French Court changes rules for calculating tax exemption for foreign business travel
Estimated reading time 3 minutes
Following a decision by the French Supreme Administrative Court, French tax residents who travel abroad for business may now claim tax exemption on any additional compensation they receive (known as ‘Foreign Service Premiums) up to a value of 40% of their total annual compensation.
The decision by the French Court overrules previous limits set by the French tax authorities, which limited tax exemption to the number of days spent working outside France during the tax year. Under the new rules, the 40% tax exemption for Foreign Service Premiums will now be calculated based on total annual compensation, without taking into account the number of days spent abroad. So, for a total annual salary of EUR 200,000, up to EUR 80,000 worth of Foreign Service Premiums would be exempt from tax.
The Court’s decision will also apply to any Foreign Service Premiums paid in the past three years. Employees who paid tax on a portion of their Foreign Service Premiums, which under the new rules would be tax exempt (ie. within 40% of their total annual compensation), may file a claim with the French tax authorities for a refund of the additional tax. Claims may be made until 31 December of the second year following the year in which tax was due (ie. for a Premium paid in 2012, tax may be reclaimed until 31 December 2015).
As well as benefiting employees, the new tax rules will allow companies to use the Foreign Service Premium as a great tool for attracting and retaining talent, which allows significant tax benefits for even a relatively low number of trips abroad.
Resources
For further detail on this ruling click here.
Further information
For further information or to discuss any of the issues raised, please contact Stéphanie Le Men-Tenailleau,
Disclaimer
Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information see our legal page.
Circular 230 disclosure
To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
Copying
If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.