News - France

France - September 2016

France is looking to improve the inbound expatriates regime

With the people of the UK opting to leave the European Union, the French Prime Minister plans to make changes to the inbound expatriate regime to attract UK tax payers to live and work in France. 

The French Prime Minister, Mr Manuel Valls announced in July that France was working on an improvement of the inbound expatriates regime. The expatriate regime allows corporate executives (provided certain conditions are met) to benefit from a rebate of up to 30% on their taxable professional income and from an exemption of compensation related to days spent outside of France for professional purposes. This special regime currently applies until December 31 of the fifth year following the year the employee started his/her contract in France and transferred their residence to France for tax purposes.

The French inbound expatriate regime was relaxed in 2015 by the Macron Law “loi Macron” which allowed inbound expatriates to keep the benefit of the regime even if the employee/corporate officer were to change employer before the expiration of the 5 year period provided they remain employed within the same group of companies.

As announced by Mr Valls, it is now expected that the exemption period will be extended up to eight years in order to enhance France as an attractive place to work and live for UK tax paying residents that might be tempted to reside and work in another European country. 

Considerations

  • It should be kept in mind that the next presidential election in France will take place in less than a year and that many of the good intentions expressed could remain campaign pledges;
  • There is a contradictory message from Manuel Valls also mentioning that France would ‘stop applying the EU Directive on the posting of employees’ if the EU does not agree to a change of the rules related to secondment in terms of social security contributions (the regulation at issue would therefore actually be the Regulations on Coordination of Social Security Systems (EC regulation n°883/2004), instead of the Directive on Posted Workers).

Further information

For further information or to discuss any of the issues raised, please contact Stéphanie Le Men-Tenailleau at Galahad on +33 1 40 06 28 29.

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