Exit Tax 2025: The Costly Mistake Expats Are Making!

If you transfer your tax residence outside of France, you may be subject to the Exit Tax under certain conditions. This tax applies to unrealized capital gains, receivables originating from an earn-out clause, and capital gains placed under a deferred tax regime.

1. Who Is Concerned?

You are subject to the Exit Tax if:

You have been a French tax resident for at least six years within the ten years preceding the transfer of your tax residence abroad.
You own shares, securities, or rights with a total value of at least €800,000 or representing at least 50% of a company’s profits.

However, under specific conditions, you may be eligible for a payment deferral, and a tax relief may apply in certain situations.

2. Changes to the Exit Tax Since 2019

For tax residence transfers occurring from January 1, 2019, modifications have been made to the Exit Tax regulations. These changes are not retroactive for taxpayers who moved their tax residence before this date.

3. Payment Deferral

Taxpayers transferring their tax residence outside of France can apply for a payment deferral for the taxes due. This deferral can be:

Automatic, depending on the destination country.
Granted upon request, requiring submission of Form 2074-ETD along with a proposed guarantee.

Since 2019, taxpayers moving to a non-cooperative state or territory (ETNC) or a non-EU country that does not have agreements with France for tax fraud prevention and recovery assistance can still apply for a deferral upon request. However, those transferring to other third-party countries outside the European Economic Area no longer qualify for this option.

For tax residence transfers made from November 22, 2019, the request must be submitted at least 90 days before the transfer, rather than 30 days prior as previously required.

If a taxpayer moves successively from one country that qualifies for an automatic deferral to another where only a deferral upon request is available, a new deferral application must be submitted at least 90 days before the second transfer.

4. Tax Relief Conditions

For transfers occurring after January 1, 2019, the tax relief period has been reduced. The taxpayer can obtain an Exit Tax exemption after:

Two years, if the total value of the securities subject to the Exit Tax is below €2,570,000.
Five years, if the value exceeds this threshold.

This rule now applies to shares in real estate-dominant companies subject to corporate tax at the time of the tax residence transfer.

For transfers made between March 3, 2011, and December 31, 2013, the tax relief period was eight years. However, as per the 2024 Finance Law (Article 11-II, Law No. 2023-1322 of December 29, 2023), social contributions that were still due can now be subject to a tax relief or reimbursement, provided that ownership of the securities is maintained until the eight-year period expires.

For transfers between 2014 and 2018, the Exit Tax and social contributions are relieved after 15 years.

5. Tax Reporting Obligations: exit tax

The Exit Tax framework requires two key tax declarations:

Form 2074-ETD, submitted when transferring tax residence outside of France, declaring unrealized capital gains, receivables from an earn-out clause, and deferred taxation capital gains.
Form 2074-ETS, submitted in subsequent years if a tax deferral was granted, ensuring continued monitoring of the tax obligations.

The 2074-ETS declaration has different versions depending on the year of tax residence transfer:

Form 2074-ETS1 for transfers in 2011 or 2012.
Form 2074-ETS2 for transfers in 2013.
Form 2074-ETS3 for transfers from January 1, 2014, onward.

These declarations must be submitted within the same deadline as the annual income tax return (i.e., in the year following the transfer for Form 2074-ETD).

If a full payment deferral is granted and no event has occurred to terminate the deferral or grant a tax relief, a simplified declaration (2074-ETSL) must be completed.

Additionally, the total amount of deferred tax must be reported in Box 8TN of the 2042C declaration (transferring information from Form 2074-ETS).

If a payment deferral is not granted, the follow-up declaration must only be submitted in case of an event leading to the refund of all or part of the initially paid Exit Tax.

If you later transfer your tax residence to another country, this move may affect your tax obligations. In such cases, you must notify the Non-Resident Tax Office (DINR) by sending a written notice within two months of the new transfer.