International umbrella company services: the risks of recharacterization under French tax law

The development of remote work, the growing mobility of consultants, and the internationalisation of services have largely contributed to the rise of umbrella company structures (portage salarial) in recent years.

However, some of these umbrella company structures are now subject to increased scrutiny by the French tax administration, particularly when they rely on the interposition of foreign companies.

In September 2025, the Directorate General of Public Finances (DGFIP) published a factsheet regarding umbrella structures aimed at evading income tax.

This document does not create new rules. It is a continuation of existing law and illustrates, in an operational manner, how the administration intends to apply the provisions, foremost among which is Article 155 A of the general tax code (CGI).

This provision allows the tax administration to tax the income corresponding to services personally performed directly in the hands of the consultant when the interposed foreign company does not have a genuine economic activity of its own.

In short, if the final structure was set up for the sole purpose of evading / eliminating tax, then the anti-abuse mechanism applies, with the reintegration of the income into the taxpayer's tax household along with any potential late payment interest / penalties / surcharges to be added.

In this context, it is useful to compare certain common misconceptions with the applicable legal framework in order to assess their actual impact.

1. Is umbrella employment legal?

Answer: true.

Umbrella employment (portage salarial) is a scheme recognized by Articles L1254-1 to L1254-31 of the French Labor Code.

It allows a professional to carry out an activity independently while benefiting from employee status, within the framework of a tripartite relationship with an umbrella company and a client company.

As such, this scheme does not constitute a fraudulent arrangement. Used in accordance with its legal framework, it does not raise any particular difficulties.

However, this qualification does not exhaust the analysis.

In tax matters, the administration does not limit itself to the legal structure chosen by the parties, but carries out an independent assessment based on the economic reality of the transaction and its ultimate purpose.

2. Does the use of an intermediary foreign company make it possible to avoid taxation in France?

Answer: false, except under a strictly justified assumption such as the case of a wage portage beneficiary who actually performs their duties from abroad.

The analysis is based on the anti-abuse mechanism provided for in Article 155 A of the FTC (General Tax Code), which allows the tax administration to directly tax the provider on the income corresponding to services they have personally rendered, when this income is received by a person or company established outside of France.

In other words, the administration does not stop at the legal invoicing circuit. It investigates whether the sums received by the foreign company correspond, in reality, to the personal activity of the consultant.

The administrative doctrine relating to Article 155 A of the FTC, commented on in BOI-IR-DOMIC-30, recalls the scope of this rule, particularly when a foreign entity receives remuneration for services rendered by another person. It thus helps to understand that the issue is not merely the existence of a foreign company, but the dissociation between the party receiving the income and the party actually performing the service.

This framework leads to going beyond the legal appearance of corporate interposition to identify the actual provider of the services.

The substance of the analysis is, however, mainly jurisprudential. The Conseil d'État has thus ruled that Article 155 A of the FTC applies when the invoicing carried out by a foreign entity "finds no real consideration in any proper intervention by the latter" (CE November 4, 2020, No. 436367).

In the same sense, the Administrative Court of Appeal of Paris held that the interposed company could not be regarded as having received the sums "in return for an intervention of its own", due to a lack of effective participation in the service (CAA Paris June 13, 2025, No. 24PA04362).

These decisions provide a clear analysis framework: the application of the text relies both on identifying the actual provider and on assessing the economic role of the interposed entity.

The factsheet published by the DGFIP in September 2025 fits directly into this logic. It describes a foreign company that limits itself to administrative management and invoicing functions, with no economic substance or participation in the execution of the services. In this context, the fees paid to this company are analyzed as directly corresponding to the consultant's work.

In such a configuration, the interposition is neutralized and the income is taxed as if it had been received directly by the provider.

3. Is the tax administration bound by the qualification given to the provider's income by the parties to the wage portage agreement?

Answer: false.

In tax matters, the classification given to flows by the parties is not binding on the administration.

The analysis is based on the actual nature of the activity carried out and on the identity of the person who actually benefits from it.

Jurisprudence relating to Article 155 A of the CGI and its anti-abuse mechanism illustrates this approach: even when the flows are presented as originating from a foreign entity, they can be linked to the taxpayer since they correspond, in reality, to their own activity.

In the aforementioned decision of November 4, 2020, the Conseil d'État thus ruled that the services were "essentially rendered by the taxpayer", regardless of the invoicing circuit.

This approach leads to tempering the scope of formal classifications when they do not reflect the economic reality of the transactions.

4. Customer location determines taxation.

Answer: false.

The location of clients is an element of analysis, but does not, in isolation, settle the tax issue.

When the service provider is a French tax resident, Article 4 A of the General Tax Code (CGI) establishes the principle of taxation in France on all worldwide income.

Therefore, the fact that clients are located outside of France, including outside the European Union, is not sufficient to exclude French taxation.

What matters is, in particular, the actual place of business activity.

A consultant who performs their services from France maintains a decisive tax connection with France.

5. Non-resident tax status makes it possible to exclude the application of Article 155 A of the CGI.

Answer: false.

Article 155 A of the CGI (French General Tax Code) expressly provides for its application to persons domiciled outside France for services rendered in France.

The analysis must be coordinated with Article 164 B of the CGI, relating to French-source income.

The administrative doctrine (BOI-IR-DOMIC-30) specifies, in this regard, that when the service provider is established outside France, only the sums corresponding to services rendered in France are taxable.

Furthermore, the doctrine relating to the territoriality of income (BOI-IR-DOMIC-10-10) states that services are considered to be carried out in France when they are physically executed there.

Thus, the change of tax residence is not sufficient in itself: the analysis is based on the actual carrying out of the activity.

6. Is the existence of a foreign company sufficient to secure the structuring and avoid French taxation on the wage portage beneficiary's salary?

Answer: false.

The legal existence of a foreign company does not, in itself, constitute a safeguarding factor.

The analysis focuses on the reality of its activity and its actual role in the provision of services.

The aforementioned consistent decisions of the Council of State and the Administrative Court of Appeal of Paris highlight that the lack of direct intervention by the interposed company and the lack of economic justification for the remuneration it receives lead to its role being dismissed.

Conversely, a company with its own resources, real autonomy, and an effective role in the provision of services is likely to be recognized as a fully-fledged economic player.

The distinction therefore relies on the substance of the structure, rather than its mere formal existence.

Structuring an umbrella company scheme, especially when it involves foreign elements, cannot be considered without a rigorous tax analysis.

The combination of the criteria regarding the tax residence of the scheme's beneficiary, but also of the umbrella company and the end clients, the territoriality of the services, and the substance of the interposed entities, requires a tailor-made approach.

Otherwise, the risk of recharacterization on the basis of article 155 A of the CGI is high.

In practice, the analysis of these schemes cannot be conducted in an abstract manner.

The applicable tax treatment depends on a combination of criteria: tax residence of the service provider, place where the activity is actually carried out, location of the end client, actual role and establishment of the umbrella company.

Depending on how these various elements interact, the level of tax risk can vary significantly.

The following situations help to illustrate the main setups encountered in practice.

1. French tax resident provider, foreign umbrella company, end client in France

This is the most tax-sensitive scheme and, in practice, the case most frequently targeted by the administration.

The service provider remains a French tax resident within the meaning of Article 4 B of the CGI and physically carries out their activity from France. The services are performed for a French client, while the invoicing passes through a foreign umbrella company.

In this configuration, the administration has a particularly strong body of evidence to invoke Article 155 A of the CGI.

The risk does not lie in the existence of a foreign company itself, but in the discrepancy between: the person who actually performs the services and the entity that legally receives the income.

In this regard, the Council of State ruled that Article 155 A of the CGI and its anti-abuse principle apply when the invoicing carried out by a foreign entity "finds no real consideration in any actual intervention of its own" (CE November 4, 2020, No. 436367).

In other words, if the foreign company does not have a real economic function: employees, real management, operational autonomy, active role in the service provision, it risks being regarded as a mere intermediary structure.

The presence of a French final client further reinforces the coherence of the tax connection to France: activity carried out in France, French clientele, French tax resident service provider, income economically attributable to France.

In such a scenario, the risk of recharacterization appears particularly high.

The factsheet published by the DGFiP in September 2025 precisely illustrates this type of scheme. It describes a foreign company that limits itself to administrative and invoicing functions, without active participation in the performance of the services.

In this case, the sums received by the foreign structure are liable to be taxed directly in the hands of the French resident consultant.

2. Service provider who is a French tax resident, foreign umbrella company, foreign end client

This pattern is extremely common in consulting, IT, digital marketing, or intellectual services carried out remotely.

The idea often put forward is that the presence of a foreign client is sufficient to exclude French taxation.

This analysis is incorrect.

The service provider remains a French tax resident within the meaning of Article 4 B of the CGI.

The determining criterion remains the actual place of exercise of the activity, and not the location of the final client or that of the umbrella company.

In other words, the fact that the services are provided to a company located abroad does not, in itself, alter the tax residency of the income when the work is carried out from France.

In this configuration, Article 155 A of the CGI remains fully applicable if the interposed foreign company does not have real economic substance.

Here again, the Council of State adopts an economic approach to the transaction, based on the reality of the foreign structure's intervention and on the existence or absence of a "real consideration in its own intervention" (EC November 4, 2020 n°436367).

The foreign location of the client may constitute a contextual element, but it is not sufficient to neutralize French taxation when: the service provider resides in France, the activity is carried out in France, and the foreign company does not play an autonomous economic role.

This point is fundamental in practice, as it corresponds to a frequently encountered confusion: confusing the internationalization of the clientele with the actual relocation of the activity.

The analysis must, however, be qualified when the activity is actually carried out abroad for a significant period and the taxpayer is able to concretely justify its reality: physical presence, business travel, effective organization of the activity, actual place of performance of the services.

In this regard, the Council of State ruled, in a decision of March 20, 2023 (n°452718), that a French tax resident receiving wages for an activity carried out in the United Arab Emirates could benefit, on the basis of the Franco-Emirati tax treaty, from a tax credit offsettable against the French tax corresponding to this UAE-source income.

Concretely, the income remains included in the French taxable base, but the corresponding French tax can be neutralized by a treaty-based tax credit.

The Council of State also confirmed that this mechanism is not subject to an effective taxation of the income in the United Arab Emirates.

This decision illustrates the crucial importance of the factual evidence allowing to demonstrate the reality of the activity carried out abroad.

3. Foreign tax-resident service provider, foreign umbrella company, end client in France

This scenario calls for a more nuanced analysis.

The service provider is not a French tax resident. However, they physically carry out their activity in France for a French client, via a foreign umbrella company.

In this context, the reasoning is no longer primarily based on the taxation of the taxpayer's worldwide income, but on the concept of French-source income.

The analysis must then be coordinated with Article 164 B of the CGI, which links to France certain incomes corresponding to activities carried out on French territory.

Furthermore, administrative doctrine (BOI-IR-DOMIC-10-10) specifies that services are considered to be performed in France when they are physically executed there.

Thus, even in the presence of a non-resident service provider and a foreign company, the fact that the services are concretely carried out from France remains likely to justify French taxation.

Within this framework, Article 155 A of the CGI can also be mobilized if the foreign structure does not possess real economic autonomy.

The administration must nevertheless demonstrate the reality of the activity being carried out in France: physical presence, duration of stays, concrete organization of the activity, actual place of performance of the services.

This point is essential, as the analysis then becomes particularly factual.

In practice, this type of situation is especially encountered when a taxpayer claims to be established abroad while continuing to carry out their activity primarily from France.

4. Service provider residing abroad for tax purposes, umbrella company in France, final client in France

This scenario is more favorable than the previous ones, but it must still be analyzed with caution.

The service provider is not a French tax resident and effectively carries out their activity outside of France. The umbrella company is located in France and the end client is French.

In this configuration, the sole fact that the end client is located in France is not sufficient, on its own, to trigger taxation in France on the service provider's income. The central criterion remains the actual place where the activity is carried out.

The analysis must nevertheless be conducted in light of Article 164 B of the CGI, which defines French-source income taxable in the hands of non-residents.

If the services are materially executed abroad, the argument for French taxation appears less obvious, subject to the applicable tax treaty.

Article 155 A of the CGI (and its anti-abuse mechanism) is also less naturally applicable in this configuration. Indeed, administrative doctrine (BOI-IR-DOMIC-30) specifies that when the service provider is domiciled outside France, the mechanism only applies to amounts remunerating services rendered in France.

On the other hand, the presence of a French umbrella company requires verifying the overall consistency of the structuring: actual place of performance of the services, effective role of the different entities, social and reporting treatment, applicable tax treaty, and any potential withholding tax.

In practice, the main risk does not lie solely in the mere presence of a French client or a French umbrella company, but in a discrepancy between the declared situation and the operational reality.

If the service provider actually carries out their activity abroad, has solid supporting evidence, and does not maintain the effective center of their professional activity in France, the risk of challenge appears more limited, even if still existing given a possible challenge to their tax residence if the majority of their income is from French sources.

The issues discussed above illustrate the importance of a rigorous prior analysis of these structures, both in terms of tax implications and treaty, reporting, and territoriality issues.

If you are considering this type of structure, a prior consultation allows you to assess its feasibility, the associated risks, and potential ways to secure it.