websites of embassies and consulates.

These readings will add to the knowledge acquired during the reading of this article, to be sure to create your liaison office according to the rules of the art.