Domiciliation in a free zone: everything you need to know
If there were only one geographical area in France in which to domicile your business or company, it would be the free zone. If you'd like to know everything there is to know about free zone domiciliation, read this comprehensive guide we've put together for you.
The idea of creating free trade zones was launched in France in the early 1980s. It wasn't until the law of November 14, 1996 that the idea was put into practice for the benefit of beneficiaries, notably entrepreneurs. Under the terms of this law, a zone franche is a franchised part of a city's territory: it is set up as such to benefit from all possible tax advantages.
The development of economic activity in free trade zones is based on government policy aimed at making them competitive on the local market through business creation. This translates into the introduction of a tax-exempt regime (or scheme). This is a package of measures ranging from tax relief to exemption from taxes and import duties, among others.
The main aim of this tax exemption scheme is to encourage investment and promote the creation and domiciliation of businesses and companies. Generally speaking, customs exemptions apply to urban areas with significant social and economic deficits. This is why these areas are often referred to as "urban free zones" (ZFU).
What are the characteristics of urban tax-free zones (ZFU)?
A district of a town with a population of over 10,000 can be designated as an urban free zone and benefit from the advantages of the tax exemption scheme on profits. The district is recognized as a hotbed of juvenile delinquency and is facing significant economic difficulties, due to very high unemployment, low commercial activity and a limited number of businesses.
The policy pursued through the institutionalization of ZFUs is therefore to create jobs and develop the local economy in socially sensitive and economically disadvantaged neighborhoods. Companies and businesses are encouraged to set up or transfer their head offices to these zones through tax and customs exemptions.
Thanks to the many advantages they offer, ZFUs are attracting growing interest from entrepreneurs keen to develop their businesses.
What are the advantages of a ZFU-TE?
ZFUs, or ZFU-TEs (zones franches urbaines - territoires entreprises), have large populations, but lack the businesses to develop regular commercial activity. By way of illustration, the department of Seine-Saint-Denis alone has more than a dozen ZFU districts. Just imagine the potential business opportunities these areas represent.
By taking advantage of the deductible and other tax benefits, your company will be exempt from all income tax or profits. The good news is that this exemption is spread over five or even eight years. For the first five years, it's 100%. For the 6th, 7th and 8th years, it will be 60%, 40% and 20% respectively.
In the first instance, the income tax reduction cannot exceed €50,000 per financial year (twelve-month period). However, if you hire a new full-time employee who has been working for at least six months, you will be entitled to an additional 5,000 euros in tax relief.
Of course, not all companies can benefit from the ZFU tax exemption scheme.
Who can benefit from the advantages of a free zone?
Regardless of its tax regime and legal status, your company can carry out a commercial or economic activity in a ZFU and be exempt from customs duties and other taxes. It must, however, meet certain conditions and make certain declarations.
Companies eligible for ZFU-TE benefits
To benefit from the tax exemption, your company must have regular operations and a permanent address (i.e. its head office) in a ZFU. But the size and activity of the company are also important.
To be an exempt entrepreneur in a ZFU, you must have fewer than 50 employees. You must work in the craft, trade or industry sectors, or be self-employed. But there are other obligations too.
You must have been established in the zone since January1, 2016, or set up your business no later than December 31 of the current year.
Your sales must be less than 10 million euros (or, if applicable, your balance sheet must fall within this range).
50% of your employees have signed a contract lasting at least twelve months: these employees must live in your ZFU or in a QPV (priority urban district).
Your business or company is required to sign a city contract if it was created before January1, 2016.
If the company employs more than 250 people and generates annual sales (excluding VAT) of over €50 million, it may not hold more than 25% of its capital. This restriction applies not only to capital, but also to voting rights.
If you meet these conditions and qualify for tax exemption, you must then file returns with the relevant authorities.
Declarations to be made by ZFU companies
Are you a business owner earning tax-exempt income in an urban free zone? You must file an income tax return, together with a statement of exempt income. Before April 30 each year, you must file an annual declaration of labor movements with the DREETS and URSSAF in your ZFU.
What's more, all new hires must be accompanied by a DPE (déclaration préalable à l'embauche), which you send to URSSAF (union de recouvrement des cotisations de Sécurité sociale et d'allocations familiales). Are you signing an employment contract with an employee? In this case, you have thirty days to send a specific declaration of employment to URSSAF and DREETS (regional directorate for the economy, employment, labor and solidarity).
Please note: you have six months from the date you set up your business in a ZFU to take the necessary steps to qualify for tax exemptions on profits. The corporate tax department (SIE) has three months to respond. If no response is received within this period, the exemption is deemed to have been accepted.
How do you register your company in an urban free zone?
Setting up a company or business in a ZFU does not depend on the entity's eligibility for the income tax exemption scheme.
On the other hand, domiciliation is a prerequisite for benefiting from this scheme. If your company's head office is located outside the ZFU, it can be transferred there.
In any case, the process of registering or transferring a head office to an urban free zone can be tedious and time-consuming for a young company like yours.
With in-depth knowledge of the particularities of free trade zones and local administrative procedures, the expertise of a domiciliation agency such as SeDomicilier can not only save you precious time, but also enable you to make substantial savings, while minimizing the effort required.
So don't hesitate to contact our team for detailed information on the nuances of domiciliation in an urban free zone - business territory.
