French exit tax: preparing your departure
A tax on gains you have never realised, triggered by a change of address. It is prepared before you leave, and it cannot be caught up afterwards.
When exit tax becomes an issue
You are selling your company and leaving
The sale is under way or has just closed, and the move abroad follows within months. The order in which the two happen changes the outcome.
- Selling before leaving or after the transfer of residence
- Interaction with a contribution-and-sale scheme or a gain already under deferred taxation
- Earn-out receivables attached to the sale, which the text also covers
- Timing of a gift to your children against the date of transfer
You are leaving without selling
You keep your shares and you move. The tax is computed on a gain you have not received, from the value of the shares on the day you leave.
- Valuation of unlisted shares on the date of transfer
- Payment deferral, automatic or on request depending on the destination country
- Guarantees to be put in place before departure where they are required
- Reporting obligations for the year of transfer
You have already left
The move has happened, the tax is deferred, and an event is coming: a sale, a gift, a share buyback, or a return to France.
- Annual reporting throughout the deferral period
- Effect of a sale on the deferred French tax and on the tax of your country of residence
- Relief at the end of the holding period
- Return to France and the fate of the tax still under deferral
Unsure where you stand? The test below follows the conditions of Article 167 bis.
Are you within the scope of the French exit tax?
Five questions on the conditions set by Article 167 bis of the French tax code: prior residence, asset thresholds, destination country. The test tells you whether you fall within the scope and under which deferral regime. It computes no amount. Nothing is sent anywhere, nothing is stored.
This test is a reading aid. It is not legal advice, it does not cover special cases such as shares held through an intermediate structure, and it is no substitute for a review of your situation.
What Article 167 bis provides
A tax triggered by a move, not by a sale.
Two conditions apply together. You must have been a French tax resident for at least six of the ten years preceding the transfer, and those six years need not be consecutive. You must then hold, on the day you leave, either shareholdings worth at least 800,000 euros in total, or a holding representing at least 50% of the profits of a company.
The base is not limited to unrealised gains. It also covers earn-out receivables from an earlier sale and gains already placed under deferred taxation.
The payment deferral suspends the tax, it does not cancel it. It applies automatically when you move to a Member State of the European Union or of the European Economic Area, and to a State bound to France by a treaty on administrative assistance and assistance in recovery.
For any other State, the deferral requires a formal request, the appointment of a tax representative and the provision of guarantees. Those guarantees are arranged before departure, not after.
The tax is relieved at the end of a holding period, counted from the date of transfer:
- Two years where the total value of the shares does not exceed 2,570,000 euros on the day of departure
- Five years above that threshold
Relief also applies, regardless of that period, on death, on a gift of the shares under certain conditions, and on a return of your tax residence to France.
Three moments, and two of them close for good.
- Twelve to twenty-four months before: valuation, the choice between selling before or after, any gift, and preparation of guarantees
- The year of transfer: a specific return filed with your French income tax return
- After departure: annual reporting during the deferral, and monitoring of the events that bring the tax back into play
A departure decided three weeks before the move leaves the third step, and only the third.
Lalé Kilic, international tax lawyer in Lyon
Nearly twenty years of practice in international private wealth taxation. A first career in major American law firms in Paris and Lyon, in international mobility, before founding L.L.V. FIDEUROPE AVOCATS in Lyon. Departures of business owners in the middle of a sale are a regular part of our practice.
- Member of the Lyon Bar, listed in the international lawyers directory
- Coordination with your M and A counsel, notaries and private bankers
- IFORA training for chartered accountants on international matters
- Consultations available in English and in French
In person in Lyon, Paris, Annecy or Geneva. Video conferencing in French and in English.
Full background
Your questions on the French exit tax
01 What is the French exit tax, in practice? +
A tax on the unrealised gains attached to your shares, triggered by the transfer of your tax residence out of France. Unrealised means you have sold nothing and received nothing: the tax authorities compute the gain you would have made had you sold on the day you left, and tax it. Earn-out receivables from an earlier sale and gains already under deferred taxation are added to that base. In most cases payment is suspended by a deferral, and the tax is ultimately relieved if the shares are kept.
02 Am I concerned if I leave with less than 800,000 euros of shares? +
Not under that threshold, but there is a second, alternative test: holding a stake representing at least 50% of the profits of a company is enough to fall within the scope, whatever its value. Timing also matters. The 800,000 euro threshold is assessed on the day of transfer, on the total value of all your shareholdings. A funding round, a revaluation or a sale in preparation can push you over the line between the moment you decide to leave and the moment you actually do.
03 Is the payment deferral automatic? +
It is when you move to a Member State of the European Union or of the European Economic Area, and to a State bound to France by a treaty on administrative assistance and assistance in recovery. For any other destination, the deferral requires a request, the appointment of a tax representative and the provision of guarantees. This is a question of timing more than of law: guarantees are arranged before departure, and arranging them takes time.
04 How long before the tax is relieved? +
At the end of a holding period counted from the date of transfer: two years where the total value of your shares does not exceed 2,570,000 euros on the day you leave, five years above that threshold. Relief also applies, independently of that period, on death, on a gift of the shares under certain conditions, and where your tax residence returns to France.
05 What happens if I sell my shares after leaving? +
A sale before the end of the holding period ends the deferral and makes the tax payable, in full or for the portion matching the shares sold. On top of that sits the possible taxation of the same sale in your new country of residence. It is precisely that interaction which is prepared in advance: depending on the applicable treaty, France and the destination State do not have the same taxing rights, and the treatment of the acquisition cost can differ from one country to the other.
06 What is the 183-day rule, and does it relate to exit tax? +
They are two separate things that are often confused. The 183-day rule is a connecting factor found in tax treaties, used in particular for employment income on short assignments. Exit tax does not depend on a day count but on a prior residence condition, six of the ten years before departure, and on asset thresholds. Leaving mid-year does not take you outside exit tax on the ground that you spent fewer than 183 days in France that year.
Let us take up your departure, before it has a date
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Any information you share is covered by professional secrecy. A first confidential consultation qualifies your situation and defines the scope of our work, in person in Lyon, Paris, Annecy or Geneva, or by video in French or in English.