French Exit Tax Kicks In

By Editorial 12 March, 2012

French Budget Minister Valérie Pécresse has recently confirmed that the government’s exit tax, adopted by parliament in July last year, applies to the transfer of a tax residence outside of France since March 3, 2011.

The measure aims to end the practice of tax optimization, whereby some taxpayers transfer their tax residence outside of France to realise capital gains on wealth without paying tax.

Therefore, taxpayers subject to the country’s solidarity tax on wealth (impôt de solidarité sur la fortune – ISF), who transfer their fiscal residence abroad are subject in France since March 3, 2011 to a tax on capital gains realized before their departure, if they cede the securities that they hold within eight years following their expatriation.

In its statement, the budget ministry underscores that this tax is for direct and immediate application, noting that a decree is due to be presented shortly to clarify the information to be included in the income tax declaration for 2011, due in spring 2012.

In accordance with the provisions of article 4b of the general tax code (CGI), individuals considered to have their tax residence in France are those who have their homes in France, who have their principal place of residence in France, who carry out a professional activity in France (whether salaried or otherwise), and those who have the centre of their economic interests in France.

State employees carrying out their duties or responsibilities in a foreign state are also considered to have their tax residence in France, if they are not subject in that country to a personal tax on all of their income.

The base of the tax is the sum of the income of the different members of the taxable household or family unit.

Tags: Individuals | Expatriates | Capital Gains Tax (CGT) | Tax | Investment | Employees | France | Exit Tax |


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