Consultants, artists, athletes, executives: why billing your services through a foreign company does not move the tax out of France.
A consultant, an artist, an athlete or an executive exercises their talent in France or from France, but the fees are collected by a company set up abroad, often in a low-tax jurisdiction, of which the individual is the shareholder and the driving force. The scheme looks elegant: the remuneration appears to escape French tax, the company accumulates cash, the individual later draws dividends or a modest salary. It is precisely this type of arrangement that is targeted by an old and formidably effective anti-avoidance device, article 155 A of the French General Tax Code, whose vigour recent case law confirms while refining its contours.
The logic of the text is simple and powerful: where remuneration is collected abroad for services actually rendered by a person established or domiciled in France, the authorities may tax those sums directly in that person's hands, as if the foreign company did not exist. The interposed company becomes transparent. The central question, for all those who structure their activity internationally, is therefore to what extent the interposition of a foreign company withstands this mechanism, and whether a tax treaty can defeat it.
We first set out the general economy of article 155 A and its scope (I), then the only truly effective ground of defence, that of the foreign company's substance and of the category of taxation (II), before examining how the device interacts with tax treaties and the safeguards available to the taxpayer (III).
I. Article 155 A, a broad anti-avoidance device
A. The legislative purpose: neutralising the relay company
Article 155 A of the French General Tax Code (CGI) was designed to counter a scheme long identified by tax authorities, which English-language commentators call the rent-a-star-company. The principle consists in interposing, between the service provider and the client, a company established in a tax-favourable jurisdiction, which invoices the services and collects the price, whereas the service is in reality rendered by a specific individual. Without a corrective device, the remuneration for the work would escape French income tax to lodge itself in a lightly taxed structure, the profit being drawn by the individual only through deferred and controlled distributions. The legislature intended to restore economic reality by taxing the remuneration where the service is actually produced.
The Constitutional Council upheld this device in its decision no. 2010-70 QPC of 26 November 2010, finding it compliant with the Constitution subject to one essential interpretive reservation: its application may not result in subjecting the same sum to income tax twice. This reservation, which prohibits the economic double taxation of a single flow, is a central safeguard to which we return below. The device is therefore not an unlimited weapon; it operates within a constitutional framework that bounds its effects, while retaining a considerable reach against arrangements devoid of substance.
B. The three cases of application and the person taxed
Paragraph I of article 155 A covers sums received by a person established outside France in remuneration for services rendered by one or more persons domiciled or established in France. Those sums are taxable in the name of the latter in three alternative situations, that is, as soon as any one of them is met. The first is where the French service provider controls, directly or indirectly, the person collecting the remuneration. The second applies where it is not established that this person predominantly carries on an industrial or commercial activity other than the provision of services. The third covers the case where the person collecting is established in a State or territory with a privileged tax regime within the meaning of article 238 A of the CGI.
The control criterion. The first situation is, in practice, the most frequent. As soon as the service provider owns or drives the foreign company that invoices the services, the control condition is satisfied, and the authorities need prove nothing further. In other words, the professional who creates a structure abroad, of which they are the principal shareholder, to lodge their fees, falls squarely within the text from the outset. Indirect ownership, through chains of participation or interposed persons, is expressly covered, which deprives of effect any cosmetic arrangement seeking to conceal control behind nominees or successive holding companies.
The person taxed and the basis. Where the device applies, the tax is assessed in the name of the person who rendered the service, not of the foreign company. The sums are taxed in the income category corresponding to the nature of the activity carried on: employment income where there is a relationship of subordination or management functions, non-commercial profits for an independent professional activity, industrial and commercial profits where appropriate. Paragraph II of the same article completes the device by covering services rendered in France, so as to capture situations where the provider is not resident but operates on French territory. The combination of these two branches gives the text a particularly broad scope, which extends beyond the sole case of the French resident.
II. The foreign company's substance, the only real line of defence
A. Does the company render a service of its own, or is it merely a screen?
The true line of defence against article 155 A lies neither in the formal regularity of the contracts nor in the existence of proper invoicing, but in demonstrating that the foreign company carries on an activity of its own, distinct from the mere personal performance of its driving force. Case law is settled on this point: the interposition of a foreign company does not, on its own, suffice to set aside the text where the service in reality flows from the talent, know-how or personal work of a specific individual. The court asks whether the company has the human and material means enabling it to provide, by itself, a service that is not reducible to the individual contribution of its shareholder.
A letterbox is not an activity. Recent decisions illustrate the severity of the analysis. A company that has abroad only a domiciliation and a few secretarial tasks cannot be regarded as rendering a service of its own; its involvement remains purely formal, and the remuneration is taxed in the hands of the actual provider. The defence can succeed only if the company employs qualified staff, bears operating costs consistent with a real activity, assumes an economic risk and provides added value attributable to it in its own right. Failing that, the authorities and the court find that the structure is no more than a cash receptacle and apply the device without hesitation.
B. The risk of recharacterisation as salary: the management-fees case
A particularly sensitive variant of the device concerns management fees invoiced by a foreign company to a French operating company for management services. Where the director, a French tax resident, interposes a foreign company they control to invoice management and leadership services that they in fact perform personally, the authorities reintegrate the corresponding sums into their taxable income, in the employment-income category, on the combined basis of articles 155 A and 79 of the CGI. The foreign structure cannot then act as a screen, because management functions are, by nature, attached to the person of the director.
The shift in the burden of proof. Where the director controls the interposed structure and the invoiced services correspond to functions they perform themselves, the burden of proving an activity of the foreign company that is its own and distinct falls on the director. They must then establish, through concrete evidence, that the company has an autonomous organisation enabling it to provide a service that does not merge with their personal work. That demonstration is rarely easy, since management functions presuppose, by hypothesis, a personal involvement. Recharacterisation as salary carries heavy consequences, both on the quantum of income tax and on social contributions and, where applicable, on the exceptional contribution on high incomes.
III. Interaction with tax treaties and taxpayer safeguards
A. The tax treaty is not neutralised as a matter of principle
Article 155 A being a provision of domestic law, its application remains subject to compliance with bilateral tax treaties, which the taxpayer is entitled to invoke. The reasoning follows the principle of subsidiarity: the tax must first find a basis in domestic law, then be tested against the treaty concluded between France and the State of residence of the taxpayer concerned. The court cannot set the treaty aside merely because the device targets a taxpayer other than the interposed company. Recent case law of the Conseil d'État, which set aside a court of appeal for failing to examine whether the interposed company had a permanent establishment in France, marks a heightened requirement of rigour in this interaction.
The permanent establishment stake. Where a treaty allocates the right to tax the profits of an enterprise to its State of residence alone, save where the activity is carried on in the other State through a permanent establishment (établissement stable), the court must verify whether the enterprise operated to render the services had such an establishment in France. If so, French taxation can be implemented, either through corporate income tax or, through article 155 A, through the individual's income tax. The boundary between these two bases is thin, and the characterisation retained depends closely on the concrete configuration, which calls for careful case-by-case analysis.
B. The prohibition of double taxation and the limits of the device
The interpretive reservation laid down by the Constitutional Council offers effective protection: the application of article 155 A cannot result in taxing the same sum twice. Where the foreign company has already been taxed on the remuneration, or where the individual has received and declared a corresponding income, the taxpayer may rely on this reservation to avoid a superposition of taxes on a single flow. Conversely, the tax treaty may be declared unenforceable where no effective double taxation is established, for instance because the remuneration bore no tax in the State of the company's establishment. The treaty argument therefore has force only if it rests on real double taxation, not on a mere potentiality.
C. Practical recommendations: structure substance or accept taxation
Check upstream for an activity of the company's own. Before interposing a foreign company to invoice services, one must honestly ask what added value that company provides by itself. If the service rests entirely on the talent or work of a specific individual, interposition offers no protection and exposes the taxpayer to a reassessment with late-payment interest and, where applicable, surcharges. Structuring makes sense only if the company has an organisation, means and staff enabling it to render a service that does not merge with the individual contribution of its driving force.
Document economic reality and the tax actually paid. Where the foreign presence is justified by a real activity, traceability becomes decisive: contracts reflecting a credible allocation of roles, evidence of the means employed, justification of the price of the services against market practice, and above all proof of the tax actually paid abroad, which conditions the useful invocation of the treaty and of the no-double-taxation reservation. We assist our clients in building this documentation, which must be contemporaneous with the activity and not reconstructed at the time of an audit.
Anticipate recharacterisation for personal services. For directors, consultants and talent professions, prudence dictates starting from the premise that services attached to the person will be taxed in France, and calibrating the structuring accordingly. A simple and fiscally accepted organisation is preferable to a sophisticated arrangement that will collapse at the first audit, exposing the individual to taxation as employment income increased by penalties. Legal certainty is built upstream, through a clear-eyed analysis of the real nature of the service.
Conclusion
Article 155 A of the CGI remains one of the most effective anti-avoidance instruments in French tax law, because it reaches economic reality beyond the legal wrapping. The interposition of a foreign company moves the tax out of France only if that company carries on an activity of its own, endowed with genuine substance; failing that, the remuneration is taxed in the hands of the actual provider, in the category corresponding to the activity, without the corporate form acting as a screen.
Our analysis is unambiguous: schemes consisting in the mere collection abroad of talent or management remuneration are today devoid of any security. Recent case law, far from softening, reinforces the substance requirement and refines the device's interaction with tax treaties, without depriving the taxpayer of the safeguards that are the invocation of the treaty and the prohibition of double taxation.
Our recommendation is clear: before lodging fees in a foreign company, have the real nature of the service and the structure's substance analysed; if the service is personal, give up the screen and organise an accepted tax treatment, because the cost of a reassessment, interest and surcharges included, far exceeds the hoped-for saving.
Frequently asked questions
Can I bill my services through a foreign company without being taxed in France?
Only if the foreign company carries on an activity of its own, distinct from your personal work, with real substance. If you control that company and the service rests on your individual talent or know-how, article 155 A of the CGI allows the authorities to tax the remuneration directly in your hands, as if the company did not exist. The interposition of a structure, even properly incorporated and invoicing correctly, never suffices on its own to set aside French tax.
What are the conditions for applying article 155 A?
Sums collected abroad for services rendered by a person established in France are taxable in that person's name in three alternative cases: if they directly or indirectly control the company that collects; if it is not established that the company predominantly carries on an industrial or commercial activity other than the provision of services; or if the company is established in a State with a privileged tax regime. A single one of these cases suffices. In practice, control of the company by the provider is the most frequent situation.
Are management fees invoiced by my foreign company concerned?
Yes. Where a director resident in France interposes a foreign company they control to invoice management services that they perform personally, the authorities reintegrate those sums into their income, in the employment-income category (CGI, art. 155 A and 79). Since management functions are attached to the person of the director, the foreign company cannot act as a screen. The burden of proving an activity of the structure that is its own and distinct then falls on the director, a demonstration rarely easy to make.
Can a tax treaty prevent the application of article 155 A?
The taxpayer may always invoke the treaty concluded between France and their State of residence; the court must take it into account, in particular by examining whether the interposed company has a permanent establishment in France. But the treaty is usefully enforceable only where effective double taxation is established. The Constitutional Council guarantees that the same sum cannot be taxed twice (decision 2010-70 QPC). Conversely, if the remuneration bore no tax abroad, the treaty argument loses most of its force.