French inpatriates tax regime

Publication December 2016


Following the Brexit vote, France has decided to improve attractiveness of Paris as a major financial centre. In this respect, the French Government announced the creation of an information desk aiming at advising inpatriates on issues such as tax regimes, housing, and residence permits in France.

The 2017 Finance Act draft contains provisions which would enhance the specific tax regime in favour of inpatriates. The purpose of this inpatriates regime is to grant a favourable tax regime to individuals moving to France for work. The tax incentives granted under this inpatriates regime cover professional income, passive income and French net wealth tax.

Who can benefit from the French inpatriates regime?

In order to qualify for this regime, individuals must

  • Work as an employee or an executive officer.
  • Be hired by a French company or be transferred by a foreign company to its French affiliate.
  • Become French tax residents upon taking up their position in France and not have been French tax residents during the last five years.

Subject to an agreement provided by the French tax authorities, this regime could also apply under certain conditions to individuals who do not meet the conditions (notably to be an employee).

Exemption regarding the income tax

French income is taxed in France at a marginal rate of 45 per cent that applies for the part of the salary which exceeds €152.108 (this figure can vary depending on the marital status or the number of children). Moreover, such income is also subject to the employees’ social security taxes at a rate of circa 10 per cent of the gross income (which amounts to 23 per cent of the net income).

However, the French inpatriates regime provides the following tax incentives

  • The inpatriation premium that may be received by the employee during his entire stay in France is fully exempted for income tax purposes. To be exempted such premium has to be an additional remuneration linked to the professional activity carried out in France. To benefit from this exemption, the inpatriate’s compensation, excluding the inpatriation premium, has to be, at least, equal to the compensation received by other employees in respect of equivalent positions in the same company or in similar companies established in France.
  • Employees hired directly by a French company or by a French affiliate of a foreign company may elect to have 30 per cent of their net remuneration treated as an inpatriation bonus, and thus be exempted from income tax.
  • In addition, the portion of such employee’s remuneration related to work carried out abroad is also fully exempted for income tax purposes.

The foregoing tax benefits are however capped inasmuch as (i) the benefits arising from both exemptions should not lead to a tax basis reduction higher than 50 per cent of the total compensation or (ii) the portion of the remuneration related to work carried out abroad should not exceed 20 per cent of the remuneration related to the work performed in France.

Exemption regarding the salary tax

The 2017 Finance Act draft provides that any compensation that are exempted of income tax under the inpatriates regime would also be exempted from the salary tax (taxe sur les salaires), which is payable by employers that are not subject to VAT on at least 90 per cent of their turnover (such as banks or insurance companies).

Exemption regarding passive income

In principle, passive income is taxed at the same rates as employment income. Nevertheless, the social security taxes are levied at a flat rate of 15.5 per cent.

However, the taxation basis of such income depends on their nature. For example, dividends are usually taxed with a 40 per cent rebate of the taxable base whereas capital gains may be taxed with a 50 per cent rebate of the taxable basis (if the shares have been held for at least two years) or even of 65 per cent rebate (if the shares have been held for at least eight years).

Under the inpatriates regime, certain passive income from foreign sources may further benefit from a 50 per cent income tax exemption. The passive income that could benefit from this additional exemption are notably

  • Dividends derived from non-French companies
  • Interests derived from non-French debtors
  • Life insurance income paid by non-French residents
  • Capital gains upon the sale of shares issued by non-French companies
  • Income derived from IP rights owed by non-French residents.

This exemption is subject to the condition that such passive income arises from a country that has concluded a tax treaty with France including an administrative assistance clause.

This exemption is currently valid until December 31 of the fifth calendar year following the inpatriate’s taking up his or her position in France. Such exemption would be extended to the first eight years by the 2017 Finance Act.

Exemption regarding French net wealth tax

All French resident households with assets located in France and overseas with a net value exceeding €1,300,000 evaluated as at January 1 are subject to net wealth tax.

Such net wealth tax is levied on the net value of the assets as at January 1 at the following rates

Assets’ net value as of January 1


From €800,000 to €1,300,000


From €1,300,000 to €2,570,000


From €2,570,000 to €5,000,000


From €5,000,000 to €10,000,000


Above €10,000,000


Exemptions or reductions may be available for specific investments under certain conditions (e.g. business assets, art, etc.).

In addition, under the inpatriates regime, individuals who transfer their tax residence to France are exempted from wealth tax on all assets located outside of France. In this respect, assets are deemed to be located in France if they have either a material link with France (e.g. real estate located in France) or a legal link with France (e.g. shares or bonds issued by a French company).

Recent publications

Subscribe and stay up to date with the latest legal news, information and events...