REMINDER – RULES OF FRENCH TERRITORIALITY REGARDING THE SOLIDARITY TAX ON WEALTH

For French fiscal residents, whether you come to France for the first time or return from expatriation

French fiscal residents are subject to the solidarity tax on wealth on all of your goods, rights and values, located in France and abroad.

This unlimited tax liability is established by the dispositions of the article 885-A-1° of the GTC. However, a few exceptions to this liability for taxpayers owning goods abroad can result from international fiscal conventions signed by France with other States or from internal legal provision (at the paragraphs 2 and 3 of the article 885 A – 1° of the GTC).

You are considered fiscally residing in France (continental France, Guadeloupe, Martinique, French Guiana and Réunion), regardless of your nationality, if, in view of the internal French right regulation (article 4 B of the GTC), and subject to international fiscal conventions,

  • Your household or your place of main residence is located in France
  • You have a professional occupation in France, wage-earning or not, other than on an ancillary basis,
  • The center of your economic interests is in France
  • Public servant working abroad, you are not subject in your country of occupation to a personal tax on all of your wages.

The fiscal domicile regarding the solidarity tax on wealth is determined on January 1st of the year of taxation.

Non-residents

In accordance with the dispositions of the article 885-A-2°, paragraph 1 of the GTC, non-residents are only subjected to the solidarity tax on wealth in proportion of their belongings, rights and values located in France, and subject to opposite conventional or internal rights disposition (for instance: tax exemption on financial investments of non-residents established by French regulation of codified at the article 885 L of the GTC).

THE CASE OF TRANSFER OF FISCAL DOMICILE TO FRANCE:  TEMPORARY TAX EXEMPTION OF THE SOLIDARITY TAX ON WEALTH ON GOODS LOCATED ABROAD

The Law of Modernisation of the Economy of August 4th, 2008 has instituted a plan for temporary exemption on the solidarity tax on wealth for natural persons who transferred their fiscal domicile to France from August 6th, 2008 for their belongings located out of France.

This plan is codified at paragraphs 2 and 3 of the 1° of the article 885 A of the GTC.

WHO IS ELIGIBLE TO THIS PLAN?

Natural persons who, regardless of their nationality, have not been fiscal residents in France during the past 5 civil years preceding the year when they transfer their fiscal domicile to France, in accordance with the article 4 B of the GTC and de facto in accordance with international fiscal conventions.

Nota Bene: this plan is not subject to the benefits of the impatriates system established for income taxes and codified at the article 155 B of the GTC, it applies independently to this system.

WHAT ARE THE CONCERNED BELONGINGS?

Belongings located out of France, namely those with their material basis abroad (unmovable and movable properties) as well as intangible goods that are not considered French.

The following are considered located in France in French internal right (article 750 ter 2° of the GTC and administrative principles) subject to international fiscal conventions:

  • Tangible properties with a material basis in France (unmovable and movable properties, business capital exploited in France)
  • The debts claimed to a debtor located or residing in France, transferable securities emitted by the French State, a French legal person governed by public law, or a company possessing, in France, its HQ or effective place of management
  • Patents and trademarks conceded or exploited in France
  • Under certain conditions, shares in the capital of companies or legal entity unregistered at the stock exchange, the head office of which is located out of France and the French asset of which is mainly comprised of unmovable or property rights located in France.

THE REACH OF THIS PLAN

Tax exemption on belongings located abroad is applicable to the year during which the tax payer keeps his or her fiscal domicile in France, according to the article 4 B of the GTC (or his/her fiscal residence if an international fiscal convention applies), until the December 31st of the 5th year following that of his/her transfer of domicile to France.

DATE OF EFFECT OF THESE DISPOSITIONS

These dispositions are beneficial for tax payer shaving established their fiscal domicile in France from August 6th, 2008. It has consequently been applied for the first time on the solidarity tax on wealth of 2009. Expatriates having established their fiscal domicile before this date cannot be eligible to this measure.

For more precisions, check our source material: Direction Générale des Finances Publiques (in French only)