France: Investing

FDI in Figures

After dropping as a result of the COVID-19 pandemic, FDI flows to France rebounded in 2021 (+191.4%), but remained below pre-crisis level. From USD 4.87 billion recorded in 2020, they reached USD 14.19 billion in 2021, according to the World Investment Report 2022 published by UNCTAD.

The stock of FDI in 2021 was about USD 978 billion (UNCTAD). Despite the crisis, investment in certain strategic sectors, such as R&D, health care and renewable energy, recorded a rise. According to OECD data, FDI flows to France amounted to more than USD 11 billion in the first half of 2022. In terms of FDI inward stock, France is the 13th largest recipient of FDI in the world (UNCTAD). Luxembourg, Switzerland, the Netherlands and the United Kingdom are the main investors in France and represent more than 50% of the stock of FDI (Bank of France, 2021). According to data published by the Bank of France, FDI stocks are mainly intended for the manufacturing industry, financial and insurance activities, and real estate. The Paris region has the largest concentration of multinational headquarters in Europe (Global 500 ranking from Fortune magazine). One of President Emmanuel Macron's goals is to attract more multinationals currently based in London.

According to the latest The Economist’s Business Environment ranking, France ranks 6th out of 82 countries, a slight improvement compared to the previous years. Prospects for further reforms are weak, preventing some long-standing weaknesses in the business environment, including the tax system and the labour market, from being addressed (The Economist). The country's assets are its position as the third European power, its highly qualified workforce, its vast industrial base, its agricultural resources, its world cultural reputation and its geographic location in the center of Europe.

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	11,359	30,885	36,413
FDI Stock (million USD)	952,937	944,763	896,806
Number of Greenfield Investments*	590	595	614
Value of Greenfield Investments (million USD)	15,852	13,956	20,238

Source: UNCTAD, Latest data available.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

FDI STOCKS BY COUNTRY AND BY INDUSTRY

Main Investing Countries	2020, in %
United States	18.3
Switzerland	13.4
Germany	12.3
United Kingdom	11.5
Luxembourg	9.4
Belgium	6.7
Netherlands	4.5
Italy	4.4
Spain	3.1

Main Invested Sectors	2020, in %
Manufacturing	29.1
Finance and insurance activities	25.7
Real Estate	21.3
Wholesale and retail trade	7.4
Scientific, technical and specialised activities	4.9
Information and communication	3.5
Construction	1.8

Source: Bank of France - Statistics extract, Latest data available.

Form of Company Preferred By Foreign Investors: SA: public limited company
Form of Establishment Preferred By Foreign Investors: The subsidiary
Main Foreign Companies: Consult some examples of successful investment projects in France (Invest in France).
Sources of Statistics: Ministry of the Economy, Finance and Recovery
Business France

What to consider if you invest in France

Strong Points

France is one of the top ten world economic powers and has many assets to attract foreign investors:

A strategic geographical location in the centre of Western Europe
A developed tertiary fabric (including tourism), a vast industrial base and strong agricultural production capacity
Leading infrastructure and quality public services
A skilled and productive workforce (2nd European country in terms of hourly productivity) and a dynamic demographics
An investment-friendly business environment and a relatively stable and transparent legal framework
A diversified economy that is full of a wide range of players ranging from large multinationals to high-tech start-ups (French tech).

Weak Points

The main obstacles to attracting FDI in the French economy are:

One of the highest corporate tax rates in the world
High cost of labour
Heaviness of the tax and work regimes
High unemployment rate (7.9% in 2021, INSEE) which particularly affects young people and older workers
Growing inequalities
High public spending fuelling already significant public debt (112.3% of GDP in 2021, IMF)
A low level of SMEs operating for export or investing in innovation

Government Measures to Motivate or Restrict FDI

Many reforms have emerged in recent years with the aim of revitalizing the national economy and attracting foreign investors. Here are the main ones:

The number of administrative formalities for the establishment of foreign companies has been reduced.
The establishment of a tax credit program of 20 billion EUR (competitiveness tax credit), the abolition of the solidarity tax and the creation of the research tax credit and incentives for young innovative companies.
The reform of the labour legislation reinforcing vocational training and adding more flexibility to the labour market.
The reduction of the corporate income tax rate from 33% to 25% by 2022.
Competitive taxation of research and temporary exemption arrangements for innovative start-ups and new businesses.
Foreign companies have access to the same subsidies as French companies (support for productive investment, R&D, vocational training, job creation, etc.).

Protection of Foreign Investment

Bilateral Investment Conventions Signed By France: France has signed bilateral investment agreements with 115 countries.
To see the list, click here.
International Controversies Registered By UNCTAD: The ISDS Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements. France is involved in 51 cases as Home State of claimant and in 1 cases as Respondent State.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International court of arbitration, International chamber of commerce
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: France is a signatory to the Convention of the MIGA.

Country Comparison For the Protection of Investors	France	OECD	United States	Germany
Index of Transaction Transparency*	8.0	6.5	7.0	5.0
Index of Manager’s Responsibility**	3.0	5.3	9.0	5.0
Index of Shareholders’ Power***	6.0	7.3	9.0	5.0

Source: The World Bank - Doing Business, Latest data available.

Procedures Relative to Foreign Investment

Freedom of Establishment: Yes. The formal investment regime remains among the least restrictive in the world.
Acquisition of Holdings: Possible.
Obligation to Declare: All foreign investments must be declared to the French Central Bank (for statistical reasons). The majority of foreign investments must also be declared to the Public Treasury, which can check whether or not prior authorisation is required. In France, the FDI screening mechanism is based on the prior authorisation of the Minister of the Economy, the details of the procedure are specified in Article L151-3 of the French Monetary and Financial Code. The prior authorisation of the Minister of Economy is required for any foreign investment in an activity involving "sensitive industries" (e.g. energy, water supply and public health). A Decree dated November 29, 2018 that became effective on January 1, 2019 has enlarged the list of sectors in which foreign investments must be subject to prior authorization to include aerospace, cybersecurity, artificial intelligence, robotics, additive manufacturing, semi-conductors, hosting of sensitive data. In particular, the law on the growth and transformation of businesses, known in France as the PACTE law, published in the Official Gazette on 23 May 2019, reshaped and extended the French prior authorisation procedure, granting the Minister of the Economy the powers of injunction. The PACTE law was supplemented by a decree and an order of 31 December 2019. In the context of the current COVID-19 pandemic, the control of foreign investments is being enhanced. New provisions have been adopted, resulting from a decree and order dated 22 July 2020, include both permanent and temporary measures aimed at protecting the most sensitive French companies.
Competent Organisation For the Declaration: General Directorate of the Treasury of the Ministry of Economy, Finance and Recovery
Requests For Specific Authorisations: Some sectors are subject to procedures to obtain prior authorisation: gambling; private security; research and development activities on pathogenic or toxic agents; phone-tapping systems; information technologies; information systems security; goods and technologies with a dual use; means of cryptology in the digital economy; companies holding national defence secrets; the arms trade and companies, which have concluded a contract with the Ministry of Defence.

Office Real Estate and Land Ownership

Possible Temporary Solutions: There are several temporary solutions: Instant Offices or Regus.
The Possibility of Buying Land and Industrial and Commercial Buildings: Foreign-registered or foreign-controlled entities are free to carry out real estate investments in France. It is possible to buy freehold or leasehold, to build industrial and commercial premises or to buy through a real estate company. Although it should very rarely apply to real estate investments in France, the Law on Growth and Transformation of Businesses (PACTE) of 23 May 2019 and the related decree of 31 December 2019 have strengthened and extended the procedure for prior authorisation of foreign investments in France (IEF), to better protect strategic sectors such as artificial intelligence or robotics.
Risk of Expropriation: An expropriation procedure entitles local or national public authorities to purchase assets for a planned transaction that is declared to be in the public interest. According to French law, foreign investors are entitled to adequate and promptly paid compensation if they are victims of expropriation.

Investment Aid

Forms of Aid

Support from the French authorities comes in various forms: subsidized or interest-free loans, grants for physical investment projects and R&D, reduced real estate costs, tax exemptions, exemptions from employer social security contributions, tax credits, covering certain expenses (e.g. training costs for new employees, etc.), government guarantees and equity investments.

Privileged Domains

Job creation, regional development, the food industry domain, protection of the environment, aid for Research and Development, Competitiveness clusters.

Privileged Geographical Zones

Regions eligible for the EU regional development subsidies.
Regions concerned by the European Regional Development Fund.

Free-trade zones

Competitiveness clusters in France
Urban free zones in France (ZFU)

Public aid and funding organisations

The French Ministry for the Economy and Finance; local administrations (regions, departments, town councils)
The EU through the European Regional Development Fund
The Business France
Bpifrance
CCI Paris Ile de France

Investment Opportunities

The Key Sectors of the National Economy: Aerospace, automobile, food industry, pharmaceuticals, luxury and fashion industry, micro electrotechnology, logistics, health equipment.
High Potential Sectors: Biotechnologies, telecommunications, firm services, information and communication technologies, environment.
Privatization Programmes: Electricity, gas, rail transport and postal services. The government has not recently announced plans to privatise any of the remaining state-owned enterprises, but it has drawn down its shareholdings in several companies.
Tenders, Projects and Public Procurement: BOAMP, French Public Procurements (in French)
Tenders Info, Tenders in France
Ted - European public markets, Business opportunities in the EU
MPF, Public markets and projects in France

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: The French government still maintains legal monopolies in public service companies: the rail network (SNCF), public transport in Paris (RATP), tobacco manufacturing and distribution (Altaldis) nuclear plants (EDF), defence, the media, energy, air transportation, aerospace.

Finding Assistance For Further Information

Investment Aid Agency: Business France (national agency supporting the international development of the French economy)
Other Useful Resources: Bpifrance (The French Public Investment Bank)
Guichet Entreprises (French government agency)
Les-Aides.fr (Online guide on support to businesses)
Doing Business Guides: Invest in France
Doing business in France (Guide by Thomson Reuters Practical Law)
Doing Business in France (Trade Commissioner Service, Government of Canada)
France's foreign investment regime (Pinsent Masons)

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