Setting Up a European Subsidiary: Full Guide

TL;DR: Establishing a European subsidiary requires choosing an EU jurisdiction, registering a local company, appointing directors, opening a bank account, and registering for tax — a process that typically takes 4–12 weeks depending on the country.

What You Need to Know

Europe remains one of the world's largest and most attractive markets for business expansion. The EU's single market offers access to over 450 million consumers under a harmonized regulatory framework, while individual member states retain distinct company law, tax systems, and business cultures.

For a non-European business, "setting up in Europe" typically means incorporating a subsidiary in one or more EU member states. The choice of country matters: it affects your tax rate, regulatory environment, access to local talent, banking relationships, and the ease of doing business.

Post-Brexit, the UK is no longer in the EU. A UK subsidiary gives you access to the UK market (67 million consumers) but does not provide a "passporting" right to the EU. For full EU market access, incorporation in an EU member state is necessary.

This guide focuses on France and Sweden — two of the EU member states where MmowW Scrib🐮 provides document preparation services — and provides a comparative framework for European expansion.

How It Works: A Practical Overview

Choosing the Right European Jurisdiction

The most common EU jurisdictions for holding and operational companies each have distinct characteristics:

France: Europe's second-largest economy. Home to a large domestic market, strong engineering talent, and significant government support for startups (France 2030 initiative). The SAS (Société par Actions Simplifiée) is the most flexible and widely used structure for foreign-owned subsidiaries. Corporate tax rate: 25% standard rate. Employer social security contributions are high (approximately 40–45% of gross salary on top of wage costs).

Sweden: A highly digital, innovation-friendly economy. Straightforward company registration (Bolagsverket online system). The Aktiebolag (AB) is the standard private company form. Corporate tax rate: 20.6%. Strong rule of law and low corruption.

Germany: Europe's largest economy. The GmbH (Gesellschaft mit beschränkter Haftung) is the standard private company form. Minimum share capital of EUR 25,000 (EUR 12,500 minimum paid up on registration). Registration process can be slower than in France or Sweden.

Ireland: English-language country, common law system, 12.5% corporate tax rate (now subject to OECD Pillar Two 15% minimum for large groups), strong tech sector presence.

Netherlands: Holding company hub, extensive tax treaty network, participation exemption for dividends.

The French SAS: Registration Process

The Société par Actions Simplifiée (SAS) is the vehicle of choice for most foreign-owned French subsidiaries.

Key features:

• Minimum share capital: EUR 1 (though EUR 10,000–50,000 is advisable for banking purposes)
• No minimum number of directors; must have a President (acting as the main executive)
• No requirement for local directors (though banks may prefer it)
• Can be 100% foreign-owned

Registration steps:

1. Draft statuts (articles of association) — must comply with French law; typically prepared by a notaire or business formation service
2. Open a provisional bank account and deposit the share capital
3. File the registration application at the Guichet-Entreprises (guichet-entreprises.fr) or the Greffe du tribunal de commerce
4. Obtain SIREN/SIRET numbers (business identification)
5. Register for French corporate tax (IS — impôt sur les sociétés) and VAT
6. Register for social security and payroll (URSSAF) if hiring employees

Timeline: Typically 5–15 business days from complete documentation submission.

The Swedish AB: Registration Process

The Aktiebolag (AB) is the standard Swedish private limited company.

Key features:

• Minimum share capital: SEK 25,000 (increased from SEK 5,000 in 2023)
• At least one director; no requirement for Swedish-resident directors
• Registration with Bolagsverket (bolagsverket.se)

Registration steps:

1. Draft bolagsordning (articles of association)
2. Open a bank account and deposit share capital
3. Submit registration application to Bolagsverket with memorandum of association, articles, and director details
4. Obtain organization number (organisationsnummer)
5. Register for F-tax (corporate tax), VAT (moms), and employer contributions with Skatteverket
6. If applicable, register branch offices with individual municipalities

Timeline: 1–4 weeks from complete application.

EU-Wide Compliance Requirements

Regardless of the EU jurisdiction chosen, all subsidiaries must comply with:

GDPR (General Data Protection Regulation): Applicable to all companies processing personal data of EU residents. Requires a lawful basis for processing, privacy notices, data subject rights procedures, and in some cases a Data Protection Officer.

Anti-Money Laundering (AML) Directives: EU AML directives (currently 6th AML Directive) impose customer due diligence obligations on regulated entities and beneficial ownership registration requirements on all companies.

DAC6 / Mandatory Disclosure Rules: Certain cross-border tax arrangements must be reported to tax authorities. Consult a qualified tax advisor.

Country-by-Country Comparison

Common Mistakes to Avoid

1. Choosing Ireland or the Netherlands solely for tax reasons without operational substance. Regulatory trends (OECD BEPS, EU Anti-Tax Avoidance Directives) increasingly require companies to have genuine economic substance in their chosen jurisdiction — real employees, decision-making occurring locally. A letterbox company in a low-tax jurisdiction is a high-risk strategy.
2. Underestimating the complexity of French payroll. France has among the most complex payroll and social security systems in Europe. The Déclaration Sociale Nominative (DSN) monthly filing, sector-specific collective agreements, and complex social contribution calculations make France a jurisdiction where outsourcing payroll to a specialist from day one is strongly advisable.
3. Not obtaining apostilled parent company documents before starting the registration process. French and Swedish registries require certified, often apostilled, copies of the parent company's constitutional documents. Obtain these before starting the process to avoid delays.
4. Assuming a single EU subsidiary gives you regulatory passporting across the EU. Company registration in one EU country does not automatically permit you to operate as a regulated business (e.g., financial services, insurance) across the EU without additional licensing. Post-Brexit, UK-authorized firms lost EU passporting rights and must obtain separate authorization in each EU country.
5. Not registering for VAT until trading begins. In France and Sweden, VAT registration should be in place before you start charging customers — issuing invoices without a valid VAT number creates problems for both your business and your customers.

Next Steps: Get Started Today

MmowW Scrib🐮 helps prepare the document packages required for European subsidiary registration.

• Director Checker: Verify director eligibility for French SAS or Swedish AB → Director Checker Tool
• Filing Deadlines: Track French and Swedish annual filing obligations → Filing Deadlines Tool
• Cost Calculator: Estimate European subsidiary setup and running costs → Cost Calculator Tool

MmowW Scrib🐮 is a document preparation service, not a law firm. We do not provide legal advice. Always consult a qualified attorney in your target European jurisdiction for legal and tax structuring advice.

Frequently Asked Questions

Q: Do I need a physical office to register a company in France or Sweden?

A: You need a registered address in the country of incorporation. This can be a virtual registered office address provided by a company formation service, not necessarily a physical workspace. However, for genuine operational activity, tax authorities may challenge whether the company has real economic substance if no physical presence exists.

Q: Can a non-EU citizen be a director of a French or Swedish company?

A: Yes. Neither France nor Sweden legally requires directors to be EU citizens or residents. However, a director from outside the Schengen area who wishes to physically manage operations in France or Sweden will need an appropriate visa/residency permit. A director managing remotely from outside the EU faces fewer formal hurdles but may trigger PE and tax residency questions.

Q: How long does it take to open a business bank account in France?

A: Significantly longer than company registration. French banks are known for extensive due diligence on foreign-owned companies. The process can take 4–12 weeks and may require in-person meetings. Some fintech alternatives (Shine, Qonto) offer faster onboarding for French businesses. Consider this timeline when planning your European expansion.

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