30 August 2024 · Bureaucracy Without Pain · France
Exit Tax Rules When Leaving France Explained
Theme: Bureaucracy Without Pain • Author’s perspective: cross-border tax attorney
If you own a meaningful slice of a company, a startup’s stock options, or a hefty crypto wallet, a simple change of scenery from Bordeaux to Barcelona can trigger a decidedly non-simple tax called the French exit tax. I’ve walked more than 120 clients through the process since the rules were revamped in 2019, and I can attest that—handled early—it’s an administrative speed bump, not a cliff.
Below I distill the hard-won lessons, traps, and opportunities into one practical guide. By the end, you will know:
- Whether the exit tax applies to you (spoiler: it often doesn’t, but when it does, it’s expensive).
- How to value shares, options, and other assets the way French tax authorities expect.
- The four legal deferral routes (and how to pick the right one for your risk appetite).
- Proven tactics to avoid paying tax twice when you land in your new country.
- A pre-departure checklist that keeps the auditors—and your future self—happy.
“All exit-tax pain derives from surprises. Remove the surprises and you remove 80 % of the pain.”
—A favorite mantra I repeat to every departing founder
1. Who the Exit Tax Applies To
1.1 The Residency Trigger
The French exit tax is formally baked into Articles 167 bis and 167 ter of the Code général des impôts. You become exposed the moment both of the following are true:
- You have been French tax resident for at least six of the ten years preceding your move, and
- On the day before departure you hold “substantial” share-based wealth.
“Substantial” is frozen in law as any of the following:
- Ownership of at least 50 % of a company’s profits or voting rights, or
- A direct or indirect shareholding worth €800,000 or more (net of debt) on 31 December of the last tax year in France.
Be careful: the 50 % test applies worldwide—your Delaware C-Corp counts. I once had a client in Lyon who owned 48 % of her family’s French SAS but also 4 % of her German GmbH. Separate companies, but the rules look per issuer, not consolidated; thankfully she squeaked under the limit.
1.2 Who Is Rarely Concerned
If you hold an ETF portfolio, French real estate, or intellectual property with no corporate wrapper, rejoice: those assets are outside the exit-tax net. The tax targets corporate equity or instruments convertible into equity (think free shares, employee warrants, RSUs, SAFEs, crypto tokens representing equity, etc.).
And yes, married couples are tested individually. A spouse with 40 % of a startup and the other with 12 % do not add up to 52 % for the threshold test. The administration can, however, aggregate indirect holdings routed through family trusts.
Field note
Over the past two years, maybe one in six BorderPilot users plotting a French departure even hits the €800 k threshold. Statistically, most of you will be more worried about how to ship 20 boxes overseas without breaking the bank than about Article 167 bis.
2. Asset Valuation Basics
2.1 The Valuation Date
The tax base is crystallised the day before you cease French tax residency—not the day you physically leave. If you fly on 30 June, but keep your primary household ties until 31 August, the latter date controls.
2.2 Accepted Valuation Methods
- Listed shares: last closing price on valuation date.
- Start-ups/privates: most recent funding round if within two years; otherwise, adjust for dilution or a DCF or multiples approach.
- Stock options/Warrants: intrinsic value (strike vs. fair market value), not Black-Scholes.
- Convertible instruments: treat as equity if effectively “in the money.”
Revenue officers lean conservative. A valuation report from a commissaire aux comptes or a French-qualified chartered accountant drastically reduces post-departure disputes. I rarely file without one.
2.3 Currency Conversions
Non-euro assets must be translated using the Banque de France* daily spot. Round to the nearest centime; trivial maybe, but I’ve seen audits launched over sloppy rounding that knocked holdings under €800 k in draft filings.
3. Payment Deferral Options
The exit tax is—on paper at least—due immediately. In practice, four legal “softeners” exist:
3.1 Automatic Deferral for EU/EEA Moves
If your new tax home is inside the EU or EEA (Norway, Iceland, Liechtenstein), you get a rolling, interest-free deferral—no guarantee required—as long as you file Form 2074-ETD annually for five years (or two years if you depart after 1 January 2019).
Good to know: The five-year clock starts on 1 January of the year following your departure. Move on 2 January 2025? Your surveillance period runs 2026-2030 inclusive.
3.2 Bank Guarantee for Non-EU Moves
Headed to Dubai, Sydney, or São Paulo? You can still defer payment by lodging a bank guarantee matching the calculated tax plus 25 % buffer. The guarantee lasts the same five years (two for post-2019 departures). French banks will charge 0.8–1.2 % per year of the covered amount—budget accordingly.
3.3 Event-Based Trigger
Even with a deferral, the tax crystallises early if you:
- Sell or otherwise dispose of the shares,
- Receive dividends that exceed the original cost basis,
- Incur any event that would have been taxed had you stayed in France (merger, liquidation, etc.).
3.4 Permanent Waiver
If, after the deferral period, none of the triggering events occurred, the exit-tax claim evaporates. That’s why some founders simply sit on their shares until the five-year sunset, then sell carefree. I call this the “cold storage” strategy—works brilliantly for illiquid holdings or patient capital.
4. Avoiding Double Taxation
The scary scenario is paying French exit tax on paper gains, then paying capital-gains tax again when you actually sell in your new jurisdiction. Here’s how to stop the bleeding.
4.1 Leverage Tax Treaties
France has 120+ treaties. Most credit French tax paid against tax due in the new country. But credits apply only to tax actually paid, not to deferred or exempt amounts. If you benefit from the deferral and never pay, you can’t claim a credit later. Ironically, sometimes electing to pay the exit tax upfront yields a better overall outcome.
Example
Julie moves to Canada, opts not to defer, pays €80 k exit tax. Five years later, she sells and owes CAD 90 k to the CRA. Under the France-Canada treaty, the €80 k (≈ CAD 110 k) credit wipes out her Canadian liability. Had she deferred, she’d owe both.
4.2 Step-Up Elections in the Destination Country
Some jurisdictions allow a “step-up in basis” when you become resident—effectively marking assets to market on arrival. The Netherlands, Australia, and (since 2023) the UK for non-doms are examples. Time your move after a large funding round to maximise the step-up and shrink exposure to future foreign gains, while still letting France tax only the historical run-up.
4.3 The Holding-Company Flip
Intra-EU entrepreneurs may contribute their French shares into a new holding company (apport-cession) before pulling up stakes. Done right, you create an intermediary basis that can be rolled into, say, a Dutch BV. Complex but can fully neutralise the exit tax. If the structuring fees are below 3 % of the share value, I usually recommend at least modelling the option.
4.4 Checking Foreign Tax Credit Limits
The U.S. foreign tax credit cap equals the U.S. tax on foreign-source income. If exit tax is classed partly as French-source, you can end up with unused FTCs. A partial workaround is to align the departure date with a low-income year to free up the U.S. credit ceiling.
5. Pre-Departure Moves That Keep Auditors Happy
Before you pop the champagne at your leaving party, work through this checklist:
-
Pin down the residency cut-off
Document the day your main abode, spouse, and economic centre of interests switch. Email confirmations of job termination or tenancy exit help. -
Obtain a professional valuation
Ask for a full report with methodologies, peer multiples, dilution adjustments. -
Draft Form 2074-ETD & 2074-ETS
Fill but don’t file until you have your certificate of tax residence abroad (formulaire 731-SI). -
Choose your deferral path
EU/EEA? Automatic. Otherwise, line up a bank guarantee well before June 15 of the year following departure. -
Open a digital tax account on impots.gouv.fr
You’ll need it for the annual monitoring forms; France loves e-filing now. -
Review treaty language
Double-check if article 13 or 21 covers exit tax—and whether “capital gains” are deemed French-source after you leave. -
Update cap tables
Record share numbers the day before exit; later restructurings can complicate proof. -
Keep an audit file
Physical or cloud folder: passport scans, boarding passes, real-estate sale documents, valuations.
Pro tip: Throw every document in a single PDF tagged “EXIT-FRANCE-YYYY-MM-DD”. When the tax office writes in 2029, you’ll look like the organised hero you are.
6. A Short Detour on Departing Retirees
Retiring to the Aegean sun? Note that the exit-tax thresholds bite also on pension-fund shares or holding companies parked in France. When comparing destinations, weigh not only income-tax rates but how each country treats latent gains. Our deep dive on Italy vs. Greece retirement residency costs unpacks that chessboard.
7. Frequently Asked (and Slightly Anxious) Questions
Q: My shares are under a vesting cliff—are they taxed?
Only vested shares count. Unvested options are ignored until they vest; then, if you’re already non-resident, France generally has no claim outside source-based rules.
Q: What if I return to France within five years?
The deferral continues seamlessly. Think of it as “pause, don’t reset.” Re-departing restarts nothing; the original clock keeps ticking.
Q: I’m a dual citizen. Can I claim I never “left” for the purposes of exit tax but left for my new country’s taxes?
Nice try. French residency is fact-based; citizenship is irrelevant. The tax office has become ruthless at tracking social-media bread crumbs and bank geolocation logs.
Q: Crypto counts?
If the tokens are classified as equity or “security tokens,” yes. Utility tokens, no. NFTs representing company shares, yes. You see where this is heading: align legal form with intended tax outcome before moving.
Q: Is there any insurance against audits?
Several French insurers now sell exit-tax audit coverage (believe it or not). Annual premiums run ~0.3 % of the guarantee amount. Worth it if your share value is north of €5 million and your paperwork is dicey.
8. Parting Thoughts
Leaving France should be about new horizons—new ventures, new cuisine, maybe fewer baguette quotas in your carb budget—not about dreading article numbers in the tax code. With early planning, France’s exit tax transforms from existential threat to manageable formality. My personal record from kickoff call to filed paperwork is 17 days (don’t try that at home), but a comfortable runway is three to six months.
If you feel the administrative fog rolling in, remember you don’t have to navigate alone. BorderPilot combines the granular data (tax rates, treaty excerpts, valuation benchmarks) with personalised timelines, so you can focus on the move—not the paperwork.
Ready to see what your bespoke departure roadmap looks like? Start your free relocation plan today and turn “au revoir” into “bon voyage” with confidence.
Disclaimer: This article shares professional insights but is not legal advice. Personal circumstances differ; consult a qualified adviser before making decisions.