1. Purpose and general rationale of the inbound expatriate regime

The “inbound expatriates” (impatriés) regime under Article 155 B of the French General Tax Code (Code général des impôts, CGI) is an income tax exemption scheme designed to encourage employees and executives coming from abroad to settle in France.

It was designed to improve the attractiveness of French territory, in response to the perception that domestic taxation was “dissuasive” among the managers of French subsidiaries of international groups. The idea is to make it advantageous for foreign residents called upon to take up employment with a company established in France, in particular senior executives (engineers, researchers, bankers, managers), to transfer their tax domicile to France.

2. Persons concerned: who can be an “inbound expatriate”?

2.1. Employees and executives covered

 The regime mainly covers:

• employees coming to carry out their professional activity in France;
• certain non-employees treated as employees, in particular certain corporate officers, where their remuneration is taxed in the category of wages and salaries.

2.2. Condition of no prior tax domicile in France

To benefit from the regime under Article 155 B of the CGI, the inbound expatriate :

• must not have been domiciled in France for tax purposes during the five calendar years preceding the year in which they take up their position in France;
• must establish their tax domicile in France as from taking up that position.

 According to administrative guidance, the tax authorities (administration fiscale):

• assess the condition of no prior domicile in light of Article 4 B of the CGI and, where applicable, the international tax treaties determining residence;
• require that domicile in France as from taking up the position be satisfied both under domestic law and under international treaties, which has been criticised by legal commentators as questionable in light of the wording of Article 155 B, which refers only to domestic law.

 Also according to this older guidance, the following may not, in principle, benefit from the regime:

• persons who have their tax domicile in France on other grounds under the CGI (Article 4 B, 1-c and 4 B, 2), even if they are resident in France within the meaning of a treaty;
• persons who meet the domestic criteria (a and b of 1 of Article 4 B: home/principal place of stay + place where the principal activity is carried out) but are not resident in France within the meaning of a treaty.

3. Period of application of the regime

 Inbound expatriate employees and executives benefit from an income tax exemption on certain elements of their remuneration directly linked to their relocation to France, until 31 December of the eighth year following the year in which they take up their position in France (a rule explicitly mentioned in 2025 guidance, and therefore recent). This period is also applied to investment income exempt up to 50%, as a period “during the same period” as that in which the individual benefits from the exemption on their employment remuneration.

4. Conditions relating to employment remuneration in France (I of Article 155 B)

4.1. Principle: exemption of the additional remuneration linked to relocation to France

 Inbound expatriate employees and executives are not subject to income tax on the elements of their remuneration directly linked to their relocation to France, in particular the inbound expatriate bonus (prime d’impatriation), on the basis of I of Article 155 B of the CGI. Recent tax guidance specifies that:

• Article 155 B offers a choice between:

• an “actual” regime, providing a full exemption of the remuneration elements directly linked to the relocation (individualised bonuses covering, for example, additional housing costs or the difference in tax burden);
• a flat-rate regime of partial exemption of 30% of the remuneration, without it being necessary to identify precisely the portion actually linked to the relocation.
• the bonus is exempt without the inbound expatriate having to justify its purpose, provided the regime is properly implemented (reference to BOI-RSA-GEO-40-10-20 no. 180).

4.2. Requirement of additional remuneration “linked to the relocation” and recent case law

 Judgments of administrative courts (tribunaux administratifs) handed down in 2022 and 2023 (thus after 2020, but not yet confirmed by the Conseil d’État) have adopted a strict interpretation:

• an employee must demonstrate additional remuneration directly linked to the relocation, even if they opt for the 30% flat-rate bonus ; failing this, they cannot benefit from the regime;
• accordingly, a legal professional employed by a law firm was held ineligible, as their employment contract did not provide for any amount presented as linked to their inbound expatriate situation, and the employer further stated that remuneration was determined according to merit-based criteria unrelated to the relocation.
• similarly, a systems and network engineer was unable to benefit from the 30% exemption for 2019, as her employment contract did not mention any remuneration element linked to the relocation (fixed salary + holiday bonus only).

 In a 2024 judgment, an employee was unable to benefit from the 30% flat-rate exemption for 2021 because:

• their contract did not provide that part of their remuneration would be directly linked to the relocation;
• and they did not establish that the portion of remuneration remaining taxable after the 30% allowance would be at least equal to the remuneration paid to employees performing similar duties within the company or in similar companies in France (the “normal” remuneration condition discussed below).

 Legal commentators note that these decisions appear to be at odds with the spirit of the text, which in principle offers an option between an actual regime and a flat-rate regime without the need, in the latter case, to identify precisely the elements linked to the relocation.

4.3. “Normal” remuneration condition (anti-abuse clause)

 The last paragraph of 1 of I of Article 155 B of the CGI contains a normal remuneration clause: if the portion of remuneration subject to tax (excluding the inbound expatriate bonus) is lower than the remuneration paid for similar duties within the company or, failing that, in similar companies in France, the difference is added back to the taxable base. An example from legal commentary illustrates this rule:

• total annual remuneration: €200,000;
• inbound expatriate bonus (30% flat rate): €60,000;
• taxable remuneration before audit: €140,000.

 If the “normal” remuneration for similar duties is:

• €150,000: the difference of €10,000 is added back, and the exemption then applies only to €50,000;
• €200,000 or more: no exemption is possible, and the entire remuneration is regarded as “normal” and taxable.

 Legal commentators point out that this anti-abuse clause may result in a “genuine” inbound expatriate, whose remuneration is deemed too reasonable, being deprived both:

• of the exemption under I (on the inbound expatriate bonus);
• and, as a knock-on effect, of the exemption under II on their passive income, if it were considered that the benefit of II requires actually benefiting from I.

5. Obligations and role of the employer

5.1. Payroll declarations (DADS / DSN)

 Where the employer is required under Article 87 of the CGI to declare the remuneration paid (DADS or DSN), it must:

• distinguish between the amount of salaries subject to income tax and the amount of those exempt under the inbound expatriate regime;
• enter in the box “sums exempt under the inbound expatriate regime” (sommes exonérées au titre du régime des impatriés) the total of:

• the inbound expatriate bonus;
• the portion of remuneration relating to activity carried out abroad that is exempt under I of Article 155 B.

 Commentary (dating back more than two years): the exempt inbound expatriate bonus is not included in the base for withholding tax (prélèvement à la source) on salaries. The employer must bring this information to the employee’s attention.

6. Investment income: II of Article 155 B (passive income and capital gains)

6.1. General principle: 50% exemption

 II of Article 155 B of the CGI provides for a 50% income tax exemption:

• of certain foreign-source “passive income” (income from intellectual or industrial property, investment income, etc.);
• of certain capital gains on the disposal of securities and company shares held abroad.

 This exemption applies to inbound expatriate individuals who meet the conditions to benefit from the exemption regime under I, i.e. those who satisfy the relocation and remuneration conditions.

6.2. Partial independence from actually benefiting from I: a newly clarified rule

• the 50% exemption on passive income and capital gains applies in particular where the inbound expatriate bonus is not exempt because of the normal remuneration limit provided for in the last paragraph of 1 of I of Article 155 B;
• even where, during one of the years in which the special tax regime applies, the inbound expatriate receives no remuneration element linked to their professional activity covered by I, they may nevertheless benefit, for that year, from the 50% exemption on their eligible passive income and capital gains.

 This is the new applicable rule arising from the 2020 case law, which put an end to the previous uncertainty among commentators according to which the benefit of II appeared to be conditional on actually benefiting from I.

6.3. Income from intellectual or industrial property (CGI Art. 92, 2-2° and 3°)

 Inbound expatriates who benefit from the income tax exemption on certain elements of their employment remuneration may also, during the same period, be exempt up to 50% on income from intellectual or industrial property:

• referred to in Article 92, 2-2° and 3° of the CGI;
• paid by a person established outside France in a State or territory that has concluded with France:

• either a tax treaty containing an administrative assistance clause aimed at combating tax fraud or evasion (CGI Art. 155 B, II-b);
• or a tax information exchange agreement.

 This 50% exemption applies, for example, to copyright royalties or other royalties received from abroad, where they meet the conditions of Article 92. Older guidance relating to authors of intellectual works (non-commercial profits, BNC) states that “non-salaried inbound expatriates who receive copyright royalties abroad benefit from a 50% income tax exemption (CGI Art. 155 B, II)”, but this statement was announced as applicable “for the last time in 2016” in connection with a transitional provision of Law 2016‑1917. This indication, dating from 2017 (and therefore more than two years old), must be read with caution in light of subsequent reforms, but it illustrates that the regime has been used for foreign-source copyright royalties.

6.4. Foreign-source investment income

 For investment income (revenus de capitaux mobiliers: dividends, interest, etc.) received from a person established outside France, the inbound expatriate may benefit from a 50% income tax exemption under the conditions of II of Article 155 B. The guidance (BOFiP of 2012, and therefore more than two years old) describes the specific reporting obligations:

• attach to the general income tax return no. 2042:

• a supplementary return no. 2042‑C;
• a return of income received abroad no. 2047;
• on return no. 2047, state separately:

• the amount of income subject to income tax (in the box corresponding to the income concerned);
• the amount of income, including tax credits, exempt up to 50%;
• the full amount of deductible fees and expenses (e.g. custody fees);
• the full amount of creditable treaty tax credits.

 A detailed example is provided for a gross dividend of €1,000 paid by a Belgian company, with 15% withholding tax, illustrating the calculation of the taxable base (50% of the net amount received) and the treatment of a treaty tax credit calculated on this partially exempt base.

6.5. Capital gains on the disposal of securities and company shares

 Gains on the disposal of securities held abroad by inbound expatriates are, during the period in which the regime applies, exempt from income tax up to 50% of their amount, but remain subject to social security contributions (prélèvements sociaux). Correspondingly, capital losses are only taken into account in the same proportion (50%).

7. Reporting obligations of inbound expatriates

7.1. Reporting of exempt income (reference taxable income)

Inbound expatriates must state on the general income tax return no. 2042 the amount of income exempt under Article 155 B of the CGI. The guidance specifies that all exempt income (exempt employment remuneration + amounts corresponding to the 50% exemption on passive income and capital gains) is taken into account in determining the reference taxable income (revenu fiscal de référence, RFR) referred to in IV of Article 1417 of the CGI. In practical terms, this means that:

• even if a portion of the remuneration or investment income is exempt from income tax, it is nevertheless added back for the purpose of calculating the RFR;
• this RFR affects many other rules (caps on certain tax benefits, exemptions from housing tax (taxe d’habitation) – abolished since 2023 for main residences –, etc.).

 The detailed reporting obligations by type of income (employment, passive income, capital gains) are set out in several BOFiP commentaries (BOI-RSA-GEO-40-10-20, BOI-RSA-GEO-40-10-30-20, BOI-RSA-GEO-40-10-30-30).

7.2. Foreign-source investment income: formalities

 For investment income received abroad, the inbound expatriate must:

• complete return no. 2047, distinguishing between:

• the taxable portion;
• the portion exempt up to 50%;
• expenses and tax credits;
• then carry these amounts over to:

• return no. 2042 (investment income sections, e.g. line 2DC in the example);
• return no. 2042‑C (line 2DM for the gross exempt amount, line 8VL for foreign tax credits).

 The numerical example also shows that:

• social security contributions are calculated on a base equal to the sum of the taxable portion and the exempt portion (i.e. 100% of the gross income, including the tax credit);
• a foreign tax credit is granted up to the amount of French tax, creditable against income tax and, where applicable, against social security contributions.

8. Interaction with other schemes and related clarifications

8.1. Link with the wealth tax (ISF, now IFI) regime for new residents

 A commentary (RJF 2021, and therefore more than two years old) recalls that, alongside the extension of the exemption regime to foreign-source passive income, the legislature introduced an exemption regime from wealth tax (impôt de solidarité sur la fortune, ISF, at the time) for new residents, codified in Article 885 A of the CGI. This regime provided that individuals who had not been domiciled in France for tax purposes during the five years preceding the year of their arrival were liable to ISF only on their assets located in France, until 31 December of the fifth year following the year in which their tax domicile was established in France. Although this regime did not explicitly target “inbound expatriates”, it was modelled on the conditions and duration of the Article 155 B regime, and designed in the interest of the same categories of taxpayers.

8.2. Combination with other preferential regimes (headquarters, logistics centres)

 Recent guidance emphasises that combining the inbound expatriate regime under Article 155 B with the regime for headquarters or logistics centres is not permitted for allowances relating to additional housing costs and to additional tax and social security contributions. An inbound expatriate who meets the conditions of both regimes must therefore, no later than when filing their first annual income tax return, make an irrevocable election for one or the other scheme. Furthermore, the exemption of expense allowances under the inbound expatriate regime may be obtained on the basis of Article 81, 1° of the CGI (allowances for professional expenses).

8.3. Consequences for withholding tax obligations

 As indicated above, the inbound expatriate bonus exempt from income tax is not included in the base for withholding tax (prélèvement à la source) applied by the employer if the exemption of the inbound expatriate bonus is handled directly in the payslip.

9. Combating international tax evasion: interaction with Article 155 A of the CGI

 Although it is not at the heart of the inbound expatriate regime, it is useful to mention Article 155 A of the CGI, which targets situations in which persons domiciled or established outside France are interposed to receive remuneration for services or licences (in particular copyright, neighbouring rights, industrial or commercial property, image rights, rights to one’s name, voice, etc.). This article provides that sums received by a foreign person are taxable in France in the name of the person who actually provides the services or grants the rights, in several situations (control, absence of a predominant activity, preferential tax regime). A recent reform, introduced by Law 2023‑1322 of 29 December 2023, added a paragraph IV to Article 155 A to avoid double taxation where sums already taxed in France under this article are paid back to the person domiciled or established in France:

• the tax corresponding to that income is deemed to have already been paid;
• this rule applies to income received on or after 1 January 2024.

 Before this law, the tax authorities already applied a relieving doctrine to avoid double taxation, by taxing the taxpayer on the higher base only. For an inbound expatriate receiving income through an interposed foreign structure, the interaction between Article 155 B (preferential regime) and Article 155 A (anti-avoidance) may therefore be a sensitive issue, particularly for intellectual property income.

10. Practical summary: points to watch when applying Article 155 B

1.  Check personal eligibility:

• no tax domicile in France during the 5 calendar years preceding the taking up of the position;
• establishment of tax domicile in France as from taking up the position, according to the criteria of Article 4 B and, in administrative practice, according to tax treaties.

2.  Secure the employment contract or corporate office agreement:

• ideally, provide for an inbound expatriate bonus or a clearly identified portion of remuneration linked to the relocation,
• ensure that the remuneration “excluding the bonus” remains at least equal to the normal remuneration for similar duties: it is therefore mandatory to obtain from one’s employer a reference salary certificate

3.  Choose the method for calculating the employment income exemption:

• “actual” regime (full exemption of the part of remuneration actually linked to the relocation, if it can be separately identified);
• or flat-rate regime (exemption of up to 30% of remuneration)

4.  Identify eligible passive income and capital gains:

• foreign-source income from intellectual or industrial property, in States that have concluded an assistance treaty or an information exchange agreement;
• foreign-source investment income;
• capital gains on the disposal of foreign securities, applying the 50% exemption and the symmetrical treatment of capital losses.

5.  Comply with reporting obligations:

• report all exempt income on return 2042 (impact on reference taxable income);
• use forms 2042‑C and 2047 for foreign-source income, distinguishing precisely between the taxable and exempt portions, as well as tax credits.

6.  Anticipate interactions with other regimes:

• irrevocable election between the inbound expatriate regime and the headquarters/logistics centres regime for housing allowances and tax/social security differential allowances;
• possible coordination with the anti-avoidance rules of Article 155 A where foreign structures are interposed.

11. Conclusion

 Article 155 B of the CGI is a complex but potentially very advantageous regime for employees and executives coming to settle in France:

• it allows a significant exemption of remuneration elements linked to the relocation, until 31 December of the eighth year following the taking up of the position;
• it also offers a 50% exemption on certain foreign-source investment income (passive income, capital gains on securities)

 Its practical application, however, requires:

• ideally: careful drafting of contracts (explicit mention of the inbound expatriate bonus or of the corresponding portion of remuneration);
• mandatorily: obtaining the reference salary certificate from one’s employer
• and strict compliance with reporting obligations, in particular for foreign-source income and the determination of reference taxable income.

 Finally, the combination of this regime with other schemes (headquarters, anti-avoidance rules of Article 155 A, wealth tax regime for new residents) must be analysed on a case-by-case basis, in light of the most recent legislation and case law.