When a company wants to set up shop abroad, creating a liaison office can be a good idea.
It is therefore an observation post that acts as a liaison between customers and the parent company in another country. This liaison office will make it possible to make contact with various local contacts to pass on various information to them.
This office may not under any circumstances be the subject of commercial services and does not have a specific legal structure. Thus, the assets of the liaison office are linked to those of the parent company, as is its corporate and commercial name, as well as
its capital.
In the case of France, can a liaison office benefit from a VAT exemption? Let's take a look together!
The special thing about a liaison office is that it doesn't do any commercial activities. So, it doesn't make any sales and works with its parent company's account. That means it's also not subject to VAT.
Additionally, the parent company can claim a partial or full VAT refund for expenses related to financing and/or setting up the liaison office.
However, they are taxable on housing tax for their premises, and will also be liable for social security contributions related to their employees' salaries.
Much more flexible than a branch, a liaison office is a relatively simple structure from a legal point of view. It is the absence of commercial activities that allows this flexibility. And in the event of commercial services, however minimal, the
liaison office will be directly reclassified as a branch. This switch will subject it to the same financial, tax, and legal obligations.
All employees of the liaison office are subject to the general employee scheme, except for any expats who will have a separate scheme.
The social obligations are the same as those for French companies
Depending on the country of establishment, the rather simplified creation procedures may vary.
It is therefore recommended to inquire about the standards in force in the host country.
Here are the formalities to consider for a liaison office in France:
- Registration of the liaison office
This registration takes place with the RCS (Trade and Companies Register), but is not compulsory since the liaison office does not carry out commercial activities.
It may still be necessary to register if you plan to open a bank account. This is because the bank will ask for a Kbis extract, which you can only get by registering.
To do this, a simple declaration proving the existence of the liaison office must be made to the CFE (Centre de Formalités des Entreprises - Business Formalities Centre) of the relevant chamber of commerce and industry.
Two scenarios are possible: the presence of an employee in a liaison office registered with the RCS, or not registered.
If employees work in a liaison office that isn't registered with the RCS (Trade and Companies Register), the employer is responsible for completing all the declaration formalities and paying social security contributions. These procedures must be carried out with a single organization. The employer can delegate this responsibility to a legal representative residing in France.
However, if employees work in a liaison office registered with the RCS, while also providing commercial services, the formalities will be carried out with the URSSAF where the office is located.
Furthermore, if the liaison office has neither registration nor employees, it will be required to register with the business tax department.
To officially set up shop, a liaison office can totally use a domiciliation company to get the address of its registered office, while also taking advantage of some significant benefits.
Renting commercial premises is, of course, a possible solution, although a much more expensive one.
A liaison office is a great way for a foreign company to set up shop in France. To get well informed before creating a liaison office, we suggest you check out specific websites like Business France, Sources d’Europe (an information center about European formalities), or the websites of embassies and consulates.
Reading these will help you build on what you've learned in this article, making sure you set up your liaison office by the book.
Written by our expert Maeva Girardot
January 4, 2018
