The French Impatriate Tax Regime in 10 Questions and Answers

1 – What are the benefits?

Income tax exemptions notably apply to the “impatriation premium”, days worked abroad, and 50% of foreign‑source interest, dividends and capital gains.

In addition, the impatriation premium is exempt from payroll tax, and foreign real estate assets are excluded from the French real estate wealth tax (IFI).

2 – What is the “impatriation premium”?

It is an additional remuneration directly linked to the performance of professional activity in France (for example a mobility allowance, cost‑of‑living differential, housing benefit, etc.).

On an optional basis, it may be assessed at a flat rate of 30% of total net remuneration (excluding savings schemes and employee shareholding plans).

3 – Who is eligible?

Eligible individuals include employees and certain corporate officers (tax‑treated as employees) who are assigned by a foreign company to a position within a French entity (intragroup mobility), or who are directly recruited abroad by a French‑established company.

The payroll tax exemption benefits employers, and the IFI advantage applies to individuals who were tax‑resident abroad during the five calendar years preceding the year they become tax‑resident in France.

4 – What are the conditions for the income tax exemption?

Impatriates must have been tax‑resident abroad during the five years preceding the year they take up their duties in France.

From the date they take up their duties, they must have their home in France and perform their professional activity there as their main activity.

According to the authorities, the actual impatriation premium must be provided for in the employment contract or corporate mandate before taking up duties in France.

Days worked abroad must be carried out in the direct and exclusive interest of the employer.

5 – What are the limits?

The first limit is time‑based: the income tax and payroll tax exemptions apply for the year duties are taken up in France and the following eight years (five years for the IFI exemption).

If taxable remuneration after exemption of the impatriation premium is lower than that of a non‑impatriate performing similar duties (“the reference remuneration”), the difference is added back for tax purposes.

On an optional basis, the exemption of the impatriation premium and days worked abroad may be capped at 50% of total remuneration, or the exemption of days worked abroad may be limited to 20% of taxable remuneration after exemption of the impatriation premium.

6 – What happens in case of a change of duties?

The exemption regime continues to apply in the event of a change of duties within the same company or within another French company belonging to the same group.

7 – Can the tax authorities challenge the application of the regime?

Although there is no prior approval procedure, the authorities retain their audit powers, notably to verify that the conditions and limits of the regime are met.

8 – Can the regime be applied retroactively?

Yes, through a formal claim and/or the filing of amended tax returns.

9 – What are the reporting obligations?

If impatriates fall under the French social security system, the employer must separately report in the DSN (“Déclaration Sociale Nominative”) the taxable remuneration and the exempt amounts relating to the impatriation premium and days worked abroad.

Impatriates must also report in their annual income tax return the income exempt under the regime.

10 – What are the practical recommendations?

It is essential to anticipate the implementation of the regime to secure it contractually, optimise the remuneration package (notably by choosing between an actual or flat‑rate impatriation premium and prioritising the use of professional expenses), and document the reference remuneration, which must be determined in light of the law, administrative doctrine, case law, and the specific facts of each situation.

Payroll must exclude from taxable net income the exemptions provided by the regime in order to adjust the withholding tax base; the cumulative taxable net income for December must be correctly determined to avoid discrepancies with the taxable remuneration reported in the annual income tax return.

Impatriates may file Form 2043 to request a personalised withholding tax rate that takes into account their eligibility for the impatriate regime and their family situation (otherwise the default withholding rate may negatively affect their cash flow).

A calendar of days worked in France and abroad must be kept up to date, along with supporting documentation for travel.

Finally, when filing the annual income tax return, the options chosen under the regime must be indicated, and the potential impact of international tax treaties must be considered (particularly in the case of deferred remuneration relating to activity performed before taking up duties in France).

Further reading