Expatriate return, or when a French citizen returns to France
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The expatriate tax status is a tax regime created for the benefit of French citizens who are tax residents abroad, also known as "expats," who wish to return to France permanently.
The purpose of this status is to encourage French citizens to return to live in France after their expatriation.
Thus, an impatriate may avoid paying French tax upon their return to France by benefiting from an exemption on certain sources of French and foreign income.
In this article, we will go through this impatriation scheme point by point.
The nature of exempt income
the impatriation premium, i.e. the additional remuneration directly linked to the exercise of a professional activity in France ;
the portion of the remuneration relating to the activity carried out abroad and performed in the interest of the employer within the framework of intra-group mobility ;
50% of income from movable capital of foreign source[1] ;
50% of income from intellectual or industrial property of foreign source[2] ;
50% of capital gains on the sale of securities and social rights of foreign source ;
allowances and reimbursement of professional expenses[3] ; and
the housing allowance, "tax-equalization"[4]and other allowances relating to impatriate employees. [5]
This status also allows for the deduction from taxable income of a portion of the contributions paid to supplementary pension and additional welfare schemes to which the impatriate was affiliated before their arrival in France.
contract.
The exempted amount of the impatriation bonus capped
Regarding an external hire, and in the event that the bonus amount is not established within the employment contract, the impatriation bonus can be assessed on a flat-rate basis, being deemed equal to a maximum of 30% of the total remuneration.
Regarding impatriates in the context of intra-group mobility and if the bonus amount is not determined, the latter must be determinable on the basis of objective and precise criteria mentioned in the employment contract.
On the other hand, if the takeover of the position within the framework of intra-group mobility took place after November 15, 2018, the assessment of the exempt amount can be done using the flat-rate valuation like external hires.
A combination of expatriate tax exemption benefits is possible, but also capped
The ceiling on the exemption of the expatriation premium can be combined with an exemption on remuneration relating to an activity carried out abroad, but this combination is capped at the taxpayer's choice:
Either a global ceiling, in which case the exemption of the expatriation premium and the share of remuneration corresponding to the activity carried out abroad cannot exceed 50% of the total remuneration;
Or a ceiling on the exemption of only the remuneration corresponding to the activity carried out abroad, in which case the exemption of this share cannot exceed 20% of the taxpayer's taxable remuneration net of the expatriation premium.
[1]Provided that the payment of such income is secured by a person established outside France in a State or territory that has concluded with France a tax treaty containing an administrative assistance clause to combat tax fraud or evasion
[2]under the same condition as set forth in 1
[3]Article 81, paragraph 1 of the French General Tax Code
[4]This refers to the full or partial reimbursement of the cost of housing constituting the residence of the expatriate employee in France, as well as the tax and compulsory social security contributions paid in France.
[5]Article 155B of the French General Tax Code
[6]the benefit of the regime is not subject to the condition that the employment contract or its amendment specifies the duration of the employment in France, nor that the employment contract is concluded for a fixed term.
[7] Within the meaning of Articles 4 a) and b) of the French General Tax Code.
[8]Failure to meet any of these cumulative conditions in respect of a given year does not exclude the benefit of the scheme in respect of previous or subsequent years – in respect of which they are met.
