Tax residency in France is determined by national legislation, which uses the concept of "tax domicile" as equivalent to tax residency. Taxes in France are regulated based on whether you are a tax resident, which is established by the following criteria:
Criteria for Tax Residency in France
Personal Criteria
Your habitual place of residence is located in France (permanent housing or rental, including hotels), and/or your family resides in France. Tax residency in France is also determined by the duration of your stay—if you spend more than 183 days in the calendar year in France, you are classified as a tax resident. However, there are exceptions, and even shorter stays can establish tax status.
Professional Criteria
You regularly work in France or are engaged in entrepreneurial activities linked to this country. For directors of large companies registered in France with a turnover exceeding 250 million euros, it is assumed that their primary professional activity takes place in France.
Economic Interests
Your main investments and sources of income are located in France. For example, if your property, bank accounts, or business income are primarily based in France, this can also influence the determination of tax residency.
If any of the above criteria apply, you are considered a tax resident of France. Other personal circumstances will not be taken into account in such a case.
Additional Situations Affecting Tax Residency in France
Dual Tax Residency
In cases where an individual qualifies as a tax resident in two countries simultaneously, international tax treaties apply. These treaties help determine which country should be considered the primary location for tax residency, based on factors such as the center of life interests, permanent home location, and place of primary professional activity.
Center of Life Interests
Determining tax residency in France can also depend on the taxpayer's "center of life interests." This takes into account family location, primary economic interests, such as property, bank accounts, and investments.
Special Rules for Officials and Employees of International Organizations
Diplomats and employees of international organizations have specific rules concerning their tax status. In certain cases, such individuals may be exempt from taxation in France under international agreements.
Foreign Students
Foreign students residing in France for study purposes may not be considered tax residents, even if they spend more than 183 days in the country, provided they can prove that their main interests remain in another country.
Special "Inpatriate" Tax Regime
For new tax residents, such as employees transferred to a French company or hired from abroad, there is a special "inpatriate" regime. This allows for reduced taxation on income earned outside of France for a defined period.
Special Tax Residency Situations in France
- Counting days of stay under exceptions: Not all days spent in France may count towards determining residency. For example, days spent solely on business trips may be excluded.
- Force Majeure and COVID-19: During the COVID-19 pandemic, some tax residency rules were temporarily altered. In such cases, relaxed rules may apply to accommodate forced stays.
Split Year and Tax Agreements
France applies a split-year regime, which means income earned before arrival is not taxed in France. This can be advantageous for taxpayers, as it helps to avoid double taxation and may reduce the tax burden on investment income.
Determining tax residency in France requires careful consideration of many factors and criteria. French tax law requires global income reporting, meaning that all income earned in other countries must also be declared. This is crucial to avoid double taxation and ensure transparency. In complex situations, it is always advisable to consult with a qualified tax advisor to clarify your tax status in France and avoid potential issues with tax authorities.
