a. How the Employment of One or More Individuals Creates a Permanent Establishment in Country and the Ramifications
From a tax law perspective, hiring one or more employees by a company with no place of business in France may raise some issues. As a principle, profits generated in France by a foreign company and distributed abroad are taxed in France. Therefore, the presence of an employee in France may be considered as a “permanent establishment”, subjecting the company to the payment of taxes in France.
b. How the Use of One or More Independent Contractors Creates a Permanent Establishment in Country and the Ramifications
Just as hiring one or more employees by a company with no place of business in France may raise issues, this would also be the case if the relationship with one or more independent contractors is re-characterized as an employment relationship. The same consequences will occur.
That being said, it should be noted that the notion of permanent establishment is defined by bilateral tax treaties. The European Court of Justice defines it as a structure with sufficient degree of permanence and capability in terms of staff and/or technical equipment, making it possible to render services autonomously (17 July 1997 ECJ case 190/195). Whereas, The French Conseil d’Etat defines it as a business installation with some stability – through which an activity generating profits is carried out – and with a certain degree of autonomy within the company.