Regional Focus

Doing business in France

Published: May 2010

France is the fifth-largest economy in the world, and the second-largest in Europe. A key participant in several European organisations, France joined other EU members to launch the euro on 1st January 1999.

Map of France

Key facts

Geography and society
Population growth rate:
Official language:
Capital city:
Time zone:
Land boundaries:
Andorra, Belgium, Germany, Italy, Luxembourg, Monaco, Spain, Switzerland
GDP per capita:
$117.5 billion
Member of:
Fiscal year:
Calendar year
Financial capital:
History and politics
Government type:
Unitary semi-presidential republic
Nicolas Sarkozy
Prime Minister:
François Fillon
Ruling party:
Union for a Popular Movement (UMP)
Country credit rating
  • AAA
Trading partners
Top five import sources:
Germany, Belgium, Italy, Spain, Netherlands
Top five export destinations:
Germany, Italy, Spain, UK, Belgium

A leading figure in Europe

France is the world’s second-largest agricultural producer after the US, with 70% of its exports going to other EU member states. Agriculture as a share of the country’s GDP is declining, however. The services sector, for example, is steadily increasing its share of the country’s economic activity and is responsible for the vast majority of new job creation in recent years. France has a strong tourist industry and is the world’s number-one tourist destination, receiving around 80m foreign visitors each year.

With the outbreak of the global financial crisis, the French government passed a €26 billion stimulus plan which allocated investment in infrastructure and tax relief for small businesses. Further funds were set aside in order to protect French companies from foreign takeovers and to promote strategic investment in science and technology, for example. Having suffered from a recession in the aftermath of the crisis, the French economy was one of the first to return to growth, which it did so in Q2 2009.

  • In France, licences for banks and investment firms operating in the country are granted by the Comité des établissements de crédit et des enterprises d’investissement (CECEI).
  • The Comité consultatif de la législation et de la réglementation financières (CCLRF) was set up in August 2003 to reorganise the regulation of the banking and insurance sectors. The CCLRF must review all legislature (including EU regulations and directives) relating to the banking, finance and insurance industries before they become law.
  • Foreign exchange controls no longer apply to non-residents looking to start or acquire a French business, unless the investment is considered direct (when the foreign investor acquires more than 20% of the capital of a French company). Under these circumstances, the investment will be subject to the control of the authorities. Investment in areas such as national defence or public health also requires prior approval.
  • Accounting standards in France are in line with the International Financial Reporting Standards (IFRS) as adopted by the EU. In January 2010 the Autorité des Normes Comptables (ANC) replaced the Conseil National de la Comptabilité (CNC) as the body responsible for overseeing France’s national accounting standards.
  • France has implemented anti-money laundering legislation which comprises the three EU money laundering directives. France is a member of the Financial Action Task Force (FATF) and as such observes most of the FATF-49 standards.

Taxation framework

  • A territorial tax system operates in France, meaning that tax is imposed only on profits made by a resident or non-resident enterprise operating in France. The taxable income of such enterprises covers total income from business activities carried out in France, including interest, rent, royalties and capital gains. Resident companies are not normally subject to tax on income from foreign sources.
  • Dividends received by a French parent company from its subsidiaries are 85% exempt from tax, providing the parent company has held no less than 5% of the capital of the subsidiary for at least two years. The remaining 5% is subject to the normal corporate income tax rate (see below).
  • Corporate income taxation (CIT) is imposed at a standard rate of 33.3%. A social contribution surcharge of 3.3% also applies on any CIT charge exceeding €763,000. Lower rates apply to SMEs that are at least 75% owned by individuals or other qualifying SMEs.
  • Withholding tax is applicable at 25% on dividends and 18% on interest paid to a non-resident company by a French company. However, under the EC Parent-Subsidiary Directive, dividends paid by a French company to an EU parent company are exempt from withholding tax, providing the parent has held at least 10% of the French company for no less than two years.
  • VAT rates range between 2.1%, 5.5% and 19.6%.
  • Thin capitalisation rules state that interest paid to related parties is fully deductible providing the rate is calculated at arm’s length. Interest will not be fully deductible if it exceeds the following three thresholds:
    1. Related party debt/equity ratio of 1.5:1.
    2. 25% of adjusted current profits for the year.
    3. Interest income received from related parties (if the company uses the funds to finance other affiliated companies).
  • Transfer pricing rules stipulate that in the event of a transaction not being carried out at arm’s length, profits may be adjusted by the French tax authorities.

Treasury activities

Local banking sector

There are approximately 220 commercial banks in France, and around 120 savings, co-operative and rural banks. Like many other European countries, in France domestic banks dominate retail banking. There are, however, over 160 foreign banks in Paris, with a strong presence in wholesale banking, securities trading and international cash management.


  • Credit transfers.

    Credit transfers are the most common form of payment for wages, pensions and social security benefits. They are also increasingly used to pay suppliers and taxes.

  • Direct debits.

    These are widely used for utility payments for instance as well as tax instalments.

  • Cheques.

    Traditionally the most popular cashless payment instrument, cheques have declined significantly in favour of electronic payment methods, and their use is now mainly confined to retail. However, over 75% of the Eurozone’s cheque payments are effected in France.

  • Payment cards.

    Bank cards are now the most commonly used cashless payment instrument in France. E-money is also quite widely used, the most well known e-purse being Moneo.

  • Other payments.

    A titre électronique de paiement (TEP) is an alternative to a direct debit; a titre interbancaire de paiement (TIP) is an inter-bank payment order for remote payments; a lettre de change relevé (LCR) is an electronic commercial trade bill, functioning much like a post-dated cheque; a billet à ordre relevé (BOR) is an electronically-processed promissory note.

Clearing and settlement

France’s national clearing system is known as TARGET2-Banque de France. It is the country’s national component of the pan-European TARGET2 RTGS system and has fully replaced the existing Transferts Banque de France (TBF) and Paris Net Settlement (PNS) systems. The country’s multilateral deferred net settlement system for retail payments is known as CORE, which replaced the Système Interbancaire de Télécompensation (SIT). CORE is operated by Technological Systems for Exchanges and Processing (Systèmes Technologiques d’Échange et de Traitement – STET).

Cash management

French residents may hold foreign currency or euro-denominated accounts both domestically and abroad. Non-residents may open foreign or domestic currency accounts in France. Domestic currency accounts held by both residents and non-residents are convertible into foreign currency.

Cash concentration is permitted in France, and all the major banks offer cash concentration services. Any cash concentration arrangement must fulfil the following criteria:

  • A single participant must control all companies participating in the cash pool.
  • All operations must be carried out at arm’s length.
  • All participants must sign an agreement detailing the extent and conditions under which the pooling of cash may take place. The agreement must respect the corporate interest of each participant and must be authorised by a special deliberation of the board (conseil d’administration).
  • Before submission to the board it is recommended that the agreement is submitted to the relevant auditors.

The above restrictions apply to cross border sweeps also.

Case study

Unique payment and liquidity solution for Western Europe generates improved efficiency

Michelin is the world’s number-one tyre producer, manufacturing 177m tyres and 16m maps and guides in 2008.

In 2005, Michelin decided to select a single bank for mass payments and liquidity management for 14 western European countries, 22 entities, over 90 accounts and 1.2m transactions a year. The company wanted full centralisation and mobilisation of its subsidiaries’ cash with a goal of zero balancing for perfect optimisation of cash. As part of this goal, Michelin required strong forecasting tools and processes at country level to give its central treasury a complete visibility of its positions.

Michelin planned to automate and secure each subsidiary’s payments processes by rationalising the number of payments, formats, delivery channels and authorisation workflows. It also wanted to improve its shared service centre’s efficiency. Starting in 2006, Michelin also harmonised its Oracle ERP application across the region to ensure it had, among other things, a clean and updated beneficiaries’ database and mapping tools that allowed a fully automated integration and reconciliation of its bank statements.

The solution

Citi proposed a single, central, secured delivery channel and one file format for all western European mass payments, including suppliers, payroll and tax. A pan-European cash pool structure combining domestic zero balancing accounts and cross-border zero balancing accounts in major currencies was established in London. These accounts are fed to the ultimate header account at the end of each day.

A global electronic banking platform gave the treasurer of each subsidiary local control and visibility of payments. The solution included payroll monitoring and a payment calendar for other types of payment. A central customer service point of contact was established, with local language support where appropriate.

A central implementation manager and technical implementation manager were responsible for the project. The project was outlined in a legally binding service level agreement outlining every detail of the process as a safeguard against any misunderstandings.

Citi won the mandate in 2006, completing the first phase of implementation in September 2006. By the end of 2007 implementation was concluded within all of the initial countries covered by the project.

The result

As a result of the solution’s success – and Michelin’s close partnership with Citi – the solution was extended to Romania in 2008, Poland and Hungary in 2009, with North America to be added in 2010.

Michelin has achieved substantial cost efficiencies by reducing its payment costs, using its shared service centre effectively and optimising its cash utilisation. Working capital was improved by increasing the control and visibility of the company’s payments and liquidity. The project increased centralisation but it has also extended the responsibilities of local treasurers, whose support enabled successful implementation.

The legality of notional pooling is in doubt due to the difficulty under French law of establishing the legal validity of the cross guarantees within the framework of a multi-company pooling structure. This is required in order to enable the bank providing the pooling service to get legal right of set-off in the event of bankruptcy. Without this guarantee, the bank would be unable to net off balances within the pooling structure for the purpose of regulatory capital reporting.

Short-term investments

  • Current accounts.

    Banks pay interest on deposit accounts and current accounts.

  • Time deposits.

    Time deposits are offered with maturities ranging from overnight to medium term (maturities exceeding two years are rare). Interest is only paid on time deposits with maturities of one month or more.

  • Certificates of deposit (CDs).

    These are offered by banks. They usually have maturities of between three and six months and may have fixed or variable interest rates.

  • Commercial paper (billet de trésorie – BT).

    Offered by companies and public authorities, commercial paper is popular with commercial banks. Maturities range from a minimum of one day to a maximum of 12 months.

  • Mutual funds.

    Residents can transfer excess funds into mutual investment funds called OPCVMs (organismes de placement collectif en valeurs mobilières). They are a popular and a flexible method of short-term investment in money, bonds or equities.

  • Treasury bills (bons du Trésor – T-bills).

    These are issued regularly by the Agence France Trésor to commercial banks and funds. Discounted T-bills have maturities ranging from two weeks to one year.

  • Repos.

    France’s repo market is the busiest in the Eurozone. Repo maturities are generally between one day and one week.

The end of ETEBAC

Banks in France provide a range of electronic banking services, traditionally offering Échanges Télématiques Banque-Clients (ETEBAC) capabilities. ETEBAC is generally perceived as the most common method of bank connectivity for French corporates. At the beginning of 2008, however, Orange Business Service announced the end of the X25 network which supports the ETEBAC protocol. As a result, from September 2011 ETEBAC will no longer work.

The end of the X25 network will see the fixed-length payment file formats of ETEBAC 3 being replaced with variable formats such as XML ISO 20022, Idoc and Paymul. ETEBAC formats are not compatible with SEPA, whereas these new formats will allow a migration from domestic protocol to pan-European protocol under the SEPA initiative.

With the transition from ETEBAC, the French banking authorities have recommended SwiftNet and eBics (Electronic Banking Internet Communication Standard) as possible replacements. eBics had been adopted in Germany since 2007. Other alternatives are e-based banking solutions, such as CitiDirect.

Key websites

Banque de France:
National Institute of Statistics:
Invest in France:
Stock Exchange – NYSE Euronext:
French Bankers’ Association:
Ministry of the Economy, Industry and Employment:
Financial Markets Authority:
Assembly of French Chambers of Commerce and Industry:
French Banking Federation:
French Association of Corporate Treasurers:

Citi’s capabilities in France

Citi has had a presence in France since 1906 with a focus on its Institutional Clients Group (ICG). Citi’s Institutional Clients Group is composed of a diverse and talented staff in over 100 countries and territories. We advise companies, governments and institutions on the best ways to realise their strategic objectives and provide innovative solutions and the broadest possible market access to thousands of issuers and investor clients. This includes cash management, trade finance, corporate finance, capital markets and securities and funds services. Trade solutions offered include import LCs (letters of credit) issuance, export LC confirmation and negotiation, receivables and supplier finance as well as export credit agency financing.

Cash management solutions in France include a full range of domestic services from local payments (vendor payments, SEPA CT, payroll, wires, direct debits, ‘TIP’, VAT electronic payments), to local collections (cheques, LCR/BOR, direct debits, SEPA Direct Debits), either via CitiDirect® Online Banking, the award-winning internet platform, SWIFTNet FIN and FileAct, host-to-host protocols or ETEBAC and in a variety of file formats including French CFONB and ISO20022 XML. Citi Paris also offers a complete range of liquidity management tools (account opening in various currencies, domestic and cross-border target balancing and short-term investment solutions). Citi’s domestic electronic payment and collection capabilities in France also extend to Guadeloupe, Martinique, La Réunion and La Guyanne Française as these French overseas departments use the same clearing system.

Citi France works in close partnership with the other Citi offices worldwide to offer its French clients a full range of financial products. Leveraging the industry’s largest proprietary network spanning 100 countries, we are uniquely qualified to serve an organisation’s local and cross-border interests, enabling clients to increase efficiency and reduce costs, effectively manage business locally and globally, and gain greater control over financial positions.

Deborah Mur
Cluster Head, France, Switzerland and Belgium, Global Transaction Services
+33 (1) 7075 5004
Nasseira Rida
Cash Management Director, France, Global Transaction Services
+33 (1) 7075 5251

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