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Transfer of tax residence and exit tax

If you are considering leaving French territory and becoming a non-French tax resident, you have most likely heard of the exit tax.

Before going into the details of this tax, you should ensure that your departure to France will indeed result in a real transfer of tax residence. For more information on this topic, you can refer to this article.

This tax, covered by the article 167 bis of the General Tax Code, concerns in particular theunrealized capital gains on the company securities that you hold at the time of the transfer. For example, if you have acquired shares in a company for a value of €100, if they are worth €250 at the time of your departure abroad, the latent surplus which will be subject to the exit tax will be €150 .

Who is affected by the exit tax?

The taxpayers concerned by the exit tax system are those tax domiciled in France within the meaning of article 4 B of the CGI, subject to the application of international tax conventions , for at least six of the ten years preceding thedeparture abroad.

Moreover, to be subject to the exit tax, the securities concerned must represent:

  • at least 50% of a company's profits;

  • ​i.e. assets in transferable securities and corporate rights consisting of securities or rights mentioned in article 150-0 A of the CGI which exceeds 800,000 €.

What is the amount due for the exit tax?

For transfers made from January 1, 2018, the exit tax rate is 30%. It includes both the amount due for income tax (12.8%) and that due for social security contributions (17.2%).

Taxpayers can, however, opt for capital gains taxation at the progressive income tax scale rather than the flat rate of 12.8%.

Is the exit tax immediately due?

When the departure abroad is to a Member State of the European Union (EU) or to another State or territory having concluded with France an administrative assistance agreement with a view to combating fraud and evasion as well as a mutual assistance agreement in matters of recovery, payment of the debt is automatically suspended. tax (unless that State or territory is not non-cooperative within the meaning of article 238-0 A of the CGI).

The suspension of payment has the effect of suspending the payment of the exit tax due in respect of departure abroad until the date of the event giving rise to its expiration (sale or redemption of securities for example).

When the departure abroad takes place in a third country to the European Union which has not concluded one of the conventions mentioned above, a reprieve may be granted but at the express request of the taxpayer. The taxpayer concerned must also appoint a tax representative and provide guarantees.

Can the'exit tax benefit from relief?

For transfers made from January 1, 2019, income tax and social security contributions are reduced at the end of a period of two years following departure abroad, or at the end of a period of five years for taxpayers whose total value of securities exceeds 2.57 million euros on the date of the transfer of tax residence.

The taxpayer may also benefit from an exit tax relief in the event of a return to France or a donation of securities subject to the exit tax.

What are the reporting obligations?

The reporting obligations linked to the exit tax are quite strict and complex, particularly when the taxpayer owns an operating company through a holding company, or when the securities concerned have been subject to restructuring in the past.

This involves filing a special form 2074-ETD prior to the transfer, no later than ninety days before the transfer of your tax domicile outside France .

The year following the transfer, the taxpayer must also file a special form when filing their income tax return.

Any failure or error in the context of its reporting obligations may result in the suspension of the exit tax being called into question in the context of a < a href="" target="_top">tax control, support by a tax lawyer is very highly recommended.

The office of Maître Nicolas Rozenbaum, very regularly confronted with this type of problem, is at your disposal for any questions on this subject.

Do not hesitate to request it directly by clicking here.

Please note that this information, up to date as of February 12, 2021, has been voluntarily simplified and summarized for educational purposes and does not constitute legal advice.


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