| An
individual is deemed to be tax-resident in France
if:
- he
has a home in France; or
- if
France is the place of his principal abode;
or
- if
France is the place where he performs his principal
professional activities; or
- if
France is the centre of his economic interests.
These
definitions are unusually wide, so that establishing
non-residence after a period of residence will
probably involve demonstrating that a residence
has been established somewhere else.
Tax
is due on French income and assets for non-residents.
Non-residents remain obliged to declare their
French source income and may be required by the
French tax authorities to appoint a representative
in France authorized to receive all correspondence
relating to tax matters. Profits or gains derived
from trades, professions or vocations carried
out in France including self-employment are subject
to tax whether or not the individual is resident.
There
are gift and inheritance taxes in France which
are not easily escaped, although within a family
the rates are quite low. If a non-resident legatee
has been a resident of France for six out of the
previous ten years, the tax applies to worldwide
assets transmitted, regardless of the residence
status of the deceased.
General
anti-avoidance legislation has not progressed
far in France, and holdings in offshore or foreign
assets other than trusts taken on before residence
finishes will probably be subject only to income
taxation. For an individual who knows he is going
to leave France, there is therefore a case for
switching income-generating assets into capital
appreciation assets outside France, or at any
rate for ensuring that gains are not made during
French residence which could incur capital gains
tax. Gains which crystallise after residence has
finished will escape French tax.
Once
French residence has been terminated, and if non-residence
is expected to be permanent, then an ex-French
resident is free to invest offshore in order to
obtain the best possible returns.
From
2007 (with regard to tax year 2006), the top rate
of individual income tax is 40%, and a 60% ceiling
on the total amount of tax paid by individuals
has been put in place.
2003
Expatriates Tax Package
In
November, 2003, the French government introduced
a package of tax incentives under which foreign
executives working in France were no longer obliged
to pay income tax on bonuses derived from working
abroad, which some estimate can represent between
20% and 50% of a top executive's income.
Other measures include the deductibility of pension
and healthcare contributions paid in their country
of origin from taxable income.
“We know that although the image of France
is good as far as its infrastructure, quality
of life and workforce is concerned, it has a poor
reputation for taxes and employment legislation,”
a spokesman representing the Finance Ministry
commented.
The measures were effective from 1 January, 2004
and were expected to benefit around 3,000 executives.
The measures also apply to French managers who
have been paying taxes abroad for at least ten
years.
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