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France ‘loses one million jobs’ due to tax exiles

France has lost around one million jobs in recent years as a result of entrepreneurs and business leaders fleeing abroad to escape the French tax man, a new report has claimed.

France 'loses one million jobs' due to tax exiles
Workers protesting over job cuts has become a common sight in France. Photo: Jean-François Monier/AFP

According to the liberal think tank Concorde, over the last 20 years France has missed out on one million new jobs because of the knock-on effects of French people going into tax exile.

Concorde bases its finding on the fact that that 3 percent of the two million French expatriates living abroad now own companies, running firms with at least ten staff on the payroll.

If these entrepreneurs had not fled L'Hexagon, as France is often referred to, then there would be now be an extra 60,000 companies employing more than 70,000 employees, the think tank concludes.

But because the flight began 20 years ago, Concorde works out a hypothesis that these "lost companies" would have employed around 35 people each. It then divides this in two because of the fact that these companies could not have been set up or developed in France.

The result: One million jobs lost as a result of tax exile.

The figures are of course only estimates based on a theory, but nevertheless, the report, published in right-leaning daily Le Figaro comes at a time when a debate over taxing high earners continues to rage in France.

After much hullabaloo, President François Hollande’s flagship 75 percent tax rate on top earners looks like it will never see the light of day. That appears to be good news for people like actor Gérard Depardieu, who was heavily critical of the proposal before he upped sticks and moved to Russia.

Stories of wealthy French nationals fleeing abroad have been a regular feature of the right-leaning press in both France and even Britain in recent months, but in reality there is little reliable data to prove that the number of tax exiles has increased since the socialist government came to power last June.

In its study, Concorde uses a series of indicators to suggest an acceleration in the number of people seeking tax exile last year, including the fact that the sale of property worth more than €1.5 million has shot up.

However, in an interview with The Local earlier this month Fabienne Petit, director of international activities at French firm Humanis, which works with French expatriates, said it was a myth that the French were leaving to go abroad for tax reasons.

Even so, politicians on France’s right are desperate to find some clear data that Hollande’s tax policies are forcing wealthy French people to seek better financial climes abroad.

President of the opposition UMP’s Finance Committee Gilles Carrez has already found out that between March 2011 and December 2012, 250 French nationals paid an exit tax upon leaving France.

However the tax is only payable by those who hold over €1.3 million worth of shares, so the stats again are inconclusive.

But Carrez wil not give up, vowing to go back the Finance Ministry to get hold of clear data.

“For constructive debate,  it is essential to measure this phenomenon,” he said.

Philippe Marini, president of the UMP’s Finance Committee in the Senate is also on a quest to unearth figures to prove that Hollande is causing the wealthy to run away from home.

He has asked the Finance Ministry for data on the number of departures abroad that are liable for income tax.

But for now, the question of tax exile looks likely to rumble on.

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TAXES

Explained: France’s exit tax

Planning on leaving France? You may, depending on your circumstances, be charged the 'exit tax'.

Explained: France's exit tax

Like some other European countries, France does have an exit tax for those (French or foreign) who are leaving the country. It’s known by the English name l’Exit tax.

However, it won’t affect most people.

Only those who have been tax resident for a minimum six years of the 10 years immediately before they permanently move out of the country are liable to pay an exit tax – if, that is, they own property, titles or rights worth a minimum of €800,000, or that represent 50 percent of a company’s social profits.

If that affects you, the best advice is to seek expert individual financial advice before moving out of France for good. The relevant page on the French government’s impot.gouv.fr website says it is possible to defer payments, and some relief is available.

Because of the relatively high figures involved, this tax is irrelevant for most people. That said, however, you will still have to inform tax authorities that you are moving out of the country because you may still have income, property and capital gains taxes to pay.

Income tax

You must inform the tax office that you are moving and give them your new address so that your tax declarations can be transferred to your new address.

You are liable for tax on everything you earned in France prior to your departure as well as on any French earnings that are taxable in France under international tax treaties that you earned after your departure.

The year of your departure, you declare your previous year’s earnings as normal – declarations in spring 2024 are for earnings in 2023.

A year later, you will have to declare any earnings taxable in France from January 1st up to the date of your departure, and any French-sourced income taxable source until December 31st of the year of your departure.

If you continue to have any French-sourced income – such as from renting out a French property – you will have to declare that income annually, using the non-residents declaration form.

Property taxes

You will have property taxes to pay if you own a French property on January 1st of any given year – whether it is occupied or not. 

Property tax bills come out in the autumn, but they refer to the situation on January 1st of that year, so even if you sell your property you will usually have the pay a final property tax bill the following year.

Moreover, if you receive income from property in France or have rights related to that property (such as shared ownership or stock in property companies), as well as any additional revenue connected to the property, during the year you leave France, you will be required to pay taxes on these earnings.

If any property assets in France exceed €1.3 million on January 1st of a given year, you may also have to pay the wealth tax (IFI).

READ ALSO What is France’s wealth tax and who pays it?

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Capital gains tax 

If you sell your French property or share of a French property, you may be liable for capital gains tax at a rate of 19 percent. It will also be subject to social security contributions at the overall rate of 17.2 percent.

Capital gains tax varies depending on how long you have owned the property and whether it was a second home or your main residence.

READ ALSO How much capital gains tax will I have to pay if I sell my French property?

The good news is, if you move to another EU country, or any country that has a specific tax agreement with France, you may be exempt from capital gains tax for non-resident sellers on the sale of a property that was your principal residence in France.

If you move elsewhere, you may be able to claim exemption on capital gains tax up to €150,000. As always, you should seek expert financial advice.

Tell Social Security

Inform social security that you are leaving France permanently – and return your carte vitale if you have one. If you do not, you may be liable for any benefits you receive to which you are no longer entitled.

More mundane tasks involve informing utility and water companies, your internet provider, if you have one, the phone company, your insurance companies, banks – and La Poste, who will be able to forward your mail for up to 12 months, for a fee…

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