The Inpat Scheme: Pay less tax!
France is well known for its strict tax rules. This can often discourage international businessmen and women from coming to live here, especially company managers and other high earning-employees.
However, did you know that there’s a special tax regime for international businessmen and women? In fact, the “régime d’impatriation” (or “inpats” scheme, as opposed to “expats”) is precisely aimed at encouraging international-scale managers to come to France and develop French firms.
Who is eligible for this scheme?
The “Inpat scheme” is applicable to:
- Employees such as country managers, sales managers, sales reps etc.
- Managing Directors; Members of the Board and Executive Board Members of an SA/SAS, as long as they have signed an employment contract or a representative
What are the criteria?
- You become a French tax resident as from the start of your employment contract;
- You have been working outside France for the past 5 years beforehand;
- Your employer is either a non-resident company or a company based in France regardless of the duration of your contract;
- You have been recruited when you were working outside France.
What are the tax exemptions?
- Exemptions of inpatriation bonus: if included in the employment contract before taking up the new position, or, for people recruited directly from abroad, this bonus is 30% of their total net salary. However, the taxable income must be equivalent to that of an income of a similar position already existing in France
- Exemptions of travel indemnity: if you are planning to compensate for frequent travels abroad, even for only 24 hours, these wages can be exonerated as long as the work is performed in the company’s direct and exclusive interest.
The exonerated amount cannot exceed:
- 50% of the total income (inpatriation bonus + travel indemnity)
- OR the exonerated part of the travel indemnity should be limited to 20% of the taxable income.
Each year, you can choose the most appealing threshold for your situation.
- Exemptions of wealth tax (ISF): assets held outside of France aren’t subject to French wealth tax, as long as the inpat owner has been working outside France for the past 5 years.
- Other tax exemptions exist for dividends, capital gains tax on shares of companies not established in France, and revenues from copyright.
- Deductibility of the foreign social contributions:if you stay affiliated with a different country’s welfare system, these contributions are deductible from your gross revenue. On top of that, in certain limits, you can also deduct part of the contributions to the foreign pension and provident schemes to avoid double payment.
For how many years can you apply for the scheme?
It depends on the starting date of the employment contract:
- Before 06/07/2016: the scheme is applicable until 31st December of the 5th year after you become a tax resident in France
- After 06/07/2016: the scheme is applicable until 31st December of the 8th year after you become a tax resident in France
The travel indemnity is exonerated without time limitation.
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