France is offering employees, or senior executive
shareholders of French groups who relocate to France under
the Brexit scenario a partial exemption from French income tax on
foreign income for eight years under article 155B CGI.
It might seem that "the gloves are off", but the actual
exemption itself is very limited in its application and a degree of
care needs to be taken, both by the French employer and by the
employee or executive taking up an offer of employment in France
under this adapted régime.
Prior to 2018, employees hired by French companies from other
countries were exempted from French income tax for the first five
years of employment, so long as the recruits declared France as
being their primary residence. That has now been extended to eight
years, and effectively amounts to a backdating to acceptances of
employment made after 6th July, 2016. Offers accepted
prior to that date only enable a 5 year exemption.
However, the exemption is not an absolute, it is limited to
either all the foreign employment income and certain other forms of
income related to the employment or function, or a 50% percentage
of total employment income.
There are anti avoidance provisions built in to the mechanism to
counter attempts made to inflate either foreign or French income in
this equation to reallocate otherwise exempt income into
What is clear is that non-EU vehicles wil only be acceptable if
the jurisdiction housing them not only has a TIEA arrangement in
place, but also one which enables enforcement of French tax
liabilities. Most TIEAs do not have that enforcement facility, and
will therefore not enable the use of offshore vehicles as part of a
bonus or payment structure in this ocntext.
The new incentive will now be backdated to include those
employees who signed employment contracts after 6 July 2016 into
the eight year holiday.
The change in French policy also offers tax breaks on bonuses
earned outside of France and such assets as intellectual
Such impatriates are also exempt from French wealth tax on all
assets held outside France for the first five years of residence in
France. Whilst this is of limited significance, as all movable
investments were excluded from the remodelled wealth tax under the
change to the IFI or impôt sur la fortune immobilière. That
remodelling only applies after 1st January, 2018.
It will therefore be possible to structure investments in
foreign immovable property or property funds so as to retain the
The conditions for qualifying for the expatriate tax breaks
1. Securing a fixed-term or permanent employment contract in a
company based in France either through a company based abroad, or
recruited directly by the company based in France.
2. Not been tax resident in France during the five prior
calendar years; and
3. Declaring France as the employee's principal tax residence
The main aim of the 2018 régime is to enable aso-called
impatriatio bonuses to be paid tax free.
Before considering or agreeing to such an "opportunity", seek
independent advice from Peter Harris.
Whether the exemption will also be applied to prélèvements
sociaux on exempted foreign income or gains has yet to be