French Tax Residency Test

January 4, 2011

Supreme Court emphasise importance of source income and non-marital family connections in maintenance of French residence.

In a series of recent decisions, the Conseil d’Etat, the French Supreme Court clarified certain aspects of French tax residency test rules, which may be of interest for individuals who, while on short or long-term international assignment, keep certain ties (personal or financial) with France.  Under French domestic tax rules, an individual is considered French tax resident if he or she has in France:

(i)    his or her “foyer” (habitual abode) or the place of main residence (the “183 days rule”);
(ii)   his or her main occupation;
(iii)  the centre of his or her economic interests in France

The above criteria are applied alternatively and not cumulatively, i.e. the French tax residency is established when either of the criteria is met.  The above domestic provisions would in most cross-border situations be overruled by tax treaty provisions.

Up to very recently, the “foyer” has been defined by French courts by reference to married persons as the place where an individual lives with his or her spouse and children (“family residence”), without regard to temporary stays elsewhere owing to professional duties or exceptional circumstances.  The 183-days rule applies only if the place of the family residence cannot be determined.

The definition of the “foyer” in the specific case of a single person with no dependent children was not clear.  It was also not clear whether the same definition would apply to an unmarried individual.

In January 2010, the Supreme Court ruled that an individual who carries out his professional activity in a foreign country but regularly travels to France where he lives with his partner and their common child must be considered to have his “foyer” and therefore his tax residence in France.

The case related to a French national who had been working in Africa (Guinea) during the years 1999 and 2000 and had made regular trips home.  He did not file any income tax return in France on the grounds that he was not French tax resident.  The French tax administration reassessed his tax situation and claimed the payment of French income taxes.  The lower court ruled that the individual was not tax resident in France and cancelled the tax adjustments.  On the appeal of the tax administration, the French Supreme Court confirmed the French tax residency and reinstated the tax adjustments.

The conclusion from this decision is that the marital status of the taxpayer is irrelevant for the determination of the place of his or her “foyer”.  Individuals working abroad but travelling regularly to France to visit their partner or spouse might be considered to have maintained their place of family residence in France and continue to be treated as French tax residents under the French tax residency test.

In March 2010 the case of a famous former French football player, Mr Blanc, came before the Supreme Court.  Mr. Blanc left France for less than a year to play in an Italian soccer team but maintained some ties with France where he had substantial investments.  The French Supreme court ruled that a single person with no dependent child is considered to have his “foyer” where he or she normally resides and has the centre of his or her personal life.  Where such individual derives income from French and foreign sources, his centre of economic interest is determined by comparing his French source income with his foreign source income.  France may not be held to be the centre of the individual’s economic interest if the individual’s foreign income is substantially higher than the income generated by his French investments and occupations, as in Mr. Blanc’s case.


Conseil d’Etat 17 March 2010 case no. 299770 and 300090, Ministry of Finance vs. Blanc; Conseil d’Etat 27 January 2010 case no. 319897 Ministry of Finance vs. Tounsi

For further information or to discuss any of the issues raised please contact Pascal Ngatsing on +33 1 53 93 94 00

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