Looking to recruit an expatriate? Focus on the impatriate tax regime
The impatriate tax regime reduces the tax burden on individuals recruited from abroad or through intra-group mobility, and thus makes your company more attractive.
What are the conditions for eligibility?
- Directly recruiting a person abroad to take up a salaried position or a management role (if that role is treated as salaried employment for tax purposes: e.g. the president of an SAS);
- Who was tax resident outside France during the 5 years preceding the start of their duties,
- Who becomes resident in France from the date they take up their duties.
Employees transferred to France through intra-group mobility also fall within the impatriate regime.
What are the advantages of this regime?
This regime gives entitlement to several income tax exemptions, allowing the employees recruited to enjoy a significantly higher net after-tax income, until 31 December of the 8th year following the year in which they take up their duties, i.e. for 9 years, depending on their date of arrival in France:
- Income tax exemption for the additional remuneration linked to impatriation, known as the “impatriation bonus” (prime d’impatriation), and, where applicable, for the additional remuneration linked to duties performed abroad, known as the “expatriation bonus” (prime d’expatriation).
These two bonuses must be determined with care. The portion of the remuneration taxable in France must remain comparable to the remuneration paid for similar duties in the same company or, failing that, in similar companies established in France.
In addition, the exemption of these bonuses is capped, at the taxpayer’s option:
- Either at an overall 50% of the total remuneration received;
- Or the portion of the remuneration received for the activity carried out abroad is exempt only up to 20% of the taxable remuneration for the activity carried out in France.
Opting for one or other of these caps requires in-depth analysis.
- Income tax exemption for 50% of the amount of foreign-source passive income (copyright royalties, dividends, interest and capital gains)
This exemption is particularly attractive for employees with recurring passive income.
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By increasing the employee’s after-tax salary, this preferential regime allows the employer to reduce the overall cost of the hire and thus to become more attractive than its competitors.
In addition, another regime also provides an exemption from the Impôt sur la Fortune Immobilière (IFI, the French real estate wealth tax) on assets held by impatriates outside France, for 5 years, subject only to being tax domiciled in France.
These welcome gifts, rare enough to be worth highlighting, are not well enough known. Don’t miss out!
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If you are planning to recruit from abroad or to carry out an intra-group transfer, do not hesitate to contact us to secure the application of this preferential regime.
Caroline Zimbris
czimbris@thelineavocats.com