Do I have to pay an "Exit Tax" ?

Conditions of taxation

If you transfer your residence for tax purposes outside France, you are, under certain conditions, liable for income tax and social levies connected with unrealised capital gains, receivables originating from an earn-out clause, and capital gains realised on the disposal or exchange of securities subject to tax deferral.
This affects your situation if you were a resident of France for tax purposes for at least six years out of the previous ten prior to the transfer of your residence abroad and if you own stocks or shares whose value is equal to or greater than €800,000 or represents at least 50% of a company's corporate profits.
You are nevertheless entitled to a stay of payment or tax relief in certain circumstances.
As regards transfers of residence for tax purposes outside France as from 1 January 2019, a number of arrangements have been added to this scheme, without retrospective effect for taxpayers having transferred their tax residence prior to this date (Article 112 of the 2019 Budget Act).

Stay of taxation

Taxpayers who transfer their residence outside France may benefit from a stay of payment of the taxes assessed in this respect. This stay is either automatic or granted upon request using return 2074 ETD accompanied by a guarantee proposal.
The stay upon request, which used to concern taxpayers transferring their residence to a non-European Economic Area country, now only applies, since 2019, to those transferring their residence to a country considered as non-cooperative or to a non-EU country or territory which has not concluded a tax treaty containing an administrative assistance clause to combat tax evasion and avoidance, or a mutual assistance agreement for the recovery of taxes with France (Act no. 2018-1317 of 28 December 2018 Article 112).
Please note: for transfers carried out from 22 November 2019 onwards, the request must be filed no later than 90 days prior to the transfer (Appendix III, Article 41 tervicies A of the French General Tax Code), instead of 30 days prior to the transfer.
In the event of successive transfers to a country eligible for an automatic stay of taxation and then to a country eligible for an optional stay, a request may be made following the second transfer. It must be made at least 90 days prior to the second transfer.

Conditional relief

For transfers carried out from 1 January 2019 onwards, the new arrangements provide for a reduction of the timeline after which the taxpayer may obtain relief on the exit tax subject to the stay of payment (except if the sale, redemption/cancellation of shares or liquidation of the company occurs in the interim). The timeline is reduced from 15 years to five or two years accordingly:
- Two years for taxpayers whose shares coming under the scope of the exit tax are worth less than €2,570,000
- Five years for those whose value is more than €2,570,000
The new arrangements now focus on shares of companies investing predominantly in property that are liable for corporation tax on the date of the transfer of the taxpayer’s residence for tax purposes.
For the record, for transfers of residence for tax purposes having taken place between 
3 March 2011 and 31 December 2013, the timeframe for retaining shares allowing for relief on the proportion of the exit tax relating to income tax was eight years. Pursuant to Article 11-II of the 2024 Budget Act no. 2023-1322 of 29 December 2023, outstanding social levies may now be subject to relief or a refund, subject to proof of holding the shares at the end of the eight-year period. If the transfer took place between 2014 and 2018, income tax and social levies are subject to relief after 15 years.

Filing obligations

Exit tax arrangements revolve around two returns:

• Return 2074-ETD to be filed in respect of the transfer of residence for tax purposes outside France for declaring unrealised capital gains, receivables originating from an earn-out clause, and capital gains subject to tax deferral that are held on the date of the transfer.
• Return 2074-ETS to be filed in respect of the years following the year when the residence for tax purposes was transferred outside France if you are subject to a stay of payment. This enables your taxes to be monitored.

There are several versions of this tax monitoring return depending on the date of the transfer:

• Return 2074-ETS1 if you transferred your residence for tax purposes outside France in 2011 or 2012
• Return 2074-ETS2 if you transferred your residence for tax purposes outside France in 2013
• Return 2074-ETS3 if you have transferred your residence for tax purposes outside France on or after 1 January 2014

These returns are to be filed within the same deadlines as your income tax return (i.e. in year N+1 for return 2074-ETD, for example, if you left in year N).

If you are entitled to a full stay of payment, either automatically or optionally, and if no event curtailing this stay of payment or triggering tax relief occurred during the year for which you are monitoring your taxes, you must file return 2074-ETSL (reduced monitoring).

In addition, in box 8TN of return 2042C, you must enter the overall amount of taxes subject to a stay of payment (carried forward from return 2074-ETS when this has been filled in).

If there is no stay of payment, the tax monitoring return must only be filed if an event leading to the full or partial refund of the initially-paid exit tax occurs.

If, once you are based abroad, you again transfer your residence for tax purposes to another country, this new transfer may have an impact on your tax arrangements. As a result, within two months of this change of residence for tax purposes, you must write a letter to inform the Individual Tax Department for Non-Residents (SIPNR) at the Non-Residents Tax Directorate (DINR) thereof, at the following address:

Service des Impôts des Particuliers Non-résidents, 10 rue du Centre, TSA 10010, 93465 Noisy-le-Grand Cedex, France.
 

UPDATED DINR PART - JANUARY 14, 2025