France: A review of the special tax regime for expatriates
The French expat tax regime offers some very beneficial tax advantages.
To make France an attractive location for the assignment of executives and high net worth individuals in multinational groups, several tax advantages have been introduced over the last few years.
Foreign individuals seconded to France or hired directly from abroad to take up a position in France may benefit from certain tax advantages as follows:
- an exemption for a maximum period of 6 years for all expatriation related allowances paid in addition to the basic salary (housing, cost of living, tax difference, moving expenses, etc.), or 30% of the global remuneration in certain cases;
- an exemption for the portion of salary relating to any activity performed outside France; and
- a partial exemption (50%) for income from foreign financial investment (interest, dividend capital gains, etc.).
France is one of the few countries which still have a wealth tax (calculated for individuals with a net wealth exceeding EUR 790,000). However, a general exemption from this wealth tax is available to expatriates (‘expats’) for a period of five years for all their non-French assets.
In order to be subject to the French expat tax regime, the expat must satisfy certain requirements, including that:
- he/she must not have been resident for tax purposes (‘tax resident’) in France during the five years preceding the assignment to France; and
- he/she must transfer his or her tax residence to France with the assignment.
The transfer of the tax residence to France must, as a matter of principle, coincide with the date when the expat commences employment in France. The French tax administration has indicated that the transfer of the tax residence may, for professional or family reasons, be postponed for a reasonable period (this being up to a few months but less than a year). If the transfer of the tax residence occurs more than a year after the assignment to France, the French expat tax regime will not apply.
In addition, the French tax residence condition must be met throughout the exemption period (up to 6 years) and the tax advantages will not be available for any year in which the expat does not qualify as tax resident in France.
Reference: Tax Instruction 5 F-13-09 dated 30 July 2009
For further information or to discuss the issues raised, please contact Pascal Ngatsing (firstname.lastname@example.org) on +33 (0) 1 53 93 94 00.
This article was produced by, and re-produced with kind permission of, our correspondent firm in France, Société Juridique et Fiscale Franco-Allemande Selas (SOFFAL). www.soffal.fr
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