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RFE

SOLE REPRESENTATIVE IN FRANCE

(employee status)

ESEF (employeur étranger sans établissement en France)

SEVERAL OPTIONS TO DEVELOP YOUR ACTIVITY ABROAD

Non-Stable Establishments (Representation Purposes Only)

1. Representative Foreign Entity (RFE)

Acts on behalf of the foreign parent company and refers all business development matters to the parent company for validation.

The RFE cannot manage the entire commercial cycle. Otherwise, the parent company may face a tax requalification as a permanent (stable) establishment in France.

2. Liaison Office / Representative Office

An official local office authorized solely to represent the parent company for marketing activities and B2B/B2C business development.

A liaison office may employ several staff members working from the same French address. However, it cannot manage the full commercial cycle. Otherwise, the parent company may risk a tax requalification as a permanent (stable) establishment.

Stable Establishments (Subject to French GAAP Compliance)

3. Subsidiary

A fully incorporated French company whose share capital is partially or wholly owned by the parent company (see: How to Form a SARL).

The subsidiary is subject to:

  • French accounting regulations (French GAAP)

  • French corporate income tax

4. Branch

A foreign company’s permanent establishment in France with no share capital in France.

The branch is subject to:

  • French accounting regulations (French GAAP)

  • French corporate income tax

Double taxation agreements may apply, depending on the relevant tax treaty.

5. Fiscal Representative / Fiscal Agent

Acts on behalf of the foreign parent company to facilitate VAT registration, VAT reporting, and the filing of other tax returns in France.

The Representative Foreign Entity (RFE) status enables a foreign company to recruit local employees and establish an initial presence in the French market while keeping operating costs to a minimum.

It offers employers an excellent opportunity to explore the French market, gain a better understanding of the local economic environment, and become familiar with its cultural specificities before making a larger investment.

This status also provides attractive and diverse career opportunities for French residents with entrepreneurial skills, allowing them to benefit from the legal status and social advantages of French employment while contributing to the development of an international business.

DUTIES OF THE FOREIGN EMPLOYER

The foreign employer is responsible for the following obligations:

  • Register as an employer in France by obtaining a SIRET number and an APE code, issued by INSEE following registration with URSSAF d’Alsace – CNFE (Centre National des Firmes Étrangères).

  • Define a job profile that complies with the criteria for non-taxability in France.

  • Apply and comply with French Labour Law and the applicable Collective Bargaining Agreement (Convention Collective Nationale – CCN).

  • Register each new employee with the mandatory employee benefit schemes, including:

    • Complementary pension

    • Life insurance

    • Health insurance

  • Meet all deadlines for the declaration and payment of French social security contributions (monthly, quarterly, and annually).

  • Prepare and manage monthly payroll and payslips.

SOCIAL ORGANISATIONS DESIGNATED FOR RFE STATUS

The following organisations are involved in the administration of the Representative Foreign Entity (RFE) status:

  • URSSAF d’Alsace – CNFE (Centre National des Firmes Étrangères), responsible for registering new RFEs through the Guichet Unique.

  • Malakoff Humanis, the mandatory complementary pension provider.

JOB PROFILE

The Representative Foreign Entity (RFE) cannot manage the entire commercial cycle.

The RFE acts solely as a representative of the foreign parent company. Typical responsibilities include:

  • Prospecting for new business opportunities.

  • Conducting market analysis.

  • Promoting and distributing the company’s documentation and marketing materials.

The RFE works under the instructions of the parent company and must systematically report:

  • Customer enquiries.

  • Purchase orders.

  • After-sales service (SAV) requests.

All commercial decisions and transactions must remain under the responsibility of the parent company, including:

  • Preparation of quotations.

  • Pricing decisions.

  • Contract negotiations.

  • Delivery of goods and services.

This organisation demonstrates that the foreign company does not have a taxable permanent establishment in France, although French social security contributions remain applicable (Rome Convention, 1980).

IMPORTANT

If, following a tax inspection, the French tax authorities determine that the RFE’s activities directly generate added value in France, they may reclassify the foreign company’s presence as a Branch or a Subsidiary.

Such a reclassification may require:

  • A reconstruction of the accounting records for the previous 5 to 10 years.

  • The application of French corporate taxation to the profits generated in France.

  • Payment of any additional taxes due.

  • Financial penalties and interest for non-compliance.

FRENCH LABOUR LAW AND COLLECTIVE BARGAINING AGREEMENTS (CCN)

Like any other employee working in France, a Representative Foreign Entity (RFE) employee is subject to French Labour Law.

The employment relationship must be governed by a written employment contract specifying, at a minimum:

  • The employee’s job title and responsibilities.

  • The applicable Collective Bargaining Agreement (Convention Collective Nationale – CCN).

  • The monthly gross salary.

  • The employee’s rights in the event of dismissal or termination during the notice period.

Because of the autonomous nature of the position, the role is generally classified as a Senior Executive.

As with all French employees, the RFE employee is entitled to the same mandatory social benefits, including:

  • State and complementary retirement schemes.

  • Life insurance.

  • Health insurance.

Training

Training programmes for RFE employees cannot be financed through an OPCA/OPCO because the foreign employer is not liable for:

  • The Apprenticeship Tax (Taxe d’Apprentissage – TA).

  • The Vocational Training Contribution (Formation Professionnelle Continue – FPC).

Company Cars

A company car cannot generally be leased directly by the foreign employer because the company is not subject to the Company Vehicle Tax (TVTS) in France, as it does not have a permanent establishment.

In practice, the vehicle lease is usually signed by the employee, who is subsequently reimbursed by the employer for the related expenses.

Dismissal and Unemployment Benefits

In the event of dismissal, the RFE employee is entitled to French unemployment benefits under the same conditions as any other employee working in France.

The duration and amount of unemployment benefits are determined according to the standard French unemployment insurance rules.

REIMBURSEMENT OF EXPENSES AND FRENCH VAT REFUNDS

As foreign companies operating under the RFE status generally do not carry out taxable activities in France, they often do not maintain a French bank account.

Business expenses are therefore usually managed through the RFE employee by means of:

  • Expense advances.

  • Monthly expense reimbursements.

Provided that valid invoices are issued in the name and address of the foreign company, the company may apply annually for a refund of French VAT, provided that it is registered for VAT in its country of establishment.

The applicable legal framework is:

  • Directive 2008/9/EC of 12 February 2008 for companies established within the European Union.

  • Directive 86/560/EEC of 17 November 1986 for companies established outside the European Union.