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France Unveils Latest 'Exit Tax' Data

by Ulrika Lomas, Tax-News.com, Brussels

28 February 2013


Director General of the country’s Public Finance Bruno Bézard has recently unveiled details to the French National Assembly finance committee of the latest information pertaining to France’s controversial "exit tax."

The figures reveal that around ten wealthy taxpayers with significant financial assets leave France every month.

As at December 31, 2012, 250 exit tax declarations had been submitted to the tax authorities from individuals electing to transfer their tax residence outside of France, of which 128 concerned departures in 2011 and 122 related to departures in 2012.

Over half (80%) of all declarations were submitted by taxpayers who had chosen to relocate to Switzerland (72), to Belgium (55), to the US (24), and to the UK (17). Other significantly less popular destinations included Singapore, Luxembourg, Canada, Morocco, Israel, Hong Kong, and Mauritius.

The global amount of capital gains declared by taxpayers leaving France exceeded EUR2bn (USD2.6bn). A total of around EUR1.4bn of latent capital gains had been declared from the 128 individuals leaving France in 2011, amounting to on average EUR10m per declaration.

Adopted by the previous Government back in July 2011, the country’s exit tax applies to the transfer of tax residence outside of France after March 3, 2011.

The measure is designed to end the practice of tax optimization, whereby some taxpayers transfer their tax residence outside of France to realize capital gains on wealth without paying tax.

Therefore, taxpayers subject to the country’s solidarity tax on wealth (impôt de solidarité sur la fortune – ISF), with wealth in excess of EUR1.3m, who transfer their fiscal residence abroad are subject to a tax on latent capital gains crystallized at the time of their departure, if they cede the assets that they hold within eight years following their expatriation.

In accordance with the provisions of article 4b of the general tax code (CGI), individuals considered to have their tax residence in France are those who have their homes in France, who have their principal place of residence in France, who carry out a professional activity in France (whether salaried or otherwise), and those who have the centre of their economic interests in France.

State employees carrying out their duties or responsibilities in a foreign state are also considered to have their tax residence in France, if they are not subject in that country to a personal tax on all of their income.

The base of the tax is the sum of the taxable assets belonging to different members of the taxable household or family unit. A 19% flat rate of tax applies and social levies are also imposed.

TAGS: individuals | Morocco | Finance | tax | Belgium | Mauritius | interest | employees | Israel | Luxembourg | Singapore | Canada | France | Hong Kong | Switzerland | exit tax

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