France — Hiring & Payroll Setup

A foreign company hiring employees in France may create a permanent establishment (PE) — a taxable presence that subjects the company to French corporate income tax on profits attributable to the PE, even if the company has not registered a French entity. The PE determination turns on whether the foreign company "operates an enterprise in France" (exploite une entreprise en France) under Article 209-I of the Code général des impôts (CGI), read together with France's tax treaties, which follow the OECD Model Tax Convention Article 5.

## Domestic law: Article 209-I CGI and the three PE pathways

Under Article 209-I CGI, a foreign company is subject to French corporate income tax on profits realized "in enterprises operated in France" (dans les entreprises exploitées en France) or whose taxation is attributed to France by treaty. French administrative case law recognizes three pathways to a taxable presence: (1) a fixed place of business (établissement) in France; (2) a dependent agent (représentant dépendant) in France who habitually exercises authority to conclude contracts on behalf of the foreign company; or (3) a complete commercial cycle (cycle commercial complet) performed in France — all essential phases of a commercial operation (sourcing, production, sale) carried out in French territory, even if one step occurs abroad.

The French tax administration uses a bundle-of-indicators (faisceau d'indices) analysis, examining:

• physical premises regularly used in France (office, co-working space, warehouse);
• employees hired under local French contracts or seconded to France;
• French bank accounts, business cards, or email addresses;
• sales functions, marketing activities, or post-sale services performed in France; and
• contract signature, negotiation, or pricing decisions made by France-based personnel.

Hiring employees in France — especially those with commercial authority or customer-facing roles — is a strong indicator under the bundle-of-indicators test. Even without a registered entity, the French tax authorities may deem a PE to exist based on the operational reality.

## Treaty framework: OECD Model Article 5

When a tax treaty applies (France has comprehensive treaty coverage with EU/EEA states and major trading partners), the PE definition in the treaty governs. Most French treaties follow OECD Model Article 5, which defines a PE as "a fixed place of business through which the business of an enterprise is wholly or partly carried on." The U.S.–France Convention, for example, incorporates the OECD Model definition at Article 5, specifying that a PE includes "a place of management; a branch; an office; a factory; a workshop" and that a construction site or project constitutes a PE only if it lasts more than twelve months.

Fixed-place PE requires (i) a fixed location (office, branch, factory), (ii) a degree of permanence, and (iii) business activity carried on through that place. A single employee working from home can constitute a fixed place if the home office is at the disposal of the enterprise and business activity is regularly performed there.

Dependent-agent PE arises under treaty Article 5(5) if a person habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise, in the name of the foreign company. France takes an expansive view: in the Conversant ruling (Conseil d'État, 11 December 2020, no. 420174), the French Supreme Administrative Court held that a French subsidiary providing sales-support services to its Irish parent could constitute a dependent-agent PE when the subsidiary's activity went beyond preparatory or auxiliary functions and effectively secured contracts for the parent.

## Practical implications: EOR vs. entity

Many foreign companies use an Employer of Record (EOR) structure to hire in France without creating a PE. Under an EOR arrangement, a third-party EOR becomes the legal employer on paper and handles payroll, social contributions, and employment-law compliance, while the foreign company directs the work. An EOR does not eliminate PE risk if the employee's activities — particularly sales, negotiation, or contract authority — are attributed to the foreign company. The French tax administration looks to economic substance: if the foreign company benefits from the employee's revenue-generating activity and exercises effective control, a PE may still be deemed to exist.

Registering a French legal entity (SAS, SARL, or branch) provides certainty and simplifies payroll setup, but triggers full French corporate income tax on the entity's profits, annual financial-statement filing, and audit requirements for larger entities. The choice between EOR and entity depends on the scale of activity, the employee's role (back-office support vs. sales), and the duration of the French presence.

## Timing and burden of proof

There is no bright-line employee count or revenue threshold. A single employee with commercial authority can trigger PE. The burden of proof in a tax audit rests on the taxpayer to demonstrate that the French activity was preparatory or auxiliary, or that contracts were concluded and negotiated outside France. French tax authorities can assess back taxes for up to six years for an undeclared PE, plus penalties of up to 80% (or 100% if profits were distributed to an unidentified beneficiary) and interest.

Source: Code général des impôts, art. 209-I Source: U.S.–France Income Tax Convention, Technical Explanation, art. 5

French employment law distinguishes sharply between the contrat à durée indéterminée (CDI) — the permanent, indefinite-term contract — and the contrat à durée déterminée (CDD) — the fixed-term contract. The CDI is the forme normale et générale de la relation de travail (the normal and general form of the employment relationship) under Article L1221-2 of the Code du travail, and French law presumes any employment relationship to be a CDI unless the parties have explicitly agreed to a CDD and satisfied strict formal and substantive requirements. The distinction is foundational: hiring on a CDD triggers mandatory written-contract rules and narrow lawful-grounds tests, while a full-time CDI may be entered into orally (though written contracts remain advisable in practice).

## CDI: no mandatory written contract for full-time employees (but written documentation now required)

Under Article L1221-1 of the Code du travail, le contrat de travail est soumis aux règles du droit commun and peut être établi selon les formes que les parties contractantes décident d'adopter — an employment contract is subject to the rules of ordinary contract law and may be established in whatever form the parties choose. For a full-time CDI, French law does not impose a mandatory written contract. The employment relationship can be created orally or implicitly, proven by any means (pay slips, emails, witness testimony).

However, since 1 December 2023, the employer must provide the employee hired under a CDI with written information about the main elements of the employment relationship. This requirement implements the EU Directive 2019/1152 on transparent and predictable working conditions. Article L1221-5-1 of the Code du travail (created by Loi n° 2023-171 of 9 March 2023) requires the employer to provide a written document — or a set of documents — containing specified information. The implementing decree (Décret n° 2023-1307 of 28 November 2023) and regulatory articles (Articles R1221-34 and following) list the required details, which include the identity of the parties, place of work, job title or description, start date, trial-period duration and conditions, components of pay and payment frequency, normal working hours, paid-leave entitlement, training rights, and termination-procedure details. The employer must provide the core information during the first week of work and supplementary information within one month. Although this is not technically a "contract," it serves a similar documentary function and is enforceable: under Article L1221-5-1, an employee who does not receive the required information may put the employer on notice (mise en demeure) and, if the employer does not comply, bring the matter before the labour court (conseil de prud'hommes).

In practice, even though a full-time CDI may be formed orally, written CDI contracts are near-universal among employers hiring in France — both French and foreign. A written contract avoids proof problems, defines the trial period (which must be in writing to be enforceable under Article L1221-23), specifies the applicable convention collective (collective bargaining agreement), and includes clauses such as mobility, non-competition, and intellectual-property assignment that must be written to be valid under French case law.

## Part-time contracts must be in writing

A part-time CDI must be in writing. Under Article L3123-6 of the Code du travail, an oral or unsigned part-time CDI is deemed to be a full-time CDI, exposing the employer to back-pay claims for the difference between part-time and full-time hours.

## CDD: mandatory written contract with precise motif, or the contract becomes a CDI

A CDD may be used only for une tâche précise et temporaire (a precise and temporary task) and only in narrowly enumerated circumstances set out in Article L1242-2 of the Code du travail, notably: replacement of an absent employee; temporary increase in activity (accroissement temporaire d'activité); seasonal work (emplois à caractère saisonnier); employment of persons without a job under government-supported programs; or, in limited sectors, work of an inherently temporary nature covered by an extended collective agreement. Article L1242-1 prohibits a CDD from being used to fill a position tied to the normal, permanent activity of the company (ne peut avoir ni pour objet ni pour effet de pourvoir durablement un emploi lié à l'activité normale et permanente de l'entreprise).

Article L1242-12 requires every CDD to be in writing (établi par écrit) and to state the precise reason (comporte la définition précise de son motif) justifying the use of a fixed-term contract. A défaut, il est réputé conclu pour une durée indéterminée — failing which, the contract is deemed to be a CDI. The written contract must be transmitted to the employee no later than two business days after hiring (Article L1242-13), and it must specify the information required by Article L1242-12 and the regulatory provisions at Articles D1242-1 et seq., including:

• the precise reason (motif précis) for using a CDD (replacement, temporary surge, seasonal need, etc.);
• the name and job title of the person being replaced, if the CDD is concluded to replace an absent employee;
• the start date and, if the contract has a fixed term, the end date (or the objective event triggering termination if the contract does not have a calendar end date);
• any trial-period duration;
• the applicable collective agreement;
• the amount of remuneration and its components;
• the job title and description of the work; and
• the workplace location.

A CDD may be renewed once, for a combined maximum term that depends on the reason for the CDD — generally 18 months, up to 24 months for certain replacement situations under Articles L1242-8 and L1243-13.

## Consequences of CDD non-compliance: requalification as CDI and criminal penalties

If the employer fails to provide a written CDD or omits the required motif précis, the employee may bring an action before the labour court to have the contract requalified as a CDI (requalification en CDI), entitling the employee to the greater protections of indefinite-term employment (including statutory notice, severance, and unfair-dismissal protection under Articles L1232-1 and L1235-1). Requalification is one of the most common grounds for labour-court litigation in France and typically results in damages awarded to the employee; the quantum varies by case but often reflects several months' salary for wrongful treatment as a fixed-term worker.

Additionally, the employer who uses a CDD or temporary-work contract (intérim) without a written agreement faces a criminal fine of up to €3,750 (€7,500 for repeat offences) under Article L1248-6 of the Code du travail.

## Language requirement: all written contracts must be in French

Whether CDI or CDD, any employment contract drawn up in writing must be drafted in French under Article L1221-3 of the Code du travail. When a job title or technical term has no French equivalent, the contract must include une explication en français du terme étranger — a French-language explanation of the foreign term. A foreign employee may request a translation of the contract into their own language, but the French version governs. If the employer relies on clauses in a contract written in breach of Article L1221-3, those clauses are unenforceable against the employee (l'employeur ne peut se prévaloir à l'encontre du salarié auquel elles feraient grief).

## Practical implications for foreign employers

For a foreign company hiring its first employee in France, the choice between CDI and CDD is strategic and compliance-sensitive. A CDD offers apparent flexibility but is hedged by strict formal requirements, narrow lawful grounds, and severe penalties for non-compliance. A CDI provides certainty, aligns with the French legal presumption, and avoids requalification risk, though it requires the employer to follow the statutory dismissal process (pre-dismissal interview, written notice with stated grounds, statutory notice period) to terminate. Most foreign employers hiring business-critical roles in France use the CDI form, reserving the CDD for genuine temporary needs such as maternity-leave replacement, a discrete project with a defined end, or a seasonal surge.

Source: Code du travail, art. L1221-1 Source: Code du travail, art. L1221-2 Source: Code du travail, art. L1221-3 Source: Code du travail, art. L1221-5-1 (LOI n° 2023-171 du 9 mars 2023) Source: Code du travail, art. L1242-1 and L1242-2 (CDD lawful grounds) Source: Code du travail, art. L1242-12 (CDD written requirement) Source: Code du travail, art. L1242-13 (CDD transmission deadline)

Before an employee may commence work in France, the employer must complete two mandatory administrative steps that together trigger social-security coverage, payroll registration, and—for a first-time employer in France—assignment of a SIRET business identifier. These are: (1) registration with URSSAF (Union de recouvrement des cotisations de sécurité sociale et d'allocations familiales), the French social-security collection agency, and (2) submission of the déclaration préalable à l'embauche (DPAE), the pre-hiring declaration that must be filed for every employee no later than the day before work begins. Failure to complete either step before the employee's start date exposes the employer to administrative penalties and criminal liability for undeclared work (travail dissimulé).

## URSSAF registration: foreign employers and the Foreign Companies Service

A foreign employer with no registered establishment in France that hires one or more employees in France must register with the URSSAF Foreign Companies Service (Service Firmes Étrangères, or SFE). Under Article L243-1-2 of the Code de la sécurité sociale, any employer whose employees are covered by the French social-security scheme is liable for the associated contributions, even if the employer has no French legal entity or fixed place of business. The URSSAF Foreign Companies Service acts as the single contact for non-French undertakings employing individuals in France, handling both social-security contribution collection and payroll formalities.

To register, the foreign employer creates an account on the Foreign Companies Service portal and completes the EO form (employer registration form). This registration triggers the assignment of a SIRET number by INSEE (the French national statistics institute). The SIRET is the employer's unique business identifier in France; it is required for the DPAE and for all subsequent payroll declarations and contribution payments. A foreign employer may not submit a valid DPAE or pay social-security contributions until it has received its SIRET.

Once registered, the foreign employer uses the Foreign Companies portal to file DPAE declarations, calculate monthly payroll contributions (which include social-security, unemployment, pension, and supplementary-pension contributions), and remit payments to URSSAF. The Foreign Companies Service consolidates all contributions and distributes them to the relevant social-protection bodies, including the health-insurance fund (Assurance Maladie), unemployment-insurance scheme (France Travail, formerly Pôle emploi), and supplementary-pension institutions (AGIRC-ARRCO). For employers with fewer than 20 employees, the Foreign Companies Service offers the Titre Firmes Étrangères (TFE) simplified system, which allows the employer to complete DPAE, register employees, and declare payroll contributions in one integrated monthly return.

A French employer with a registered establishment (branch, subsidiary, or société such as an SAS or SARL) registers with the regional URSSAF office corresponding to the geographic location of its establishment. The regional URSSAF assigns the SIRET during company-formation registration at the Guichet unique des formalités des entreprises (the one-stop business-formalities portal, formalites.entreprises.gouv.fr), which replaced the older CFE system in January 2023. The registered employer then files DPAE declarations with the URSSAF office that covers the workplace location of the employee being hired.

## Déclaration préalable à l'embauche (DPAE): mandatory pre-hiring declaration

Under Article L1221-10 of the Code du travail, "l'embauche d'un salarié ne peut intervenir qu'après déclaration nominative accomplie par l'employeur auprès des organismes de protection sociale désignés à cet effet"—an employee's hiring may not take place except after a nominative declaration by the employer to the designated social-protection agency. This declaration is the DPAE. The employer must submit the DPAE no later than the last working day before the employee's start date, and it may be filed as early as eight calendar days before the employee begins work (Article R1221-4 of the Code du travail).

The DPAE is a single administrative filing that consolidates six distinct employment formalities into one submission:

1. Employer immatriculation at URSSAF, if this is the employer's first hire in France (triggering the assignment of a SIRET and opening an employer account);
2. Employee immatriculation with the social-security health-insurance fund (Caisse Primaire d'Assurance Maladie, or CPAM), triggering the assignment or update of the employee's social-security number (numéro de sécurité sociale, also called the NIR);
3. Affiliation of the employer with the unemployment-insurance scheme (France Travail), effective automatically upon the first DPAE;
4. Enrollment of the employer with a service de santé au travail (occupational-health service), which is responsible for arranging mandatory pre-employment or in-employment health visits;
5. Notification of the upcoming occupational-health visit for the employee; and
6. Pre-establishment of the annual payroll data return (formerly DADS, now subsumed into the monthly DSN—Déclaration Sociale Nominative—electronic payroll declaration).

The DPAE must include the following information, as specified in Article R1221-1 of the Code du travail:

• employer name or company name, business activity code (APE), address, and SIRET number;
• employee's surname, first name(s), sex, date and place of birth, and social-security number (NIR) if already assigned (foreign employees may not yet have a NIR; the employer may file the DPAE without it, and URSSAF will initiate the immatriculation process);
• date and hour of commencement of work (the exact start time must be declared to the hour; this precision is required to combat undeclared work);
• for CDI and CDD contracts longer than six months: the nature and duration of the contract and any trial-period duration;
• for agricultural employees: additional details on contract type and duration.

The DPAE is filed electronically through the URSSAF employer portal (urssaf.fr for French-registered employers, or via the Foreign Companies Service portal for foreign employers), the Net-Entreprises portal (net-entreprises.fr), the government-run multi-agency business-declaration platform, or integrated payroll software that transmits the DPAE electronically on the employer's behalf.

Employers that filed more than 50 DPAE declarations in the prior calendar year must file all subsequent DPAE declarations electronically (Article D1221-12-1 of the Code du travail). Smaller employers may alternatively file by fax or registered post, though electronic filing is by far the most common practice.

After submission, URSSAF or the MSA (for agricultural employers) issues an acknowledgment of receipt (accusé de réception). The employer must provide the employee with a copy of the DPAE or the acknowledgment of receipt on or before the employee's start date (Article R1221-8). This obligation may be satisfied by including in the written employment contract a reference to the DPAE and the name of the agency to which it was sent.

## Penalties for failure to file the DPAE or late filing

Failure to file a DPAE before the employee begins work is a criminal offense under Article L8221-5 of the Code du travail, which defines travail dissimulé par dissimulation d'emploi salarié (concealment of salaried employment) to include intentionally evading the DPAE requirement. The offense is punishable by up to three years' imprisonment and a fine of €45,000 for an individual, or €225,000 for a legal entity, plus additional penalties including seizure of vehicles or equipment used in the violation and exclusion from public-procurement contracts (Articles L8224-1 and L8224-5).

Even in the absence of criminal prosecution, Article L1221-11 imposes an administrative penalty for DPAE non-compliance equal to 300 times the minimum-guarantee hourly rate (taux horaire du minimum garanti, a statutory reference wage currently set at €4.15 per hour as of 1 January 2025). The penalty is therefore €1,245 per undeclared employee. Labour inspectors (agents de contrôle under Article L8271-7) may issue the penalty notice upon discovery of an undeclared employee during a workplace inspection.

Employers required to file electronically (those exceeding 50 DPAE per year) who fail to do so face a separate administrative penalty of 0.5% of the monthly social-security ceiling (€37.50 per employee, based on the 2026 monthly ceiling of €3,864) under Article D1221-13.

## Practical workflow for foreign employers: registration, SIRET, then DPAE

For a foreign employer with no French establishment, the operational sequence is:

1. Register with the Foreign Companies Service and submit the EO form;
2. Receive the SIRET number from INSEE (typically within a few business days);
3. File the DPAE for each employee through the Foreign Companies portal, no earlier than eight days before and no later than the last working day before the employee's start date;
4. Issue the employment contract (CDI or CDD, as applicable) and provide the employee with a copy of the DPAE acknowledgment or incorporate the DPAE reference into the contract;
5. File monthly social-security declarations (via the Foreign Companies portal) and remit contributions by the 15th of the following month; and
6. Register with supplementary institutions as required by the applicable convention collective (collective bargaining agreement): AGIRC-ARRCO for supplementary pension, and any sector-specific health or provident fund (mutuelle or prévoyance) mandated by the agreement.

The Foreign Companies Service simplifies this workflow by consolidating payroll declarations and contributions into a single monthly return, but it does not eliminate the obligation to file a separate DPAE for each new hire.

Source: Code du travail, art. L1221-10 (DPAE requirement) Source: Code du travail, art. L1221-11 (administrative penalty for DPAE non-compliance) Source: Code du travail, art. R1221-1 (DPAE required information) Source: Code du travail, art. R1221-8 (copy to employee) Source: Code du travail, art. L8221-5 (criminal offense: travail dissimulé) Source: Titre Firmes Étrangères (TFE) — Foreign Companies Service registration and payroll system