However, at a certain point this activity may create a tax presence.
A tax presence means that the local tax authorities consider your business as local enough to tax you — even if you have no legal entity, branch, or registration. In tax treaties this is called a permanent estabishment, but the concept is broader.
If your activities create a tax presence, this can trigger obligations such as:
corporate income tax on locally attributable profits
local bookkeeping and reporting requirements
registration with tax authorities
penalties or retroactive tax assessments if risks are missed
The difficulty is that tax presence is not always obvious.
Many companies assume that “no company” automatically means “no tax”, which is not always correct.
Tax presence risks often arise when a company:
has employees or directors working from another country
uses local sales agents or representatives
carries out long-term projects or on-site activities
operates warehouses or fixed facilities
manages local operations from a home office
Whether these activities create a tax presence depends on how authorities apply these tax rules in practice.
Tax presence issues in France are handled within a highly developed and assertive tax enforcement environment, with a strong focus on substance and value creation.
Audits and assessments are carried out by the French tax administration (Direction générale des Finances publiques, DGFiP), which has extensive experience with cross-border structures and permanent establishment disputes (link).
Interpretation of tax treaties and permanent establishment concepts is heavily influenced by French case law, with final authority resting with the Conseil d’État, France’s highest administrative court (link).
In practice, France is regarded as one of the more aggressive jurisdictions in asserting tax presence, particularly in digital, sales-driven and commissionaire-type structures.
French tax treaties generally follow the OECD model, but French courts have long applied a substance-over-form approach that often goes beyond formal contractual arrangements.
The French tax authorities place particular emphasis on whether activities carried out in France form an essential and autonomous part of the foreign enterprise’s business.
France is internationally known for its extensive case law on commissionaire and sales support structures.
In the landmark Zimmer case, the Conseil d’État initially held that a commissionaire structure did not automatically create a permanent establishment under the France–UK tax treaty. This decision was widely relied upon by multinational groups for years (link).
However, French practice shifted significantly in later years. In a series of high-profile cases involving digital and technology companies, including Google, the French tax authorities argued that local sales and marketing entities constituted a dependent agent permanent establishment of foreign principals.
In the Google Ireland case, the Administrative Court of Appeal initially sided with the taxpayer, but subsequent legislative and interpretative changes strengthened the French position on dependent agents and principal role concepts (link).
Following the OECD BEPS changes, France has been particularly quick to apply the “principal role leading to the conclusion of contracts” test in audits and disputes.
Remote work and home office arrangements are increasingly scrutinised in France, especially where they are permanent and closely linked to operational decision-making.
French administrative guidance indicates that a fixed place of business may arise where a location in France is used on a continuous basis for the business and is effectively at the disposal of the enterprise (link).
While occasional remote work is generally tolerated, structurally embedding functions such as sales management, operational control or technical leadership in France materially increases tax presence risk.
Scrutiny by French tax authorities typically increases where local personnel are involved in negotiating or shaping contracts, where sales support functions are closely tied to revenue generation, where activities are presented as auxiliary but are essential to the business model, or where remote work becomes permanent and operationally central.
French audits tend to focus on how value is actually created and monetised, rather than on contractual form alone.
If tax presence is established, France may assess corporate income tax on profits attributable to French activities, often accompanied by detailed profit attribution and transfer pricing analyses.
Retroactive assessments are common, and penalties can be substantial, particularly where the tax authorities conclude that a structure was designed to artificially avoid French taxation.
In France, incorporation often becomes the cleaner option once sales or commercial decision-making functions are exercised locally, when local teams play a decisive role in contract conclusion, when operational substance is permanently embedded in France, or when ongoing audit risk outweighs the flexibility of operating without a formal entity. At that stage, incorporation typically provides greater legal certainty and reduces exposure to prolonged disputes with the tax authorities.
Across tax systems, the assessment of tax presence typically follows a consistent set of underlying principles:
Substance over legal form
Actual business activities and economic reality carry more weight than contractual labels or formal structures.
People and decision-making
Where key individuals work, negotiate, manage operations or make decisions is often decisive.
Continuity and regularity
Ongoing or recurring activities are treated differently from occasional or incidental involvement.
Economic value creation
Where value is created, managed or controlled is a central factor in tax attribution.
These principles explain why the absence of a legal entity does not automatically eliminate tax exposure.
Tax presence risk is most commonly associated with the following types of activities:
Employees or directors working structurally from another jurisdiction
Sales personnel or agents with decision-making authority
Long-term or recurring on-site projects
Fixed places of business such as offices, warehouses or workshops
Home offices used as a regular base for business operations
The decisive factor is rarely a single activity, but rather the combination, duration and functional role of these activities.
Certain activities are widely regarded as preparatory or auxiliary and typically do not, on their own, create tax presence:
Occasional business travel
Pure marketing or promotional activities
Independent agents acting in the ordinary course of their business
Short-term presence without operational continuity
Supporting functions without decision-making authority
Risk may still arise when these activities evolve or are combined with more substantive functions.