Exit Tax Under Article 167 bis CGI
The French exit tax (article 167 bis CGI) imposes taxation on unrealised gains accruing to certain rights, securities, and shares when a taxpayer transfers their tax residence outside of France. This mechanism applies to individuals who have been fiscally domiciled in France for at least six of the ten years preceding the transfer, and who hold rights, securities, or shares referred to in article 150-0 A, I, 1 CGI exceeding the statutory thresholds, or a direct or indirect participation representing at least 50% of the profits of a legal entity.
1. Definition & Scope
Exit tax targets unrealised gains on the rights, securities, and shares referred to in article 150-0 A, I, 1 of the CGI, held at the date of transfer of tax residence outside France. It applies to taxpayers who have been tax-domiciled in France for at least six years during the ten years preceding the transfer of tax residence outside France, provided they hold rights, securities, shares or claims falling within the scope of Article 167 bis CGI and meeting the statutory thresholds. French nationality is irrelevant. The tax is calculated on the difference between the acquisition cost and the fair market value at the date of transfer.
Assets within scope: gains on rights, securities, and shares as defined in article 150-0 A, I, 1 CGI, as well as gains on claims (créances) referred to in article 150-0 A, I, 2 CGI (deferred-payment claims arising from a prior disposal).
2. Triggering Thresholds
Exit tax is triggered if the taxpayer holds at the date of transfer either: (i) rights, securities, and shares as defined in article 150-0 A, I, 1 CGI with an aggregate value exceeding EUR 800,000, or (ii) a direct or indirect participation representing at least 50% of the profits of a legal entity, regardless of the EUR 800,000 threshold. These two conditions are alternative, not cumulative.
Key distinction: The two thresholds are alternative: either condition, taken separately, suffices to trigger exit tax. The aggregate value is assessed across all rights, securities, and shares within the scope of article 150-0 A, I, 1 CGI held at the date of transfer.
3. Deferral & Reduction Mechanisms
Automatic Deferral (CGI, art. 167 bis IV): the deferral (sursis de paiement) is automatic — without any prior request, designation of a tax representative or constitution of guarantees — when the taxpayer transfers his tax residence to a Member State of the European Union, or to any other State or territory that has concluded with France both a mutual administrative assistance convention against tax fraud and evasion and a mutual recovery assistance convention of comparable scope to Council Directive 2010/24/EU, provided the destination is not listed as a non-cooperative jurisdiction (CGI, art. 238-0 A). For destinations not falling within Article 167 bis IV, deferral must be requested on election (CGI, art. 167 bis V) and is granted only subject to three cumulative conditions: filing of the election, designation of a representative established in France, and constitution of guarantees sufficient to ensure recovery of the deferred exit tax, calculated on the basis of gains and receivables declared on Form 2074-ETD (subject to subsequent adjustment after issuance of the tax assessment). Payment suspension remains subject to ongoing reporting compliance.
Statutory Relief Period: Taxpayers may obtain statutory exit tax relief or cancellation (dégrèvement) by retaining their securities throughout the applicable holding period without disposing of them: 2 years where the total value of securities subject to exit tax is not exceeding EUR 2,570,000, or 5 years where that value exceeds EUR 2,570,000. The statutory relief may be granted upon expiry of the holding period, provided no event triggering the end of the deferral has occurred in the interim, the securities have been continuously held, and the applicable reporting obligations have been complied with.
4. Procedural Requirements
Exit tax requires filing form 2074-ETD (declaration of unrealised gains) within the statutory filing deadline of the tax campaign following the year of transfer of residence (article 175 CGI). This initial declaration must detail all affected securities, their acquisition cost, fair market value at the date of transfer of tax residence, and corresponding unrealised gains. Subsequent tracking is made through the relevant 2074-ETS3 or 2074-ETSL forms only where the notice requires it: for transfers involving only latent capital gains, filing is generally event-driven; annual filing may remain required for earn-out receivables or gains under deferral. Accurate valuation is critical for compliance.
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