The 2013 Amending Finance Law introduces a number of changes to the French exit tax regime:
- stricter conditions of application: although the 1% shareholding threshold is replaced with a 50% threshold in order to only target majority shareholding, on the other hand, the exit tax will henceforth be applicable in any case if the total value of shareholding held by a taxpayer exceeds €800,000 (previously €1,300,000 which corresponds to the wealth tax threshold). Moreover, UCITS which, until now, were outside the exit tax’s scope are now taxable on the same basis as other securities or rights held by taxpayers. Lastly, the 8-year period after which the income tax on unrealized capital gain may be cancelled or reimbursed is increased to 15 years: the only consolation on this subject is that cancellation or reimbursement of the taxes on unrealized capital gains concerns not only the income tax, as it was the case until now, but also the social taxes which were still due even after the 8-year period following the transfer of tax residence of the taxpayer.
- adjustments of the exit tax regime to take into account the reform of the capital gain regime: the taxable basis of the exit tax is calculated based on the new capital gains regime, taking into account new allowances provided by the Article 150-0 D of the French tax code, e.g., by taking into account a 50% rebate after a 2-year holding period, and 65% after 8 years. In addition, when a guarantee has to be provided before the transfer of tax residence from France, this guarantee will be uniformly 30% of the amount of the unrealized capital gains;
- measures for complying with EU law and other clarification measures: the Bill provided that gift of shares subject to the French exit tax would put an end to the exit tax only if the taxpayer provided proof that the purpose of the gift was not only for tax purposes. The 2013 Rectifying Finance Law does not require this proof anymore (which had been ruled as contrary to EU law by the French Administrative Supreme Court on July 12, 2013) for taxpayers who have become residents of the EU or of the EEA. For other taxpayers, they will have to prove that the “main” reason for the gift was not to avoid the exit tax.
Furthermore, the Law clarifies the rules for offsetting capital losses from sales of securities that are subject to the exit tax (post-departure) against capital gains on other securities that are also subject to the exit tax, against capital gains taxable pursuant to Article 244 bis A, and when the taxpayer again becomes a French resident.
Lastly, the Law clarifies how the contribution of shares realized after the transfer of tax residence should be treated, by providing that contributions realized pursuant to Article 150-0 B ter of the French tax code do not have the same consequences as “sales” which put an end to the deferral of payment of the exit tax The deferral of payment of the exit tax applies until the date of the sale of the shares received in exchange of the contribution or of the contributed shares within 3 years of the contribution, except reinvestment within the deadlines provided by Article 150-0 B ter.