The Tax and Social Benefits France Offers to Expatriates Moving to France

Introduction

France stands out on the international stage with attractive tax and social security regimes designed to encourage the relocation of expatriates—individuals transferring their tax residence to France to live and work there.

At TaxLhab, we have already dedicated a detailed article to the inpatriate tax regime, which notably allows eligible individuals to benefit from income tax exemptions on expatriation bonuses, the portion of remuneration linked to work performed outside France, as well as a 50% exemption on certain foreign passive income and capital gains. For more details, we invite you to read our comprehensive analysis [here].

In this article, we highlight other tax and social measures that facilitate settling in France:

1. Exemption from real estate wealth tax (IFI) on assets and rights located abroad;
2. Temporary exemption from compulsory affiliation to the mandatory old-age pension scheme;
3. Deduction of contributions paid to a foreign social security scheme;
4. Exemption from payroll tax ("Taxe sur les salaires").

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1. Exemption from Real Estate Wealth Tax (IFI)

New tax residents in France, whether foreign nationals or returning French citizens, benefit from an exemption from the real estate wealth tax (IFI) on assets and real property rights located abroad. This advantage applies if the taxpayer was not a French tax resident during the five years preceding their relocation to France.

This regime is applicable for each year during which the taxpayer maintains their tax residence in France, up until December 31 of the fifth year following the year in which their tax residence was established in France. Beyond this period, expatriates are subject to IFI under the same conditions as other French residents.

Scope of IFI
The real estate wealth tax applies to taxpayers holding a net taxable real estate portfolio exceeding €1.3 million. The taxable base includes real property and property rights, reduced by deductions such as loans contracted for their acquisition. The IFI tax scale is progressive, with rates ranging from 0.5% to 1.5% for the highest-value estates.

Example
Consider an individual transferring their tax residence to France for the first time. This person owns a property in Germany worth €2 million and purchases an apartment in Paris valued at €1.5 million. To finance this purchase, they take out a loan of €1 million.

In this case:

• The real estate located abroad (the property in Germany) is excluded from the taxable base for the first five years following the move to France.
• Only the apartment in Paris is included in the taxable base, with a net value of €500,000 (€1.5 million – €1 million loan).

Since the net taxable base is below the €1.3 million threshold, this individual is not liable for IFI (during the exemption's validity period).

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2. Temporary Exemption from Mandatory Old-Age Pension Contributions

Employees recruited from abroad to work in France may, under certain conditions, benefit from an exemption from mandatory basic and supplementary old-age pension contributions for a period of three years, renewable once. This exemption applies to both the employee's and employer's share of these contributions. However, the period covered by this exemption does not entitle the employee to any benefits under the French old-age pension system.

Scope of Application
According to the French administration’s guidelines, eligible individuals for this temporary exemption include employees and similar workers:

• “who come from abroad to temporarily carry out a professional activity on French territory;
• and who, for this reason, are compulsorily affiliated with a French social security scheme […].”

The requirement of temporary employment is not explicitly stated in the law (Article L. 767-2 of the French Social Security Code). Therefore, in our view, the exemption should also apply to employees hired for an indefinite period, aligning with the expatriate tax regime (Article 155 B of the French General Tax Code).

Eligibility Conditions
To qualify for the temporary exemption, the employee:

• must not have been affiliated with a mandatory French old-age pension scheme during the five calendar years preceding their employment in France (except for incidental, seasonal, or student activities);
• must contribute at least €20,000 annually to a pension scheme providing effective retirement rights. This contribution can relate to:
  (a) a pension system in a third country; or
  (b) private or public, individual or collective pension products in France or abroad, subscribed by the employee or employer.

The private pension product must:

• aim to provide an annuity or lump sum upon definitive cessation of professional activity;
• not allow for early liquidation unless linked to retirement, except as defined under the PACTE law.

Exemption Application Process
The application for exemption must be submitted using a form specified by the decree of June 27, 2019, which should:

• be completed by the legal representative of the employer hosting the employee in France, stamped and signed by the company;
• also be signed by the employee.

The application must be sent to URSSAF at least 60 days before the employee’s start date. In case of delays:

• the employer and employee must comply with contribution obligations;
• the employer may request a reimbursement of contributions up to the date of URSSAF’s notification of approval for the exemption.

The exemption may be revoked before the end of the three-year period if the employee ceases their activity or is transferred to another company.

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3. Deduction of Contributions Paid to a Foreign Social Security Scheme

Certain expatriates may remain affiliated with the social security system of their home country under the European regulations on the unity of applicable social security legislation, particularly Regulations (EC) No. 883/2004 and No. 987/2009. This provision also applies under the Trade and Cooperation Agreement between the European Union and the United Kingdom, signed on December 30, 2020.

Under these frameworks, eligible expatriates are not subject to social security contributions in France. As a result, they do not fall under the regime described in Section 2.

However, these individuals benefit from a significant tax advantage: they may deduct from their taxable income contributions paid to statutory social security schemes, supplementary pension schemes, or complementary insurance schemes (whether mandatory or optional) during their secondment in France. This deduction, provided for under Articles 83, 1°-0 bis, and 2°-0 ter of the French General Tax Code (CGI), reduces the taxable base for income tax purposes, thereby substantially lowering the tax burden.

Secondment is also a solution provided under bilateral social security agreements concluded by France with countries and territories outside the European Union, including: Algeria, Andorra, Argentina, Benin, Bosnia-Herzegovina, Brazil, Cameroon, Canada, Cape Verde, Chile, Congo, South Korea, Côte d'Ivoire, the United States, Gabon, Guernsey, India, Israel, Japan, Jersey, Kosovo, North Macedonia, Madagascar, Mali, Morocco, Mauritania, Mayotte, Monaco, Montenegro, Niger, New Caledonia, the Philippines, French Polynesia, Quebec, San Marino, Saint Pierre and Miquelon, Senegal, Serbia, Togo, Tunisia, Turkey, and Uruguay.

France is also linked to the Isle of Man under the 1956 Franco-British convention.

A thorough analysis of the scope of each agreement is essential to identify any branches of social protection not covered by the agreement. Such gaps may lead to contributions being due in France, even in the context of secondment.

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4. Exemption from Payroll Tax ("Taxe sur les salaires")

Payroll Tax Exemption for Impatriation Bonuses: A Key Advantage to Attract International Talent

In the context of intense global competition for talent, the impatriate regime provides French employers with a significant fiscal advantage. Among its benefits, the partial exemption from payroll tax on impatriation bonuses offers a valuable opportunity to optimize recruitment costs while enhancing France's appeal to highly qualified professionals.

A Measure Governed by the French General Tax Code

Article 231 bis Q of the French General Tax Code (CGI) provides that remuneration components mentioned in paragraph 1 of section I of Article 155 B of the CGI, which are directly linked to the impatriation status or, alternatively, fixed at 30% of the gross remuneration, are exempt from payroll tax. This exemption applies only to impatriate employees who assumed their roles in France on or after July 6, 2016, provided they meet the tax residence and duration requirements set out in the same article.

For employees opting for the 30% flat-rate calculation, employers benefit from a substantial reduction in the payroll tax base, offering significant cost savings while facilitating the recruitment of international talent.

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5. Attracting International Talent

In summary, the French favorable tax and social security regimes for impatriates, though technical, are powerful strategic tools for attracting and retaining international talent.

To deepen your understanding of impatriation regimes and their implementation within your company, contact TaxLhab at: contact@taxlhab.com. Our team offers tailored and educational support designed to meet your specific needs.

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