CFC rules, in principle, are not applicable with respect of foreign branches or subsidiaries located in another EU country. However, this exception is not applicable if the French tax authorities can demonstrate that the foreign entity located in another EU country constitutes an artificial arrangement, set up to circumvent French tax legislation. This concept is similar to the ‘abuse of law’ concept, although it does not have all the same characteristics.
In other cases, if a French company falls within the scope of CFC, it can be exempt if it demonstrates that the operations of the entity established outside France are primarily intended to have an object and effect other than to transfer profits in a State or territory where it is subject to a preferential tax regime.                         This condition is deemed to be fulfilled when the entity established outside France has mainly an industrial or commercial activity.  