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This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.
 Split Payroll
Foreign source income
Expatriation from France (outbound)
 Split Payroll
Split payroll applies to executive managers of multinational companies carrying on responsibilities in subsidiaries located in multiple foreign countries.
Applicable tax treaties and domestic tax and social rules may result in a lower taxation of the global compensation served to the beneficiaries while lowering the complexity of the management fees (check "Transfer pricing") administration.
Implementation of a relevant split payroll policy may result in very significant savings for both the multinational company and the beneficiaries.
Foreign source income
French tax residents are taxable on their worldwide income. Relevant issues to manage:
Check if the individual is French tax resident according to French tax rules and applicable tax treaties.
Determine which foreign revenues are taxable in France.
Anticipate and solve any double taxation issue.
Check if tax holidays are available e.g. temporary stay outside France "expatriation".
Expatriation from France (outbound)
An expatriation triggers most of the time heavy consequences on:
Income taxes
Social taxes
Inheritance tax
Wedding agreement (Right of each spouse)
Healthcare plans
Pension schemes
Stock option plan
Applicable treaties must be carefully reviewed before accepting an expatriation. If no treaties are available, it is strongly advised to investigate in depth what will be the consequences of the expatriation in the current country of residence, in the country of expatriation and in the country where the expatriate is a citizen.
French tax residency must be analyzed according to the applicable tax treaties, the French tax residency rules, the tax residency rules of the country the expatriate is coming from and the residency rules of the country where the expatriate is a citizen.
If there is no tax treaty, French tax residency rules alone will be applicable.
It worth notices that until December 31, 2004, taxpayers resident in France 6 years during the last 10 years and who transfered their tax residency outside France were liable from an exit tax on the accrued capital gain on interest higher than 25% in companies subject to French corporate income tax. The taxable gain was equal to the difference between the fair market value of the shares at the time of the transfer and the acquisition price.
However the European Cour of Justice (March 11, 2004, C-9/02, de Lasteyrie du Saillant) ruled that this French exit tax breached EU freedom of establishment guaranteed by European Union law. Therefore the French exit tax cannot apply to transfer of tax residency in an other EU member state. This ECJ ruling had also consequences for Austria, Denmark, Germany, Luxembourg, the Netherlands and Sweden which have all exit tax measures applicable to substantial participations. When the tax residency is transfered outside the European Union, the exit tax is restricted according to the applicable treaties.
As of January 1st, 2005 the taxpayers transferring their domicile outside France no longer have to file a temporary tax return nor pay the related income tax before leaving the country. Taxpayers only have to file their regular income tax return and pay their taxes according to standard rules.
TAX REFUND: French tax authorities officially agreed (Guidelines 5 C-1-06) that French taxpayers who transferred their tax residence to an EU or EEA (Iceland and Norway only) before January 1st, 2005, are entitled to claim a refund of the taxes paid on the hidden capital gain on participative shares held at the day of the transfer. The benefit of this provision does not apply to taxpayers who transferred their tax residency to a third country.
See also Taxation of expatriate arriving in France.
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