According to E&Y, the law, which was passed by the National Assembly on 10th June, is due to be voted on by the Senate, and could soon become law, subject to any amendments written by the upper chamber. These new provisions would be applicable to assignments in France starting on or after 1st January, 2008.

Under the old regime, taxpayers who were sent to France by their employers were eligible for tax breaks for a "limited period." Under the new rules, these tax breaks will be extended to individuals directly employed by a French employer, also for a limited period. However, in order to qualify for favourable tax treatment under the new regime, the taxpayer must not have been resident in France in the five tax years immediately preceding the commencement of their employment or assignment.

These favourable provisions apply up to the 31st December following the fifth anniversary of their arrival in France.

The new regime allows those assigned to France by a foreign employer to exclude from their taxable income those elements of remuneration that are directly related to the expatriate assignment. If individuals are locally recruited, they have the option of excluding from their taxable income those elements of remuneration directly related to their expatriate assignment, or a standard 30% deduction.

However, if the amount of income which remains subject to French income tax after applying the relief is less than the level of remuneration paid locally in France or an individual in the same of similar position, the difference is added back onto their taxable income ensuring that qualifying taxpayers declare at least the same amount of taxable income as a local employee in a similar position.

There is also an exemption available for residual taxable income under the new regime (the taxable remuneration which remains after having exempted the expatriate elements or the 30% deduction), although the amount of income that can be exempted under the new regime is subject to caps.