2021 Investment Climate Statements: France and Monaco

Policies Towards Foreign Direct Investment

France welcomes foreign investment. In the current economic climate, the French government sees foreign investment as a means to create additional jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives are available to foreign investors. According to surveys of U.S. investors, U.S. companies find France’s skilled and productive labor force, good infrastructure, technology, and central location in Europe attractive. France’s membership in the European Union (EU) and the Eurozone facilitates the efficient movement of people, services, capital, and goods. However, notwithstanding French efforts at economic and tax reform, market liberalization, and attracting foreign investment, perceived disincentives to investing in France include the relatively high tax environment. Labor market fluidity is improving due to labor market reforms but is still rigid compared to some OECD economies.

Limits on Foreign Control and Right to Private Ownership and Establishment

France is among the least restrictive countries for foreign investment. With a few exceptions in certain specified sectors, there are no statutory limits on foreign ownership of companies. Foreign entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.

France maintains a national security review mechanism to screen high-risk investments. French law stipulates that control by acquisition of a domiciled company or subsidiary operating in certain sectors deemed crucial to France’s national interests relating to public order, public security and national defense are subject to prior notification, review, and approval by the Economy and Finance Minister. Other sectors requiring approval include energy infrastructure; transportation networks; public water supplies; electronic communication networks; public health protection; and installations vital to national security. In 2018, four additional categories – semiconductors, data storage, artificial intelligence and robotics – were added to the list requiring a national security review. For all listed sectors, France can block foreign takeovers of French companies according to the provisions of the 2014 Montebourg Decree.

On December 31, 2019 the government issued a decree to lower the threshold for vetting of foreign investment from outside Europe from 33 to 25 percent and then lowered it again to 10 percent on July 22, 2020, a temporary provision to prevent predatory investment during the COVID-19 crisis. This lower threshold is set to expire at the end of 2021. The decree also enhanced government-imposed conditions and penalties in cases of non-compliance and introduced a mechanism to coordinate the national security review of foreign direct investments with the European Union (EU Regulation 2019/452). The new rules entered into force on April 1, 2020. The list of strategic sectors was also expanded to include the following activities listed in the EU Regulation 2019/452: agricultural products, when such products contribute to national food supply security; the editing, printing, or distribution of press publications related to politics or general matters; and R&D activities relating to quantum technologies and energy storage technologies. Separately, France expanded the scope of sensitive sectors on April 30, 2020 to include biotechnology companies.

Procedurally, the Minister of Economy, Finance, and Recovery has 30 business days following the receipt of a request for authorization to either: 1) declare that the investor is not required to obtain such authorization; 2) grant its authorization without conditions; or 3) declare that an additional review is required to determine whether a conditional authorization is sufficient to protect national interests. If an additional review is required, the Minister has an additional 45 business days to either clear the transaction (possibly subject to conditions) or prohibit it. The Minister is further allowed to deny clearance based on the investor’s ties with a foreign government or public authority. The absence of a decision within the applicable timeframe is a de facto rejection of the authorization.

The government has also expanded the breadth of information required in the approval request. For example, a foreign investor must now disclose any financial relationship with or significant financial support from a State or public entity; a list of French and foreign competitors of the investor and of the target; or a signed statement that the investor has not, over the past five years, been subject to any sanctions for non-compliance with French FDI regulations.

In 2020, the government blocked at least one transaction—the attempted acquisition of a French firm by a U.S. company in the defense sector.

Other Investment Policy Reviews

France has not recently been the subject of international organizations’ investment policy reviews. The OECD Economic Survey for France (April 2019) can be found here:  http://www.oecd.org/economy/france-economic-forecast-summary.htm .

Business Facilitation

Business France is a government agency established with the purpose of promoting new foreign investment, expansion, technology partnerships, and financial investment. Business France provides services to help investors understand regulatory, tax, and employment policies as well as state and local investment incentives and government support programs. Business France also helps companies find project financing and equity capital. Business France recently unveiled a website in English to help prospective businesses that are considering investments in the French market ( https://www.businessfrance.fr/en/invest-in-France ).

In addition, France’s public investment bank, Bpifrance, assists foreign businesses to find local investors when setting up a subsidiary in France. It also supports foreign startups in France through the government’s French Tech Ticket program, which provides them with funding, a resident’s permit, and incubation facilities. Both business facilitation mechanisms provide for equitable treatment of women and minorities.

President Macron made innovation one of his priorities with a €10 billion ($11.8 billion) fund that is being financed through privatizations of State-owned enterprises. France’s priority sectors for investment include:  aeronautics, agro-foods, digital, nuclear, rail, auto, chemicals and materials, forestry, eco-industries, shipbuilding, health, luxury, and extractive industries. In the near-term, the French government intends to focus on driverless vehicles, batteries, the high-speed train of the future, nano-electronics, renewable energy, and health industries.

Business France and Bpifrance are particularly interested in attracting foreign investment in the tech sector. The French government has developed the “French Tech” initiative to promote France as a location for start-ups and high-growth digital companies. In addition to 17 French cities, French Tech offices have been established in 100 cities around the world, including New York, San Francisco, Los Angeles, Shanghai, Hong Kong, Vietnam, Moscow, and Berlin. French Tech has special programs to provide support to startups at various stages of their development. The latest effort has been the creation of the French Tech 120 Program, which provides financial and administrative support to some 123 most promising tech companies. In 2019, €5 billion ($5.9 billion) in venture funding was raised by French startups, an increase of nearly threefold since 2015. In September 2019, President Emmanuel Macron convinced major asset managers such as AXA and Natixis to invest €5 billion ($5.9 billion) into French tech companies over the next three years. He also announced the creation of a listing of France’s top 40 startups “Next 40” with the highest potential to grow into unicorns.

On June 5, 2020, the French government introduced a new €1.2 billion ($1.4 billion) plan to support French startups, especially in the health, quantum, artificial intelligence, and cybersecurity sectors. The plan includes the creation of a €500 million ($590 million) investment fund to help startups overcome the COVID-19 crisis and continue to innovate. It also comprises a “French Tech Sovereignty Fund” with an initial commitment of €150 million ($177 million) launched on December 11, 2020 by Bpifrance, France’s public investment bank.

The website Guichet Enterprises ( https://www.guichet-entreprises.fr/fr/ ) is designed to be a one-stop website for registering a business. The site, managed by the National Institute of Industrial Property (INPI), is available in both French and English although some fact sheets on regulated industries are only available in French.

Outward Investment

French firms invest more in the United States than in any other country and support approximately 780,000 American jobs. Total French investment in the United States reached $310.7 billion in 2019. France was our tenth largest trading partner with approximately $99.7 billion in bilateral trade in 2020. The business promotion agency Business France also assists French firms with outward investment, which it does not restrict.

Investments in France by other EU member states are governed by the provisions of the Treaty of Rome and by European Union law. France has Bilateral Investment Treaties (BITs) with 95 countries:  Albania, Algeria, Argentina, Armenia, Azerbaijan, Bahrain, Bangladesh, Bosnia and Herzegovina, Bulgaria, Cambodia, Chile, China, Colombia, the Democratic Republic of the Congo, Costa Rica, Croatia, Cuba, Czech Republic, Djibouti, Dominican Republic, Egypt, El Salvador, Equatorial Guinea, Estonia, Ethiopia, Georgia, Guatemala, Haiti, Honduras, Hong Kong, Hungary, Iran, Iraq, Jamaica, Jordan, Kazakhstan, Kenya, Korea (South), Kuwait, Kyrgyz Republic, Laos, Latvia, Lebanon, Liberia, Libya, Lithuania,  Madagascar, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Namibia, Nepal, Nicaragua, Nigeria, North Macedonia, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Qatar, Romania, Russian Federation, Saudi Arabia, Senegal, Serbia, Seychelles, Singapore, Slovakia, Slovenia, Sri Lanka, Sudan, Tajikistan, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, Yemen, and Zambia.

Bilateral Investment Treaties between France and the following countries have been signed but are not in force:  Angola, Belarus, Brazil, Ghana, and Zimbabwe. France previously had BITs with Mauritius and Syria; new BITs with these two countries have been signed but have not yet entered into force. UNCTAD maintains the most current list of ratified and non-ratified BITs, including links to each document: https://investmentpolicy.unctad.org/international-investment-agreements/countries/72/france .

The United States and France have enjoyed a Navigation and Commerce Treaty since 1822, which guarantees national treatment of U.S. citizens.

The 2021 finance law reduces corporate tax from its current level of 28 percent. Firms with revenues above €250 million ($295 million) will be taxed 26.5 percent on profits in 2021 and 25 percent in 2022.  Firms with revenues at or below €250 million ($295 million) will be taxed 27.5 percent on profits in 2021 and 25 percent in 2022.

Since 1994, a Convention between the Government of the United States of America and the Government of the French Republic continues to be in force for the avoidance of double taxation and the prevention of fiscal evasion.  France has tax agreements with 128 countries:  Albania, Algeria, Andorra, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Belarus, Belgium, Benin, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Cameroon, Canada, Central African Republic, Chile, China, Cyprus, Colombia, the Democratic Republic of the Congo, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Equatorial Guinea, Estonia, Ethiopia, Finland, Gabon, Georgia, Germany, Ghana, Greece, Guinea, Hong Kong, Hungary, India, Indonesia, Iran, Ireland, Island, Ivory Coast, Israel, Italia, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Korea (South), Kosovo, Kuwait, Kyrgyz Republic, Latvia, Lebanon, Libya, Lithuania, Luxemburg, Macedonia (FYRM), Madagascar, Malaysia, Malawi, Mali, Malta, Mauritania, Mauritius Island, Mayotte, Mexico, Monaco, Mongolia, Montenegro, Morocco, Namibia, Netherlands, New Zealand, New Caledonia, Niger, Nigeria, Norway, Oman, Pakistan, Panama, Philippines, Poland, French Polynesia, Portugal, Qatar, Quebec, Romania, Russian Federation, Saudi Arabia, Saint-Martin, Saint Pierre and Miquelon, Senegal, Serbia, Singapore, South Africa, Spain, Slovakia, Slovenia, Sri Lanka, Sweden, Switzerland, Syria, Tajikistan, Taiwan, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States of America, Uruguay, Uzbekistan, Venezuela, Vietnam, Zambia, and Zimbabwe.   (Ref: https://www.impots.gouv.fr/portail/les-conventions-internationales .)

Transparency of the Regulatory System

The French government has made considerable progress in the last decade on the transparency and accessibility of its regulatory system. The government generally engages in industry and public consultation before drafting legislation or rulemaking through a regular but variable process directed by the relevant ministry. However, the text of draft legislation is not always publicly available before parliamentary approval. U.S. firms may also find it useful to become members of industry associations, which can play an influential role in developing government policies. Even “observer” status can offer insight into new investment opportunities and greater access to government-sponsored projects.

To increase transparency in the legislative process, all ministries are required to attach an impact assessment to their draft bills. The Prime Minister’s Secretariat General (SGG for Secretariat General du Gouvernement) is responsible for ensuring that impact studies are undertaken in the early stages of the drafting process. The State Council (Conseil d’Etat), which must be consulted on all draft laws and regulations, may reject a draft bill if the impact assessment is inadequate.

After experimenting with new online consultations, the Macron Administration is regularly using this means to achieve consensus on its major reform bills. These consultations are often open to professionals as well as citizens at large. Another innovation is to impose regular impact assessments after a bill has been implemented to ensure its maximum efficiency, revising, as necessary, provisions that do not work in favor of those that do. Finally, the Macron Administration aims to make all regulations and laws available online by 2022.

Over past decades, reforms have extended the investigative and decision-making powers of France’s Competition Authority. On April 11, 2019, France implemented the European Competition Network (ECN) Directive, which widens the powers of all European national competition authorities to impose larger fines and temporary measures. The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position. It issues specific guidance on competition law compliance, and government ministers, companies, consumer organizations, and trade associations now have the right to petition the authority to investigate anti-competitive practices.

While the Authority alone examines the impact of mergers on competition, the Minister of the Economy retains the power to request a new investigation or reverse a merger transaction decision for reasons of industrial development, competitiveness, or saving jobs.  The Competition Authority continues to simplify takeover and merger notifications with online procedures via a dedicated platform in 2020. Also in 2020, the Competition Authority issued new merger control guidelines that replaced the prior ones issued in 2013. The new guidelines clarify the Competition Authority’s procedural rules and increase transparency into the substantive merger review process. In particular, the new rules emphasize the Competition Authority’s ability to request documents from merging parties.

France’s budget documents are comprehensive and cover all expenditures of the central government. An annex to the budget also provides estimates of cost sharing contributions, though these are not included in the budget estimates. Last September, the French government published its first “Green Budget,” as an annex to the 2021 Finance Bill. This event attests to France’s strong commitment, notably under the OECD-led “Paris Collaborative on Green Budgeting” (which France joined in December 2017), to integrate “green” tools into the budget process. In its spring report each year, the National Economic Commission outlines the deficits for the two previous years, the current year, and the year ahead, including consolidated figures on taxes, debt, and expenditures. Since 1999, the budget accounts have also included contingent liabilities from government guarantees and pension liabilities.  The government publishes its debt data promptly on the French Treasury’s website and in other documents. Data on nonnegotiable debt is available 15 days after the end of the month, and data on negotiable debt is available 35 days after the end of the month.  Annual data on debt guaranteed by the state is published in summary in the CGAF Report and in detail in the Compte de la dette publique. More information can be found at:  https://www.imf.org/external/np/rosc/fra/fiscal.htm 

International Regulatory Considerations

France is a founding member of the European Union, created in 1957. As such, France incorporates EU laws and regulatory norms into its domestic law. France has been a World Trade Organization (WTO) member since 1995 and a member of GATT since 1948. While developing new draft regulations, the French government submits a copy to the WTO for review to ensure the prospective legislation is consistent with its WTO obligations. France ratified the Trade Facilitation Agreement in October 2015 and has implemented all of its TFA commitments.

Legal System and Judicial Independence

French law is codified into what is sometimes referred to as the Napoleonic Code, but is officially the Code Civil des Francais, or French Civil Code. Private law governs interactions between individuals (e.g., civil, commercial, and employment law) and public law governs the relationship between the government and the people (e.g., criminal, administrative, and constitutional law).

France has an administrative court system to challenge a decision by local governments and the national government; the State Council (Conseil d’Etat) is the appellate court. France enforces foreign legal decisions such as judgments, rulings, and arbitral awards through the procedure of exequatur introduced before the Tribunal de Grande Instance (TGI), which is the court of original jurisdiction in the French legal system.

France’s Commercial Tribunal (Tribunal de Commerce or TDC) specializes in commercial litigation.  Magistrates of the commercial tribunals are lay judges, who are well known in the business community and have experience in the sectors they represent. Decisions by the commercial courts can be appealed before the Court of Appeals. France’s judicial system is procedurally competent, fair, and reliable and is independent of the government.

The judiciary – although its members are state employees – is independent of the executive branch. The judicial process in France is known to be competent, fair, thorough, and time-consuming. There is a right of appeal. The Appellate Court (cour d’appel) re-examines judgments rendered in civil, commercial, employment or criminal law cases. It re-examines the legal basis of judgments, checking for errors in due process and reexamines case facts. It may either confirm or set aside the judgment of the lower court, in whole or in part. Decisions of the Appellate Court may be appealed to the Highest Court in France (cour de cassation).

The French Financial Prosecution Office (Parquet National Financier, or PNF), specialized in serious economic and financial crimes, was set up by a December 6, 2013 law and began its activities in 2014.

Laws and Regulations on Foreign Direct Investment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all sorts of remunerative activities. U.S. investment in France is subject to the provisions of the Convention of Establishment between the United States of America and France, which was signed in 1959 and remains in force. The rights it provides U.S. nationals and companies include:  rights equivalent to those of French nationals in all commercial activities (excluding communications, air transportation, water transportation, banking, the exploitation of natural resources, the production of electricity, and professions of a scientific, literary, artistic, and educational nature, as well as certain regulated professions like doctors and lawyers). Treatment equivalent to that of French or third-country nationals is provided with respect to transfer of funds between France and the United States. Property is protected from expropriation except for public purposes; in that case it is accompanied by payment that is just, realizable, and prompt.

Potential investors can find relevant investment information and links to laws and investment regulations at  http://www.businessfrance.fr/ .

Competition and Antitrust Laws

Major reforms have extended the investigative and decision-making powers of France’s Competition Authority. France implemented the European Competition Network or ECN Directive on April 11, 2019, allowing the French Competition Authority to impose heftier fines (above €3 million / $3.5 million) and temporary measures to prevent an infringement that may cause harm. The Authority issues decisions and opinions mostly on antitrust issues, but its influence on competition issues is growing. For example, following a complaint in November 2019 by several French, European, and international associations of press publishers against Google over the use of their content online without compensation, the Authority ordered the U.S. company to start negotiating in good faith with news publishers over the use of their content online. In another matter, on December 20, 2019, Google was fined €150 million ($177 million) for abuse of dominant position. Following an in-depth review of the online ad sector, the Competition Authority found Google Ads to be “opaque and difficult to understand” and applied in “an unfair and random manner.”

The Competition Authority launches regular in-depth investigations into various sectors of the economy, which may lead to formal investigations and fines. The Authority publishes its methodology for calculating fines imposed on companies charged with abuse of a dominant position. It issues specific guidance on competition law compliance. Government ministers, companies, consumer organizations and trade associations have the right to petition the authority to investigate anti-competitive practices. While the Authority alone examines the impact of mergers on competition, the Minister of the Economy retains the power to request a new investigation or reverse a merger transaction decision for reasons of industrial development, competitiveness, or saving jobs.

A new law on Economic Growth, Activity and Equal Opportunities (known as the “Macron Law”), adopted in August 2016, vested the Competition Authority with the power to review mergers and alliances between retailers ex-ante (beforehand). The law provides that all contracts binding a retail business to a distribution network shall expire at the same time. This enables the retailer to switch to another distribution network more easily. Furthermore, distributors are prohibited from restricting a retailer’s commercial activity via post-contract terms. The civil fine incurred for restrictive practices can now amount to up to five percent of the business’s revenue earned in France.

Expropriation and Compensation

In accordance with international law, the national or local governments cannot legally expropriate property to build public infrastructure without fair market compensation. There have been no expropriations of note during the reporting period.

Dispute Settlement

ICSID Convention and New York Convention

France is a member of the World Bank-based International Centre for Settlement of Investment Disputes (ICSID) Convention and a signatory to the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention) which means local courts are obligated to enforce international arbitral awards under this system. The International Chamber of Commerce’s International Court of Arbitration (ICA) has been based in Paris since 1923.

France was one of the first countries to enact a modern arbitration law in 1980-1981. In 2011, the French Ministry of Justice issued Decree 2011-48, which introduced further international best practices into French arbitration procedural law. As a result, parties are free to agree orally to settle their disputes through arbitration, subject to standards of due process and a newly enacted principle of procedural efficiency and fairness.

Investor-State Dispute Settlement

The President of the High Civil Court of First Instance (Tribunal de Grande Instance) of Paris has the authority to issue orders related to ad-hoc international arbitration. Paris is the seat of the International Chamber of Commerce’s International Court of Arbitration, composed of representatives from 90 countries, that handles investment as well as commercial disputes.

France does not have a bilateral investment treaty with the United States.   The European Commission directly negotiates on behalf of the EU on foreign direct investment since it is part of the EU Common Commercial Policy. In 2015, the EU agreed to pursue an investment court approach to investor-State dispute settlement. While this model is included in the Comprehensive Economic and Trade Agreement (CETA) with Canada and the EU-Vietnam FTA, no actual court has yet been established in any form or context; no disputes have been brought under these post-2015 treaties.

International Commercial Arbitration and Foreign Courts

French law provides conditions for the recognition and the enforcement of foreign arbitral awards in relation to the New York Convention. The provisions of French law are contained in the Code of Civil Procedure and the Code of Civil Enforcement Procedures. The recognition of judgments of foreign courts by French courts is possible, but judgements must be accompanied by the issuance of an exequatur – a legal document issued by a sovereign authority that permits the exercise or enforcement of a foreign judgement.  The French Civil Code additionally provides for several mechanisms of alternative dispute resolution (ADR) including out-of-court arbitration and conciliation where a judicial conciliator facilitates resolution of a dispute.

Bankruptcy Regulations

France has extensive and detailed bankruptcy laws and regulations. Any creditor, regardless of the amount owed, may file suit in bankruptcy court against a debtor. Foreign creditors, equity shareholders and foreign contract holders have the same rights as their French counterparts. Monetary judgments by French courts on firms established in France are generally made in euros.  Not bankruptcy itself, but bankruptcy fraud – the misstatement by a debtor of his financial position in the context of a bankruptcy – is criminalized. Under France’s bankruptcy code managers and other entities responsible for the bankruptcy of a French company are prevented from escaping liability by shielding their assets (Law 2012-346).  France has adopted a law that enables debtors to implement a restructuring plan with financial creditors only, without affecting trade creditors.  France’s Commercial Code incorporates European Directive 2014/59/EU establishing a framework for the recovery and resolution of claims on insolvent credit institutions and investment firms.  In the World Bank’s 2020 Doing Business Index, France ranked 32nd of 190 countries on ease of resolving insolvency.

The Bank of France, the country’s only credit monitor, maintains files on persons having written unfunded checks, having declared bankruptcy, or having participated in fraudulent activities. Commercial credit reporting agencies do not exist in France.

Investment Incentives

Following the election of President Emmanuel Macron in May 2017, the French government implemented significant labor market and tax reforms. By relaxing the rules on companies to hire and fire employees and by offering investment incentives, Macron improved the operating environment in France, based on surveys of U.S. investors.

However, with the onset of the pandemic, Macron delayed further planned reforms, including on pensions and unemployment, and shifted focus to mitigating France’s most severe economic crisis in the post-war era. The economy shrank 8.3 percent in 2020 compared to the year prior. In response, the government passed four modified budgets in 2020 and implemented an unprecedented level of fiscal support. As of April 2021, support and investment for businesses and households reached nearly €600 billion ($708 billion), or approximately 25 percent of GDP. It is mainly comprised of loan guarantees, unemployment schemes that support workers’ wages, subsidies to vulnerable sectors, investment in green and developing technologies, production tax cuts and other tax benefits, and expanded funding for research and development. The government’s agenda aims to bolster competitiveness, increase productivity, and accelerate the ecological transition.

As part of the €600 billion ($708 billion) in support measures, the government’s centerpiece stimulus package came in September 2020 with the €100 billion ($118 billion) France Relance plan. Over half is dedicated to supporting businesses, most of which is accessible to U.S. firms operating in France. The plan focuses on three pillars: ecological transition; industrial competitiveness; and education and skills training, with a particular emphasis on youth employment. Whereas previous government measures in response to the pandemic mainly focused on supporting demand through initiatives like the temporary unemployment scheme, this package largely employs supply-side measures to support industry, including a €20 billion ($23.6 billion) cut to production taxes to encourage reshoring of manufacturing to France. The government earmarked €34 billion ($40.4 billion) to boost business competitiveness, support re-shoring of production, and invest in key innovative industries. Finally, the government dedicated another €36 billion ($42.7 billion) to skills retraining and education, with a specific focus on improving capacity for youth. The government highlighted this third pillar would partly aim to tackle inequality and promote “social cohesion” across France. Forty percent of the “France Relaunch” package will be funded by EU grants corresponding to France’s share of the €750 billion ($885 billion) Next Generation EU fund.

As of April 2021, the government continues to expand its support measures and adapt them to the evolution of the COVID pandemic.

Foreign Trade Zones/Free Ports/Trade Facilitation

France is subject to all EU free trade zone regulations. These allow member countries to designate portions of their customs’ territory as duty-free, where value-added activity is limited. France has several duty-free zones, which benefit from exemptions on customs for storage of goods coming from outside of the European Union. The French Customs Service administers them and provides details on its website ( http://www.douane.gouv.fr ). French legal texts are published online at http://legifrance.gouv.fr .

In September 2018, President Macron announced the extension of 44 Urban Free Zones (ZFU) in low-income neighborhoods and municipalities with at least 10,000 residents.  The program provides incentives for employers, who have created 600 new jobs since 2016. Incentives include exemption from payment of payroll taxes and certain social contributions for five years, financed by €15 million ($17.7 million) a year in State funds.

Performance and Data Localization Requirements

While there are no mandatory performance requirements established by law, the French government will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives. Incentives like PAT regional planning grants (Prime d’Amenagement du Territoire pour l’Industrie et les Services) and related R&D subsidies are based on the number of jobs created, and authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors.

The French government imposes the same conditions on domestic and foreign investors in cultural industries:  all purveyors of movies and television programs (i.e., television broadcasters, telecoms operators, internet service providers and video services) must contribute a percentage of their revenues toward French film and television productions. They must also abide by broadcasting cultural content quotas (minimum 40 percent French, 20 percent EU).

Real Property

Real property rights are regulated by the French civil code and are uniformly enforced. The World Bank’s Doing Business Index ranks France 32nd of 190 on registering property. French civil-law notaries (notaires) – highly specialized lawyers in private practice appointed as public officers by the Justice Ministry – handle residential and commercial conveyance and registration, contract drafting, company formation, successions, and estate planning. The official system of land registration (cadastre) is maintained by the French public land registry under the auspices of the French tax authority (Direction Generale des Finances Publiques or DGFiP), available online at  http://www.cadastre.gouv.fr . Mortgages are widely available, usually for a 15-year period.

Intellectual Property Rights

France is a strong defender of intellectual property rights (IPR). Under the French system, patents and trademarks protect industrial property, while copyrights protect literary/artistic property. By virtue of the Paris Convention, U.S. nationals have a priority period following filing of an application for a U.S. patent or trademark in which to file a corresponding application in France:  twelve months for patents and six months for trademarks.

Counterfeiting is a costly problem for French companies, and the government of France maintains strong legal protections and a robust enforcement mechanism to combat trafficking in counterfeit goods — from copies of luxury goods to fake medications — as well as the theft and illegal use of IPR. The French Intellectual Property Code has been updated repeatedly over the years to address this challenge, most recently in 2019 with the implementation of the so-called Action Plan for Business Growth and Transformation or PACTE Law (Plan d’Action pour la Croissance et la Transformation des Entreprises).  This law reinforced France’s anti-counterfeiting legislation and implemented EU Directive 2015/2436 of the Trademark Reform Package. It increased the Euro amount for damages to companies that are victims of counterfeiting and extends trademark protection to smartcard technology, certain geographical indications, plants, and agricultural seeds. The legislation also increased the statute of limitations for civil suits from three to ten years and strengthened the powers of customs officials to seize fake goods sent by mail or express freight.  France also adopted legislation in 2019 to implement EU Directive 2019/790 on Copyright and Related Rights in the Digital Single Market.

The government also reports on seizures of counterfeit goods. In February 2021, the government launched a new French customs plan to combat counterfeiting for the 2021-2022 calendar year. Customs seizures in France have increased from 200,000 in 1994 to 5.64 million in 2020 (+ 20 percent compared to 2019). This new action plan will focus on improved intelligence gathering, investigation, litigation, and cooperation between all the stakeholders involved, including the Customs Office, which investigates fraud cases; the National Institute of Industrial Property, which oversees patents, trademarks, and industrial design rights; and France’s top private sector anti-counterfeiting organization, UNIFAB.

France has robust laws against online piracy. A government agency called the High Authority for the Dissemination of Artistic Works and the Protection of Rights on Internet (Haute Autorite pour la Diffusion des Œuvres et la Protection des droits sur Internet or HADOPI) administers a “graduated response” system of warnings and fines. It has taken enforcement action against several online pirate sites. HADOPI cooperates closely with the U.S. Patent and Trademark Office (USPTO) including pursuing voluntary arrangements to single out awareness about intermediaries that facilitate or fund pirate sites. (Note that one of HADOPI’s tasks is to ensure that the technical measures used to protect works do not prevent the right of individuals to make personal copies of television programs for their private use.) In December 2019, HADOPI released its yearly barometer of online cultural consumption showing that 26 percent of French people acquired and consumed music, films, and television series through illegal sites (53 percent via streaming and 45 percent through direct or indirect download). This figure has remained steady over the past few years. Offenders risk fines of between €1,500 ($1,770) and €300,000 ($354,000) and/or up to three years imprisonment.

The French government is increasing its efforts to combat online piracy in 2021 with a bill on the creation of a new audiovisual regulatory authority, Arcom, to regulate websites and audiovisual communications. The Ministry of Culture (MoC) announced in September 2019 its intention to merge France’s digital piracy watchdog HADOPI with the Higher Audiovisual Council (Conseil Supérieur de l’Audiovisuel) to create a more powerful authority capable on blocking illegal sites and blacklisting pirate sites. However, the establishment of this new authority was delayed by the COVID-19 pandemic as well as the appointment of a new government in July 2020.

France does not appear on USTR’s 2021 Special 301 Report.  USTR’s 2020 Notorious Market List includes an infringing site reportedly hosted in France.  The 2020 report also listed amazon.fr, based in France, noting alleged high levels of counterfeit goods on its platform (Note: Other Amazon sites were also included in the report: amazon.ca in Canada, amazon.de in Germany, amazon.in in India, and amazon.co.uk in the United Kingdom.)

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

There are no administrative restrictions on portfolio investment in France, and there is an effective regulatory system in place to facilitate portfolio investment. France’s open financial market allows foreign firms easy access to a variety of financial products, both in France and internationally. France continues to modernize its marketplace; as markets expand, foreign and domestic portfolio investment has become increasingly important. As in most EU countries, France’s listed companies are required to meet international accounting standards. Some aspects of French legal, regulatory, and accounting regimes are less transparent than U.S. systems, but they are consistent with international norms. Foreign banks are allowed to establish branches and operations in France and are subject to international prudential measures. Under IMF Article VIII, France may not impose restrictions on the making of payments and transfers for current international transactions without the (prior) approval of the Fund.

Foreign investors have access to all classic financing instruments, including short-, medium-, and long-term loans, short- and medium-term credit facilities, and secured and non-secured overdrafts offered by commercial banks. These assist in public offerings of shares and corporate debt, as well as mergers, acquisitions and takeovers, and offer hedging services against interest rate and currency fluctuations. Foreign companies have access to all banking services. Most loans are provided at market rates, although subsidies are available for home mortgages and small business financing.

Euronext Paris (also known as Paris Bourse) is part of a regulated cross-border stock exchange located in six European countries. Euronext Growth is an alternative exchange for medium-sized companies to list on a less regulated market (based on the legal definition of the European investment services directive), with more consumer protection than the Marché Libre still used by a couple hundred small businesses for their first stock listing. A company seeking a listing on Euronext Growth must have a sponsor with status granted by Euronext and prepare a French language prospectus for a permit from the Financial Markets Authority (Autorité des Marchés Financiers or AMF), the French equivalent of the U.S. Securities and Exchange Commission. Small and medium-size enterprises (SMEs) may also list on Enternext, a subsidiary of the Euronext Group created in 2013. The bourse in Paris also offers Euronext Access, an unregulated exchange for Start-ups.

Money and Banking System

France’s banking system recovered gradually from the 2008-2009 global financial crises and passed the 2018 stress tests conducted by the European Banking Authority. In the context of the COVID-19 outbreak, the European Banking Authority (EBA) postponed the EU-wide stress test to 2021 as a measure to temporarily alleviate the acute operational burden for banks. The EBA launched the EU-wide stress test exercise in January 2021 and its results will be published at the end of July 2021.

Four French banks were ranked among the world’s 20 largest as of January 2021 (BNP Paribas SA; Crédit Agricole Group, Société Générale SA, Groupe BPCE). The assets of France’s top five banks totaled $9.5 trillion in 2020. Acting on a proposal from France’s central bank, Banque de France, in March 2020, the High Council for Financial Stability (HCSF) instructed the country’s largest banks to decrease the “countercyclical capital buffer” from 0.25 percent to zero percent of their bank’s risk-weighted assets, thereby increasing liquidity to help mitigate the impact of the pandemic-induced recession. As of March 2021, banks maintained the zero percent countercyclical capital buffer with no intention to increase it before the end of 2022, at the earliest. The HCSF considered the risks to financial stability remain high, due to the impact of the crisis on the accounts of financial and non-financial actors. Firms increased their debt significantly in 2020, even if this was accompanied by an almost equivalent increase in their cash position. HCSF data highlighted the heterogeneity of the impact, as some companies were significantly weakened by the crisis, while others remain unaffected.   Banque de France is a member of the Eurosystem, which groups together the European Central Bank (ECB) and the national central banks of all countries that have adopted the euro. Banque de France is a public entity governed by the French Monetary and Financial Code. The conditions whereby it conducts its missions on national territory are set out in its Public Service Contract. The three main missions are monetary strategy; financial stability, together with the High Council of financial stability (Haut Conseil de la Stabilité Financière) which implements macroprudential policy; and the provision of economic services to the community. In addition, it participates in the preparation and implementation of decisions taken centrally by the ECB Governing Council.

Banque de France is a member of the Eurosystem, which groups together the European Central Bank (ECB) and the national central banks of all countries that have adopted the euro. Banque de France is a public entity governed by the French Monetary and Financial Code. The conditions whereby it conducts its missions on national territory are set out in its Public Service Contract. The three main missions are monetary strategy; financial stability, together with the High Council of financial stability (Haut Conseil de la Stabilité Financière) which implements macroprudential policy; and the provision of economic services to the community. In addition, it participates in the preparation and implementation of decisions taken centrally by the ECB Governing Council.

Foreign banks can operate in France either as subsidiaries or branches but need to obtain a license. Credit institutions’ licenses are generally issued by France’s Prudential Authority (Autorité de Contrôle Prudentiel et de Résolution or ACPR) which reviews whether certain conditions are met (e.g., minimum capital requirement, sound and prudent management of the bank, compliance with balance sheet requirements, etc.). Both EU law and French legislation apply to foreign banks. Foreign banks or branches are additionally subject to prudential measures and must provide periodic reports to the ACPR regarding operations in France, including detailed reports on their financial situation. At the EU level, the ‘passporting right’ allows a foreign bank settled in any EU country to provide their services across the EU, including France. There are about 941 credit institutions authorized to carry on banking activities in France; the list of foreign banks is available on this website:  https://www.regafi.fr/spip.php?page=results&type=advanced&id_secteur=3&lang=en&denomination=&siren=&cib=&bic=&nom=&siren_agent=&num=&cat=01-TBR07&retrait=0 

Foreign Exchange and Remittances

Foreign Exchange

For purposes of controlling exchange, the French government considers foreigners as residents from the time they arrive in France. French and foreign residents are subject to the same rules; they are entitled to open an account in a foreign currency with a bank established in France, and to establish accounts abroad. They must report all foreign accounts on their annual income tax returns, and money earned in France may be freely converted into dollars or any other currency and transferred abroad.

France is one of nineteen countries (known collectively as the Eurozone) that use the euro currency. Exchange rate policy for the euro is handled by the European Central Bank, located in Frankfurt, Germany. The average euro to USD exchange rate from March 1, 2020 to March 1, 2021 was 1 USD to 0.86 euro.

France is a founding member of the OECD-based Financial Action Task Force (FATF, a 39-member intergovernmental body). As reported in the Department of State’s France Report on Terrorism, the French government has a comprehensive anti-money laundering/ counterterrorist financing (AML/CTF) regime and is an active partner in international efforts to control money laundering and terrorist financing.  Tracfin, the French government’s financial intelligence unit, is active within international organizations, and has signed new bilateral agreements with foreign countries.

Remittance Policies

France’s investment remittance policies are stable and transparent. All inward and outward payments must be made through approved banking intermediaries by bank transfers. There is no restriction on the repatriation of capital. Similarly, there are no restrictions on transfers of profits, interest, royalties, or service fees. Foreign-controlled French businesses are required to have a resident French bank account and are subject to the same regulations as other French legal entities. The use of foreign bank accounts by residents is permitted.

Sovereign Wealth Funds

France has no sovereign wealth fund per se (none that use that nomenclature) but does operate funds with similar intent. The Public Investment Bank (Bpifrance) supports small and medium enterprises (SMEs), larger enterprises (Entreprises de Taille Intermedaire), and innovating businesses with over €36 billion ($42.5 billion) assets under management. The government strategy is defined at the national level and aims to fit with local strategies.  Bpifrance may hold direct stakes in companies, hold indirect stakes via generalist or sectorial funds, venture capital, development or transfer capital.  In November 2020, Bpifrance became a member of the One Planet Sovereign Wealth Funds (OPSWF) international initiative, which federates international sovereign wealth funds mobilized to contribute to the transition towards a more sustainable economy. Bpifrance stepped up its support for the ecological and energy transition, aiming to reach nearly €6 billion ($7.1 billion) per year by 2023.

The 11 listed entities in which the French State maintains stakes at the federal level are Aeroports de Paris (50.63 percent); Airbus Group (10.95 percent); Air France-KLM (14.29 percent, although expected to increase temporarily to nearly 30 percent as part of a March 2021 bailout package); EDF (83.58 percent), ENGIE (23.64 percent), Eramet (25.57 percent), La Française des Jeux (FDJ) (21.91 percent), Orange (a direct 13.39 percent stake and a 9.60 percent stake through Bpifrance), Renault (15.01 percent), Safran (11.23 percent), and Thales 25.68 percent). Unlisted companies owned by the State include SNCF (rail), RATP (public transport), CDC (Caisse des depots et consignations) and La Banque Postale (bank). In all, the government has majority and minority stakes in 88 firms, in a variety of sectors.

Private enterprises have the same access to financing as SOEs, including from state-owned banks or other state-owned investment vehicles. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors. Conversely, SOEs may get subsidies and other financial resources from the government, just as private competitors.

France, as a member of the European Union, is party to the Agreement on Government Procurement (GPA) within the framework of the World Trade Organization. Companies owned or controlled by the state behave largely like other companies in France and are subject to the same laws and tax code. The Boards of SOEs operate according to accepted French corporate governance principles as set out in the (private sector) AFEP-MEDEF Code of Corporate Governance. SOEs are required by law to publish an annual report, and the French Court of Audit conducts financial audits on all entities in which the state holds a majority interest. The French government appoints representatives to the Boards of Directors of all companies in which it holds significant numbers of shares, and manages its portfolio through a special unit attached to the Ministry for the Economy and Finance Ministry, the shareholding agency APE (Agence de Participations de l’Etat). The State as a shareholder must set an example in terms of upholding high standards with respect for the environment, gender equality and social responsibility. The report also highlighted that the State must protect its strategic assets and remain a shareholder in areas where the general interest is at stake.

Privatization Program

The government will temporarily increase its stake in Air France-KLM, which was severely impacted by the COVID-19 crisis. Although terms are still being negotiated as of March 2021, it is likely France’s stake in the entity will increase from 14.3 percent to nearly 30 percent.

The government was due to privatize many large companies in 2019, including ADP and ENGIE in order to create a €10 billion ($11.8 billion) fund for innovation and research. However, the program was delayed because of political opposition to the privatization of airport manager ADP, regarded as a strategic asset to be protected from foreign shareholders. The government succeeded in selling in November 2019 a 52 percent stake in gambling firm FDJ. The government continues to maintain a strong presence in some sectors, particularly power, public transport, and defense industries.

The business community has general awareness of standards for responsible business conduct (RBC) in France. The country has established a National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises, coordinated and chaired by the Directorate General of the Treasury in the Ministry for the Economy and Finance. Its members represent State Administrations (Ministries in charge of Economy and Finance, Labor and Employment, Foreign Affairs, Ecology, Sustainable Development and Energy), six French Trade Unions (CFDT, CGT, FO, CFE-CGC, CFTC, UNSA) and one employers’ organization, MEDEF.

The NCP promotes the OECD Guidelines in a manner that is relevant to specific sectors. When specific instances are raised, the NCP offers its good offices to the parties (discussion, exchange of information) and may act as a mediator in disputes if appropriate.  This can involve conducting fact-finding to assist parties in resolving disputes, and posting final statements on any recommendations for future action with regard to the Guidelines. The NCP may also monitor how its recommendations are implemented by the business in question. In April 2017, the French NCP signed a two-year partnership with Global Compact France to increase sharing of information and activity between the two organizations.

In France, corporate governance standards for publicly traded companies are the product of a combination of legislative provisions and the recommendations of the AFEP-MEDEF code (two employers’ organizations). The code, which defines principles of corporate governance by outlining rules for corporate officers, controls and transparency, meets the expectations of shareholders and various stakeholders, as well as of the European Commission. First introduced in September 2002, it is regularly updated, adding new principles for the determination of remuneration and independence of directors, and now includes corporate social and environmental responsibility standards. The latest amendments in February 2019 tackle the remuneration and post-employment benefits of Chief Executive Officers and Executive Officers: 60 percent variable remuneration based on quantitative objectives and 40 percent on quality objectives, including efforts in the corporate social responsibility.

Also relating to transparency, the EU passed a regulation in 2017 to stem the trade in conflict minerals and, in particular, to stop conflict minerals and metals from being exported to the EU; to prevent global and EU smelters and refiners from using conflict minerals; and to protect mine workers from being abused. The regulation wentinto effect January 1, 2021, and now applies directly to French law.

France has played an active role in negotiating the ISO 26000 standards, the International Finance Corporation Performance Standards, the OECD Guidelines for Multinational Enterprises, and the UN Guiding Principles on Business and Human Rights. France has signed on to the Extractive Industries Transparency Initiative (EITI), although, it has not yet been fully implemented.

The February 2017 “Corporate Duty of Vigilance Law” requires large companies based in France and having at least 5,000 employees to set up, implement, and publish a corporate plan to identify a due diligence approach and assess any potential risks to human rights, fundamental freedoms, workers’ health, safety, and risk to the environment from activities of their company and its affiliates through the supply chain.

Additional Resources 

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

In line with President Macron’s campaign promise to clean up French politics, the French parliament adopted in September 2017 the law on “Restoring Confidence in Public Life.” The new law bans elected officials from employing family members, or working as a lobbyist or consultant while in office. It also bans lobbyists from paying parliamentary, ministerial, or presidential staff and requires parliamentarians to submit receipts for expenses.

France’s “Transparency, Anti-corruption, and Economic Modernization Law,” also known as the “Loi Sapin II,” came into effect on June 1, 2017. It brought France’s legislation in line with European and international standards. Key aspects of the law include: creating a new anti-corruption agency; establishing “deferred prosecution” for defendants in corruption cases and prosecuting companies (French or foreign) suspected of bribing foreign public officials abroad; requiring lobbyists to register with national institutions; and expanding legal protections for whistleblowers. The Sapin II law also established a High Authority for Transparency in Public Life (HATVP). The HATVP promotes transparency in public life by publishing the declarations of assets and interests it is legally authorized to share publicly. After review, declarations of assets and statements of interests of members of the government are published on the High Authority’s website under open license. The declarations of interests of members of Parliament and mayors of big cities and towns, but also of regions are also available on the website. In addition, the declarations of assets of parliamentarians can be accessed in certain governmental buildings, though not published on the internet.

France is a signatory to the OECD Anti-Bribery Convention. The U.S. Embassy in Paris has received no specific complaints from U.S. firms of unfair competition in France in recent years. France ranked 23rd of 180 countries on Transparency International’s (TI) 2020 corruption perceptions index. See  https://www.transparency.org/country/FRA .

Resources to Report Corruption

The Central Office for the Prevention of Corruption (Service Central de Prevention de la Corruption or SCPC) was replaced in 2017 by the new national anti-corruption agency – the Agence Francaise Anticorruption (AFA). The AFA is charged with preventing corruption by establishing anti-corruption programs, making recommendations, and centralizing and disseminating information to prevent and detect corrupt officials and company executives. The French anti-corruption agency guidelines can be found here: https://www.agence-francaise-anticorruption.gouv.fr/files/2021-03/French%20AC%20Agency%20Guidelines%20.pdf . The AFA will also administrative authority to review the anticorruption compliance mechanisms in the private sector, in local authorities and in other government agencies.

Contact information for Agence Française Anti-corruption (AFA):

Director: Charles Duchaine
23 Avenue d’Italie
75013 Paris
Tel : (+33) 1 44 87 21 14
Email: charles.duchaine@afa.gouv.fr 

Contact information for Transparency International’s French affiliate:

Transparency International France
14, Passage Dubail
75010 Paris
Tel: (+33) 1 84 16 95 65;
Email:  contact@transparency-france.org 

France is a politically stable country. Large demonstrations and protests occur regularly (sometimes organized to occur simultaneously in multiple French cities); these normally do not result in violence. When faced with imminent business closures, on rare occasions French trade unions have resorted to confrontational techniques such as setting plants on fire, planting bombs, or kidnapping executives or managers.

From mid-November 2018 through 2019, Paris and other cities in France faced regular protests and disruptions, including “Gilets Jaunes” (Yellow Vest) demonstrations that turned violent, initiated by discontent over high cost of living, taxes, and social exclusion. In the second half of 2019, most demonstrations were in response to President Macron’s proposed unemployment and pension reform. Authorities permitted peaceful protests. During some demonstrations, damage to property, including looting and arson, in popular tourist areas occurred with reckless disregard for public safety.  Police response included water cannons, rubber bullets and tear gas.

Between 2012 and 2020, 270 people have been killed in terrorist attacks in France, including the January 2015 assault on the satirical magazine Charlie Hebdo, the November 2015 coordinated attacks at the Bataclan concert hall, national stadium, and streets of Paris, and the 2016 Bastille Day truck attack in Nice. While the terrorist threat remains high, the threat is lower than its peak in 2015. Terrorist attacks have since been smaller in scale. Security services remained concerned with lone-wolf attacks, carried out by individuals already in France, inspired by or affiliated with ISIS.  French security agencies continue to disrupt plots and cells effectively. Despite the spate of recent small-scale attacks, France remains a strong, stable, democratic country with a vibrant economy and culture. Americans and investors from all over the world continue to invest heavily in France.

France has one of the lowest unionized work forces in the developed world (between 8-11 percent of the total work force). However, unions have strong statutory protections under French law that give them the power to engage in sector- and industry-wide negotiations on behalf of all workers. As a result, an estimated 98 percent of French workers are covered by union-negotiated collective bargaining agreements. Any organizational change in the workplace must usually be presented to the unions for a formal consultation as part of the collective bargaining process.

The number of apprenticeships in France peaked in 2020, at over 500,000, including 495,000 in the private sector, according to February 5, 2021 Labor Ministry figures. Apprenticeships, like vocational training, have been placed under the direct management of the government via a newly created agency called France Compétences. Growth of apprenticeship and reform of vocational training help to explain the drop in the unemployment rate in 2019 and in the first quarter of 2020.

During the COVID-19 crisis, France’s partial unemployment scheme, which allows firms to retain their employees while the government continues to pay a portion of their wages, expanded dramatically in scope and size and kept unemployment at pre-crisis levels (between 8-9 percent). The government initially enacted a gradual reform of France’s Unemployment Insurance scheme in July 2019 but suspended it at the onset of the COVID-19 pandemic. Despite labor union opposition, a government decree published on April 1, 2021 changed how benefits are calculated from July 1, 2021 to ensure unemployment benefits never exceed the average monthly net salary. Other changes, such as stricter rules for accessing unemployment benefits and the reduction of benefits for high earners will go into effect “when the economic situation allows.” Pension reform and the introduction of financial sanctions to limit the use of short-term contracts have been delayed until after the May 2022 presidential elections.

Given France’s high per capita income, investments in France do not qualify for investment insurance or guarantees offered by the U.S. International Development Finance Corporation (DFC).

* French Source:  INSEE database for GDP figures and French Central Bank (Banque de France) for FDI figures. Accessed on March 19, 2021.  

*Note: These figures represent the stock of foreign direct investment (FDI), not the annual flow of FDI.  The United States was the top investor by flow of FDI in 2020.

Dustin Salveson
Economic Officer
U.S. Embassy
2 Avenue Gabriel
75008 Paris, France
Tel: +33.1.43.12.2000
FranceICSeditor@state.gov
https://fr.usembassy.gov/business/

The Principality of Monaco, the world’s second smallest country by area, has an open economy that welcomes foreign investment.  Monaco enjoys a high standard of living and low unemployment.  With the exception of French citizens, foreigners (and Monegasques) actually living and working in Monaco are not subject to personal income tax.  Corporations may benefit from various tax incentives.  There are no restrictions preventing foreigners and non-residents from buying property or opening bank or brokerage accounts in Monaco, though some banks have levied fees on American accounts.  Non-residents likely account for more than half of real estate investments.  Monaco is well known for its security and political stability.

Investment Regime of Monaco

Monaco’s economic and regulatory system is closely tied to that of France, and Monaco uses the Euro as its currency.  The convention of May 1, 1963 brought French and Monegasque territories, including territorial waters, under a common customs union resulting in the application of French customs law in Monaco.  Although Monaco is not a member of the European Union, the customs union with France makes it subject to EU customs laws, thus guaranteeing that the transfer of goods and services from and into Monaco remains within the single European market.

Economic activity within Monaco, including commercial, handicraft and industrial activity, is strictly monitored by the government.  Prior approval from the Direction de l’Expansion Economique (Department of Economic Expansion) is required before conducting any economic activity in the principality, and this applies to foreign companies which may establish a branch or an administrative unit in the principality.  Monegasque authorities issue approvals based on type of business; approval is personal and may not be transferred.  Any change in the terms requires a new approval.  The government is streamlining the approval process from 10-12 weeks down to 6-8 weeks.

A body called Espace Entreprises Monaco Business Office helps new investors.  The Monaco Welcome and Business office (MWBO) assists individuals and entrepreneurs in relocating to the Principality of Monaco.  In the financial sector, creation of any financial organization is subject to the approval of both the French CECEI (Committee for Credit and Investment Institutions) in Paris and of Monegasque financial supervisory authorities.  Offshore companies are subject to the same due diligence and suspicious transaction reporting regulations as other banking institutions.

Monaco has taken a number of initiatives to promote economic activity and make company operations more transparent while maintaining high ethical standards, including:

• Creation of the legal status of a Limited Liability Company;
• Adoption of systems to combat money laundering, organized crime, and corruption (through the creation of the Service d’Information et de Contrôle sur les Circuits Financiers, SICCFIN: http://www.siccfin.gouv.mc); and
• Special exemptions for new companies and research.

In Monaco, there is no direct taxation, with two exceptions:

• Companies earning more than 25% of their turnover (revenue) outside of the principality, and companies whose activities consist of earning revenues from patents and literary or artistic property rights, subject to a tax of 33.33% on profits; and
• French nationals unable to prove that they resided in the principality for five years before October 31, 1962 are subject to the French income tax.

To encourage the creation of economic activity, the Principality of Monaco offers tax exemptions to new companies developing a new activity.  These new companies enjoy 100% exemption from corporate tax in the first two years, and then gradually assume normal tax obligations by the sixth year.  An R&D tax credit was additionally created in March 2009.  Additionally, start ups and small businesses may benefit from support through incubator programs in country, including those that provide expert advice and affordable workspace.

On July 12, 2016, the European Union and Monaco signed an agreement making Monaco’s tax compliance regulations and automatic exchange of financial information stronger and equivalent to measures in force in the EU.  The EU-Monaco agreement entered into force in 2018.  Monaco is now classified as “largely compliant” by OECD tax transparency standards.  The principality has signed 33 (32 are in force) tax information exchange agreements (TIEA), including one with the United States in 2009.

Size of the Economy of Monaco

Monaco’s GDP was 6.63 billion EUR (7.80 billion USD) in 2019, an increase of 675 percent from 2018.  (Source: IMSEE – Monaco https://www.monacostatistics.mc/Economy-and-Finance/GDP).  The country’s budget comes from taxes on industry, trade, and services; a vibrant tourism sector; and several government-owned enterprises, most notably the country’s famous casinos.  Approximately 50 percent of government revenue comes from the Value Added Tax (VAT), which is collected by French authorities and disbursed to Monaco according to an agreed formula.

In 2020, Monaco’s GDP was expected to expand by 7.1 percent, but the COVID-19 pandemic took a disastrous toll on the economy.  As of April 2020, final numbers for Monaco’s 2020 GDP had yet to be published, but all indications point to a significant contraction.  Revenue from the hotel and restaurant sector – a significant component of Monaco’s economy – was down 48 percent from 2019.  Unemployment increased to 4-5 percent, up from 2-3 prior to the pandemic.  The government provided assistance to Monegasque businesses, largely in the form of subsidies for unemployment benefits and wages, rent support, cash transfers for lost revenue, and loan forgiveness.

There is a high concentration of financial professionals in Monaco, as might be expected in this center of international business.  French banking law applies in Monaco, subjecting banks to the same level of supervision as in France.  Some 30 banks and 88 financial companies institutions in Monaco (Source: CMB: Association Monégasque des Activitiés Financières).