France

Individual - Significant developments

Last reviewed - 11 November 2020

Recent significant developments impacting the taxation of individuals include the following:

Tax residency of executives of major French companies

A criteria has been added for tax domiciliation in France for executive of large French companies.

Managing executives (defined below) of a company having its registered office in France and whose turnover exceeds 250 million euros are considered as exercising their professional activity mainly in France unless they prove otherwise. In accordance with French domestic law, they are thus considered as having their tax domicile in France and are subject to French income tax, pursuant to Article 4 A, on their worldwide income. 

However, the criteria for determining the tax domicile according to domestic law are fully applicable except as otherwise provided by the provisions of applicable international tax treaties. Thus, only executives for whom a tax treaty does not attribute the tax residency to a country other than France are likely to be concerned by this measure. In addition to the income tax implications, it will also be necessary to assess, depending on the applicable tax treaties, the impact of this measure on obligations in terms of "IFI" wealth tax on real estate property and inheritance or gift taxes.

Taxation of non-residents of France

Included in the 2019 Finance Bill, was a reform relating to the taxation of non-tax residents of France. This reform, which was expected to come into effect on January 1, 2020, was to bring the taxation of non-residents closer in line to that of French tax residents by eliminating the withholding tax at 0%, 12% and 20% on non-residents’ wages (Article 182 A of the French Tax Code), the implementation of the employer withholding obligation (PAS) and the elimination of the partially discharging  nature of the withholding tax.

The National Assembly adopted on October 13, 2020 as part of the 2021 draft finance bill an amendment providing for the continuity of the current withholding tax mechanism (rates at 0%, 12% and 20%) and of the partially discharging nature of the withholding tax. 

These measures will have to be confirmed during the final vote of the law planned for the end of December 2020.

COVID-19 and cross-borders workers

Agreements were reached with Germany, Belgium, Switzerland, Luxembourg and Italy so that frontier workers benefiting from the specific tax regimes for workers living and working in frontier areas can continue to benefit from them, even if they were forced to stay at home during the health crisis linked to Covid-19. Some of these agreements have also been extended to frontier workers who are not eligible for those tax regimes.

These agreements have been renewed until December 31st, 2020.