THE ‘MACRON EFFECT’ MAKING FRANCE AN ATTRACTIVE PLACE FOR FOREIGN DIRECT INVESTMENT
Emmanuel Macron took office as the President of France on 14 May 2017, becoming the youngest president in French history and youngest head of state since Napoleon. His victory was based on a manifesto of significant social and economic reform. As his program has started to take effect, Macron has been hailed as having re-launched the French economy as an attractive destination for foreign direct investment – the so called “Macron Effect”.
SO WHY INVEST IN FRANCE?
France has always been a potential launch pad into the rest of mainland Europe – but perhaps even more so now than before the UK Brexit vote. French GDP is growing at +2.5%, a faster rate than at any time since the financial crisis of 2010. Economic growth is rapidly reducing its budget deficit. Confidence indicators such as a recent American Chamber of Commerce survey showed that 52% of its French members were planning to add more staff.
Some say that the structural reforms that Macron is introducing have been a long time coming and while there might be a turbulent labour relations environment ahead, many believe it is a price worth paying. Key Macron reforms now starting to bite include:
- Radical changes and a big government investment in training and education
- A national focus and support around development of new technologies and innovation
- A reduction in corporation tax from 33% to 25%.
- Introduction of a climate plan and shift towards green energy
- A five-year tax strategy targeted at encouraging investment and entrepreneurialism
Most controversially is a transformation of labour laws to allow greater flexibility for employers. This includes simplifying dismissal procedures, easing regulations around post redundancy obligations, fixing the costs associated with unfair dismissal claims and increased flexibility in the use of contract labour.
The French government will pay foreign investors a cash grant known as a regional development subsidy (referred to as PAT) which could be as much as 15,000 euros per job created. There are a range of other grants and subsidies administered at a national or regional level.
There are income tax reductions and exemptions for companies setting up in ‘special development’ zones such as:
- Delayed payment of first four corporate tax installments for businesses not in special development zones
- Exemption from IFA for the first three years for certain types of companies
- Twenty per cent corporate or income tax reduction plus €915 tax reduction for businesses belonging to a ‘centre de gestion’
- Reduction in corporate tax to 15.45 per cent on profits up to €38,120 under certain conditions
- Exemption from ‘taxe professionnelle,’ property tax and other local taxes for the first two years
- Tax benefits for businesses investing at least 15 per cent of their turnover in research and development.
If you are a business looking to launch into Europe, or are thinking of expanding across borders and see France as a potential growth opportunity, the idea has recently become a whole lot more attractive. For information about this opportunity or all matters French contact….
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