Exit tax and the inbound regime: leaving, returning
French exit tax on departure: thresholds, deferral of payment and relief. The inbound regime on arrival: conditions and duration.
Contents
The situation
A company director leaves France holding his shares. Nobody told him that the departure itself triggers tax on a gain he has not received, nor that missing the specific return for the year of departure is paid for in penalties.
Conversely, an executive returns to France after several years abroad without knowing that a regime would have exempted a substantial part of his remuneration, provided its conditions were met when he took up his duties.
What the rules say
| Mechanism | What it provides |
|---|---|
| Exit tax (article 167 bis of the French tax code) | taxation of unrealised gains on departure, above 800,000 euros of securities or 50 per cent of a company’s profits |
| Deferral of payment | as of right for a move to the European Union or the European Economic Area, on request and against security elsewhere |
| Relief | after two years of holding, or five years where the value of the securities exceeds 2,570,000 euros |
| Inbound regime (article 155 B) | exemption of the inbound premium and of part of foreign-source income, for people recruited from abroad |
The inbound regime requires that you were not resident in France during the five calendar years preceding the taking up of duties, and it applies for a limited period running from that date.
What the firm does with those rules
On departure, the work is one of filing and of calendar: valuing the securities at the date of transfer, filing the return for the year of departure, obtaining the deferral, then meeting the annual obligations on which it depends. A deferral lost through inattention makes the tax immediately payable.
It is also strategic: the order of operations matters. A sale before or after the transfer, a prior contribution to a holding company, a gift, do not produce the same result.
On arrival, the work is to check eligibility before the contract is signed, because the regime is assessed at the taking up of duties, and to choose between the exemption methods the law leaves open.
Frequently asked questions
How much does the exit tax cost?
It applies to the unrealised gain at the rate applicable to capital gains on securities, plus social levies. But payment is deferred and the tax is relieved if the securities are held long enough: the real issue is the follow-up, not an immediate outlay.
Is the deferral automatic?
As of right for a departure to a State of the European Union or the European Economic Area which has concluded the required agreements. Elsewhere it must be requested and secured.
How do you qualify for the inbound regime?
By being recruited abroad by a business established in France, or seconded to France by a foreign employer, and by not having been resident in France during the five preceding calendar years.
Can the inbound regime be combined with other reliefs?
It combines with some and excludes others. That is a choice to be made on arrival, then reviewed each year.
This article sets out a general framework and is no substitute for a review of your file: every situation has its own dates, figures and documents.