{"id":12318,"date":"2022-09-30T10:48:00","date_gmt":"2022-09-30T08:48:00","guid":{"rendered":"https:\/\/www.aprz.eu\/?p=12318"},"modified":"2023-05-25T19:01:13","modified_gmt":"2023-05-25T17:01:13","slug":"permanent-establishment-pe-in-france-risk-and-avoidance-solutions","status":"publish","type":"post","link":"https:\/\/www.aprz.eu\/en\/permanent-establishment-pe-in-france-risk-and-avoidance-solutions\/","title":{"rendered":"<strong>Permanent Establishment PE in France: risk and avoidance solutions<\/strong>"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"12318\" class=\"elementor elementor-12318\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-6ae859f elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"6ae859f\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-dd41788\" data-id=\"dd41788\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-08ec34a\" data-id=\"08ec34a\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-a09bc52 elementor-align-right elementor-widget elementor-widget-button\" data-id=\"a09bc52\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-sm\" href=\"https:\/\/www.aprz.eu\/wp-content\/uploads\/2023\/05\/Download-PE.pdf\" target=\"_blank\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t\t\t\t<span class=\"elementor-button-text\">download the article in pdf<\/span>\n\t\t\t\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-d0746c9 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"d0746c9\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-fd5bab9\" data-id=\"fd5bab9\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-65cb254 elementor-widget elementor-widget-heading\" data-id=\"65cb254\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Permanent Establishment PE in France: risk and avoidance solutions<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-07599df elementor-widget elementor-widget-heading\" data-id=\"07599df\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">Preamble<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-e6d1773 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"e6d1773\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-a3d00bb\" data-id=\"a3d00bb\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-4194e99 elementor-widget elementor-widget-text-editor\" data-id=\"4194e99\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p style=\"font-weight: 400;\">The definition given by the OECD (article 5, Model Convention) for a PE Permanent Establishment is: \u2018\u2019<span style=\"color: #000000;\"><a style=\"color: #000000;\" href=\"\/establishment-of-a-foreign-company-in-france\/\" target=\"_blank\" rel=\"noopener\"> The term Permanent Establishment means a fixed place of business through which an enterprise carries on all or part of its business<\/a><\/span> \u2018\u2019.<\/p><p style=\"font-weight: 400;\">It can be a head office, a workshop, a factory, an office, a construction site, &#8230;<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-b11a699 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"b11a699\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-6e3634e\" data-id=\"6e3634e\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-57fb0e7 elementor-widget elementor-widget-heading\" data-id=\"57fb0e7\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">I PERMANENT ESTABLISHMENT for CIT<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-53b158e elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"53b158e\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-cefed78\" data-id=\"cefed78\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-053a2d8 elementor-widget elementor-widget-text-editor\" data-id=\"053a2d8\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p style=\"font-weight: 400;\">In France, since 2020, a Permanent Establishment for Corporate Income Tax (CIT) is characterized as soon as one has:<\/p><p style=\"font-weight: 400;\">&#8211; a fixed place of business,<\/p><p style=\"font-weight: 400;\">&#8211; or a dependent agent.<\/p><h4 style=\"font-weight: 400;\"><strong>I 1\/ Fixed business installation<\/strong><\/h4><p style=\"font-weight: 400;\">An installation is considered as fixed, as soon as it presents a certain degree of <strong>permanence<\/strong>, of temporal and geographic fixity.<\/p><p style=\"font-weight: 400;\">On a practical level, the French Tax office will retain a duration of more than 6 months to meet the concept of permanence.<\/p><p style=\"font-weight: 400;\">The establishment in France must carry out an<strong> activity related<\/strong> to the activity of the main establishment abroad.<\/p><p style=\"font-weight: 400;\">The premises rented or owned in France (or the employee&#8217;s home if teleworking), must be <strong>available <\/strong>to the company where the activity is carried out on a <strong>regular and continuous<\/strong> basis.<\/p><p style=\"font-weight: 400;\">Concerning <strong>teleworking<\/strong>, as soon as it is imposed by the employer (who does not make an office available to the employee), the risk of a permanent establishment of the employee&#8217;s home is high.<\/p><h4 style=\"font-weight: 400;\"><strong>I 2\/ Agent<\/strong><\/h4><p style=\"font-weight: 400;\">An agent is a non-independent person (salaried or non-salaried) who <strong>usually<\/strong> exercises in France <strong>powers<\/strong> enabling him to engage the company in a commercial relationship, relating to operations constituting its own activities.<\/p><p style=\"font-weight: 400;\">France now applies without reservation (since the <em>arr\u00eat du Conseil d\u2019Etat du 11 d\u00e9cembre 2020 n\u00b0420174<\/em>) article 12 of the OECD Multilateral Instrument with the following consequences:<\/p><ul><li>Even if the agent in France does not formally conclude contracts on behalf of the foreign company, the Permanent Establishment is constituted as soon as the agent in France plays the <strong>main role<\/strong> and decides on transactions that the foreign company <strong>limits itself to ratifying<\/strong>, and which thus ratified engage this foreign company.<\/li><li>The simple signature of the foreign company is then automatic, leaving the power of negotiation to the agent at the place of marketing of the product.<\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-0dbe2ca elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"0dbe2ca\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-b2a873e\" data-id=\"b2a873e\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-7131210 elementor-widget elementor-widget-heading\" data-id=\"7131210\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">II PERMANENT ESTABLISHMENT for VAT<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-5482894 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"5482894\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-434a7fa\" data-id=\"434a7fa\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-58dea4a elementor-widget elementor-widget-text-editor\" data-id=\"58dea4a\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p style=\"font-weight: 400;\">For the OECD, a permanent establishment is characterized for VAT, as soon as one has the human and technical <strong>equipment,<\/strong> with a sufficient degree of permanence, able to make possible <strong>autonomous<\/strong> supplies of services.<\/p><p style=\"font-weight: 400;\">This excludes fictitious establishments such as domiciliation and mailboxes.<\/p><p style=\"font-weight: 400;\">A characterized Permanent Establishment means that the foreign company must register for <span style=\"color: #000000;\"><a style=\"color: #000000;\" href=\"\/tax\/\" target=\"_blank\" rel=\"noopener\">VAT in France<\/a><\/span>.<\/p><p style=\"font-weight: 400;\">If France only provides services to the foreign company, which is not a separate legal entity, these services do not fall within the scope of VAT. Therefore, to recover the VAT incurred in France, the foreign company must follow the 8th\/13th Directive procedure.<\/p><p style=\"font-weight: 400;\">If the establishment in France also performs (in addition to the services provided to the foreign company) taxable transactions with third parties, the French Administration authorizes that all deductible VAT be refunded under the conditions of French common law (i.e., by the French Administration to the French establishment).<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-68da037 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"68da037\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-f10d6d8\" data-id=\"f10d6d8\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-518bfe6 elementor-widget elementor-widget-heading\" data-id=\"518bfe6\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">III PERMANENT ESTABLISHMENT for TS tax<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-262f264 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"262f264\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-bfe04e9\" data-id=\"bfe04e9\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-ee24295 elementor-widget elementor-widget-text-editor\" data-id=\"ee24295\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p style=\"font-weight: 400;\">As soon as a Permanent Establishment is established, the TS (Tax on Salaries) can be due.<\/p><p style=\"font-weight: 400;\">The Liaison Offices (representation offices) are excluded from the liability <span style=\"color: #000000;\"><a style=\"color: #000000;\" href=\"\/payroll-and-social-declarations\/\" target=\"_blank\" rel=\"noopener\">to payroll tax<\/a><\/span>.<\/p><p style=\"font-weight: 400;\">Branches that only provide services to the foreign headquarters\/entity\/establishment are also exempt from payroll tax.<\/p><p style=\"font-weight: 400;\">Branches, on the other hand, which generate turnover with third parties, must calculate a <strong>pro rata<\/strong> VAT. In this case, the payroll tax is due as soon as the branch is not subject to VAT on more than 90% of the income (on a technical level, income from internal services of the same legal entity can be included in the numerator and denominator because the French Administration allows the possibility to consider these revenues under a VAT regime as if the main establishment abroad was a third party).<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-327e24e elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"327e24e\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-d9f90d8\" data-id=\"d9f90d8\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-82bf840 elementor-widget elementor-widget-heading\" data-id=\"82bf840\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">IV STRATEGIES TO AVOID REQUALIFICATION INTO PERMANENT ESTABLISHMENT (for CIT and VAT and TS)<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-78ec73f elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"78ec73f\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-432ce66\" data-id=\"432ce66\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-45b10b7 elementor-widget elementor-widget-text-editor\" data-id=\"45b10b7\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p style=\"font-weight: 400;\">The following activities (limitative list) allow to avoid the risk of reclassification as Permanent Establishment:<\/p><ul><li>Product showrooms only,<\/li><li>Storage only,<\/li><li>Delivery of goods belonging to the company,<\/li><li>Purchase (only) of goods,<\/li><li>Research of information for the company,<\/li><li>Contract work for a third party,<\/li><li>In general, preparatory or auxiliary operations,<\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-df80d60 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"df80d60\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-4d53dac\" data-id=\"4d53dac\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-7489674 elementor-widget elementor-widget-heading\" data-id=\"7489674\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">V PENALTIES FOLLOWING RECLASSIFICATION AS A PERMANENT ESTABLISHMENT<\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-d8db488 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"d8db488\" data-element_type=\"section\" data-e-type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-302570f\" data-id=\"302570f\" data-element_type=\"column\" data-e-type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-b4ba601 elementor-widget elementor-widget-text-editor\" data-id=\"b4ba601\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p style=\"font-weight: 400;\">The French Administration carries out tax investigations and searches following an order issued by the Judge of Freedom (art L16B of the LPF). The penalties to be expected following requalification as a Permanent Establishment for corporate income tax purposes are:<\/p><h4 style=\"font-weight: 400;\"><strong>1\/ Automatic taxation<\/strong><\/h4><p style=\"font-weight: 400;\">The procedure of automatic taxation reverses the charge of proof on the taxpayer. It is up to the taxpayer to demonstrate (even though &#8211; in theory &#8211; he does not keep books \/ accounting) that he has not realized the turnover and the profit alleged by the tax authorities.<\/p><h4 style=\"font-weight: 400;\"><strong>V 2\/ Recovery period<\/strong><\/h4><p style=\"font-weight: 400;\">The tax recovery period in France is three years. However, in case of requalification as a Permanent Establishment, the recovery period is <strong>10 (ten) years<\/strong> (art L176 of the LPF for VAT, and art L169 of the LPF for CIT).<\/p><h4 style=\"font-weight: 400;\"><strong>V 3\/ Penalties<\/strong><\/h4><p style=\"font-weight: 400;\">The automatic increase is by <strong>80%<\/strong> of the amount of the automatic taxation assessment (art 1728 1.c. of the CGI) for occult activity.<\/p><h4 style=\"font-weight: 400;\"><strong>V 4\/ Example<\/strong><\/h4><p style=\"font-weight: 400;\">Let&#8217;s assume two employees costing 4,000 euros each gross + charges per month (8,000 for two, 96,000 per year, 960,000 for 10 years). If the Administration assumes that the Establishment must charge twice the salary cost to be profitable:<\/p><p style=\"font-weight: 400;\">Turnover \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1,920,000<\/p><p style=\"font-weight: 400;\">Expenses \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0960,000<\/p><p style=\"font-weight: 400;\">Taxable income\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0960,000<\/p><p style=\"font-weight: 400;\">I\/S 25% + Penalty 80%<\/p><p style=\"font-weight: 400;\"><span style=\"color: #cc0000;\"><strong>Automatic taxation\u00a0\u00a0 \u00a0\u00a0 432,000 euros<\/strong><\/span><\/p><p style=\"font-weight: 400;\">Feel free to ask your Chartered Accountant for a risk assessment of your specific situation regarding Permanent Establishment in France, we are here to assist.<\/p><p style=\"font-weight: 400;\">\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>download the article in pdf Permanent Establishment PE in France: risk and avoidance solutions Preamble The definition given by the OECD (article 5, Model Convention) for a PE Permanent Establishment is: \u2018\u2019 The term Permanent Establishment means a fixed place of business through which an enterprise carries on all or part of its business \u2018\u2019. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12252,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_theme","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-12318","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-non-classe"],"_links":{"self":[{"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/posts\/12318","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/comments?post=12318"}],"version-history":[{"count":61,"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/posts\/12318\/revisions"}],"predecessor-version":[{"id":13363,"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/posts\/12318\/revisions\/13363"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/media\/12252"}],"wp:attachment":[{"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/media?parent=12318"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/categories?post=12318"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aprz.eu\/en\/wp-json\/wp\/v2\/tags?post=12318"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}