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How to do business in... France

In the latest of our series to help the Scottish business community, Gareth Magee gives an insight into how to do business in France.

Population: approx. 67 million

Currency: Euro

Capital city: Paris

GDP: approx. US$2.6 trillion

Our close neighbour, France, boasts the fifth largest economy in the world, just ahead of the UK, which sits at number six. A mere few billion separates us, as well as the channel, and perhaps this is why relations between the UK and France go back a long way and continue, albeit more successfully, today.

The major countries investing in France are, as you would expect, the USA, Germany and the UK, as well as Japan and Sweden, and moving into France is popular - more than one million businesses have been set up over the past five years - that's 550 per day. With over 20,000 subsidiaries of international companies and many, many big brands in the country, there's no shortage of 'incomers'.

However close we are, France is distinctly different when it comes to business. The French culture dictates its own way of doing things, and it's wise to work this out before heading South, hopping on the Eurostar and setting out your stall on the Champs Elysees.

Doing business in France appears quite formal and proper greetings and manners are essential. Although English is commonly used for business, use of some French language is also tremendously important. Even if you are not fluent in French, a well-researched attempt goes a long way - or for more complicated deals, having a French 'fixer' is worth its weight in gold. At the very least, always use Monsieur or Madame, until otherwise invited. However, the French formality is not all that it seems. The French are a social, warm society, and personal relationships and alliances are equally as important. As is lunch, which can last a long time.

Additionally, forget making your big push in July or August. To all intents and purposes, France is closed during these months - the rest of the year is business as usual though.

So, why do business in France? Well, for a start the level playing field is a boon. Most countries have different rules for indigenous businesses and inward investors - not France. Buying, selling, renting, acquiring, establishing - the rules are the same. Costs for property and labour are relatively low, so if you want a base in mainland Europe, France is a good option. With an economy similar to that of the UK and assuming cultural differences can be overcome, venturing into France doesn't sit far outside the comfort zone of a UK entity.

There are some tax incentives available for those investing in France, however these are mainly concentrated in areas of poor industrialisation, or where the deal involves taking over an ailing company. Innovation is also rewarded, particularly investment in research - which is partly the reason that France has attracted a healthy biotech and R&D sector. That the tax incentives are fairly niche is the flipside of the level playing field - you aren't penalised for being an overseas investor, but neither are you handsomely rewarded just for showing up.

Day-to-day business taxes and compliance are similar to the UK, but always check thresholds. France is a highly taxed country, even if the benefits do come back in other ways. The workforce too, is well protected, even though only a small number of workers are unionised. A system of staff representation from elected spokespersons and a range of work committees applies, depending on the number of employees.

So, while you might read that the French economy has plummeted, if you were in France you'd probably read the same about the UK. In relative terms, it's a robust market. With cultural differences manageable, an equitable market, and short travel times to the UK, France can be the ideal location for Scottish businesses venturing into mainland Europe, particularly those looking for a long term alliance.

Gareth Magee is a partner at Scott-Moncrieff, leading accountants and business advisors, which, through its membership of the Moore Stephens network, helps Scottish businesses realise their international potential.

The full 'Doing Business in the France' guide, including information about setting up, and tax laws, produced in association with Moore Stephens International, can be found here

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