Many French people decide to leave their country to live abroad as expatriates. However, some of them choose to return to France after several years. This situation often raises questions about the taxation of income received abroad and the tax rules applicable on returning to France. In this article, we will explain the conditions for tax exemption on returning to France after a period of expatriation.

Tax Rules to Comply with When Returning to France

When returning to France after a period of expatriation, it is important to know that a tax resident is taxable on all of their income from French and foreign sources. This rule applies to all taxpayers, including those who have spent several years abroad. Foreign-source income is therefore subject to income tax in France.

However, there are specific tax rules for people who have been expatriates for several years and who return to France to take up a position in a French company. These taxpayers may benefit from a tax exemption on the inpatriation bonus (prime d’impatriation) and, up to 50%, on certain foreign-source income thanks to the inpatriate regime (régime d’impatriation).

Inpatriate Regime: Who Can Benefit from It and What Does It Offer?

The inpatriate regime concerns all persons who were domiciled for tax purposes outside France during the five years preceding their taking up of new duties in a company established in France.

These inpatriates must establish their tax domicile in France from the time they take up their duties. This situation may arise when the employee is called upon to work for a company with links to a foreign company (intra-group mobility) or when they are recruited directly from abroad (external hires).

Under this regime, inpatriates may benefit from an income tax exemption on the additional remuneration linked to their work in France (inpatriation bonus). They also benefit from an exemption on part of their remuneration relating to their work abroad. This second exemption can only apply if the work abroad is carried out in the direct and exclusive interest of their employer.

Their salary (excluding the inpatriation bonus) must be at least equal to the reference salary, that is, the salary for a similar position.

The persons concerned must be able to prove by any means that the condition relating to the reference salary is met in order to benefit from the exemption.

” For this purpose, they may produce a certificate from their employer. ” Inst. 30-7-2009, 5 F-13-09 no. 43; BOI-RSA-GEO-40-10-20 no. 120, 21-6-2017

In addition, they may be exempt up to 50% on certain sources of foreign income, such as investment income, income from intellectual or industrial property, and gains from the disposal of securities and corporate rights. Contributions paid to foreign supplementary pension and complementary welfare schemes to which the inpatriate was affiliated before arriving in France may also be deducted from taxable income (Art. 83, 2°-0 ter of the French General Tax Code (Code général des impôts, CGI)).

How to Declare Your Income Under the Inpatriate Regime?

The inpatriate may benefit from this regime at most until 31 December of the eighth calendar year following the year in which they took up their position with their host company.

As regards income tax returns, the following must be declared: – The net taxable salary (after deduction of the exemption) in sections 1AJ or 1BJ of return 2042 – The exempt salaries and bonuses in sections 1DY or 1EY of supplementary tax return No. 2042 C.