Taxation of residents
Your tax residency is in France
All persons whose tax residency is in France are subject to the French tax system. There are, however, a few exceptions.
French tax system
All persons residing in France are in the same tax situation as those ordinarily living in France. All their income, whether generated abroad or in France, should be declared at the resident's local tax office (centre des impôts).
As a result, residents benefit from all forms of tax credit as stated by the French tax code, as well as reductions for the elderly. They can also benefit from expenses deductible from the overall income.
Special system for foreign professionals
Based on the British "non dom" model, some professionals coming to France to work can benefit from a dispensatory tax system.
- employees and managers called from abroad to take up a position in a company established in France (internal company mobility),
- persons and employees directly hired by a company established in France,
- non-employees who establish their tax residency in France by December 31st, 2011 at the latest and who make an exceptional contribution to France,
- persons whose principal activity requires specific skills or is experiencing hiring difficulties in France (the list of these activities is fixed by decree),
- persons investing in a company's capital since January 1st, 2008 (however, there are additional financial conditions to be met).
Particularities of the special system
For all those moving to France since January 1st, 2008, additional income linked to temporary assignments is exempt from French income tax up to a limit of 30% or entirely (for internal group mobility).
Some income earned abroad (share dividends, capital gains on foreign stock transfers) is exempt from income tax up to a limit of 50%.
Assets held outside France are exempt from wealth tax (Impôt sur la fortune or ISF) for the first 5 years of residency in France.
Lastly, foreign expatriates can deduct contributions made to additional pension schemes and foreign complementary social security schemes (to which they subscribed before taking up their position in France) from their taxable income, within certain limits. This option is valid up to December 31st of the 5th year following the start of the new professional position in France.
Foreign expatriates concerned by this system must not have had tax residency in France during the 5 years preceding the start of their new professional position in France. The dispensatory system is applicable in France for 5 years.
© All Contents, Laurence de PERCIN, janvier 2014.