Expatriates planning to return to France? The “impatriate” tax regime
Under what conditions can you benefit from the favorable “impatriation” tax regime, and what exactly does it involve?
The tax regime for people who come to live in France after a period of residence abroad includes special arrangements for income tax and real estate wealth tax.
As a reminder, status as a French tax resident means that worldwide income and worldwide real estate assets are subject to French income tax and French wealth tax.
Impatriate tax regime for income tax (IR)
Impatriates are exempt from income tax on supplementary remuneration linked to their move to France, and are taxed on a reduced basis on some of their passive foreign-source income.
This favorable regime applies for 8 years.
Are you eligible for the IR impatriate scheme?
Conditions of domiciliation
- You must not have been domiciled in France for tax purposes for the 5 calendar years preceding the year in which you take up your new position.
- Be a French tax resident
- Be called by a foreign company to work for a company established in France (intra-group mobility) or
- Be recruited directly abroad by a company established in France.
What are the tax benefits?
- The impatriation bonus provided for in the employment contract (drawn up prior to taking up the post) or the corporate mandate is exempt from income tax for its actual amount.
- Option to opt for exemption of a flat-rate bonus of 30%.
- Exemption of up to 50% of the amount of certain “passive” foreign-source income (capital gains, intellectual or industrial property income, capital gains on securities).
Please note these exemptions are subject to compliance with specific reporting formalities.
Please note “passive” income remains fully subject to French social security contributions, without application of the 50% exemption.
Impatriate (or “new resident”) tax regime for real estate wealth tax (IFI)
In terms of the IFI, the impatriation regime is broader in terms of the people who can benefit from it:
All persons who transfer their domicile to France after having been domiciled abroad for tax purposes for 5 years are temporarily taxed only on their French assets.
The IFI exemption on real estate assets located abroad applies until December 31 of the fifth year following the year of residence in France.
Please note the IFI impatriation regime is shorter (5 years) than the IR impatriation regime (8 years).
The IFI impatriate regime applies regardless of the reason for the move to France, and regardless of the taxpayer’s nationality.
If the taxpayer moves back and forth between France and another country during the five-year period: no loss of regime, i.e. the regime continues to apply until expiry of the initial 5-year period.
Some tax treaties provide for a specific real estate wealth tax regime applicable to impatriates: treaties with the United States, Italy, Great Britain, Canada, Germany, Austria and Spain. Under certain conditions, these systems can be combined with the French system.
Only an in-depth analysis of your personal situation will enable us to advise you on the tax regime applicable to your return project. Our lawyers are at your disposal to answer any questions you may have and to advise you. Our meetings can be held in person or by videoconference. You can make an appointment directly online at www.agn-avocats.com.
AGN AVOCATS – Tax department
09 72 34 24 72