Regime for inpatriates; towards an extension of exemption

In a ruling dated 22 October 2020, the Council of State annulled the administrative doctrine which restricted the application of the 50% exemption of passive income under the inpatriate regime to the existence of professional income for which they benefit from the income tax exemption.

As a reminder, the inpatriate regime allows certain employees or directors of limited liability companies subject to the tax regime of employees called from abroad to work for a limited period of time for a company established in France, whether these persons are recruited directly from abroad by the company established in France or whether they are called by a foreign company to work for the company established in France in order to be exempt from income tax.

These persons must not have been resident in France for tax purposes in the last five years in order to benefit from this scheme. The scheme only applies to years of tax domicile in France, until 31 December of the eighth calendar year following the year in which the person took up his or her duties in France.

This exemption applies to :

– On the one hand, to the additional remuneration directly linked to the exercise of professional activity in France (in patriation bonus).

– On the other hand, to the portion of remuneration (basic salary and, where applicable, additional remuneration) corresponding to the activity carried out, where applicable, abroad on condition that the stays abroad are carried out in the direct and exclusive interest of the employer.

(Either the overall exemption granted in respect of the activity carried out in France and abroad is limited to 50% of the total remuneration, or the fraction of the remuneration received in respect of the activity carried out abroad is only exempt up to 20% of the taxable remuneration in respect of the activity carried out in France).

– For 50% of passive income, this exemption is no longer conditional upon receipt of the above-mentioned income since this ruling.

Our team is at your disposal to explain the details of this exemption scheme [email protected]