Leaving France: A breakdown of what you need to know.
You are subject to the “exit tax” if you are a natural person domiciled in France who moves house, thus leaving France, and you meet the criteria of Art. 167a of the French General Tax Code (See our previous article Exit tax – Part 1).
What are you taxed on?
- Unrealized gains: these are the potential capital gains of the securities that you hold and yield in case of their disposal.
- Deferred capital gains: these are capital gains of either security disposal or security trading which are reinvested in the capital of a company. They immediately become “exit tax” taxable.
- Debt that originates from a contractual clause : when selling securities, the purchaser can conclude an agreement with the transferor which provides the payment of an additional fixed amount, according to an indexation directly related to the activity of the company. In this case, the transferred amount by the buyer represents debt for the seller of the securities.
What do you have to report?
- Unrealized gains: they are equal to the difference between the value of the securities on the date of departure from France and the securities’ purchase price (price paid by the purchaser).
The valuation of securities is complex; hence it is possible to use multiple methods according to their nature:
- Securities of listed companies are evaluated on the basis of the last-known price or by calculating the average of the last 30 prices preceding the taxation date.
- Securities of non-listed companies are valued at their real value which can be the intrinsic value, the yield on the security or goodwill. It must be ensured that the real value takes into account the characteristics of the company and its economic context. The mathematical value is emphasized if the security holder has a decision-making power on the company; or on the yield on the security if there is no decision-making power on the company.
Please note that the amount of unrealized capital gains can be reduced by a minimum discount of 35% if you have held the shares for at least 2 years.
- Deferred capital gains: they have to be declared for the same amount as reported in form n°2074-I for the deferred capital gain statement.
- Debt that originates from a contractual clause on price addition: it is valued at its real value according to an indexation provided by the agreement between the transferor and the transferee of the securities.
This is a matter to be followed up on. Here at Maupard we would be more than happy to look into your individual circumstances, to help you make sense of the consequences of this change and work in your favor.
Do not hesitate to contact us via telephone +33 (0) 1 53 93 94 20 or [email protected]. Our team of experts will happily assist you with any queries you might have.