Individuals' taxation

Immigration
The “EC long term resident card” has been implemented for people who stayed legally for 5 years beforehand in one country of the European Union. It gives them the right to stay and work in other European countries.
Non-European employees trans-ferred from a European country to France are no longer subjected to any work authorization to carry out their professional activity in France.

European law against French anti tax-evasion measures
Article 123 bis of the French Tax Code provides for the taxation in France by a “look-though” mechanism, at the French Resident  Individual’s level of income and capital gains earned by foreign entities located in low-tax jurisdictions in which they hold at least 10%, either directly or indirectly.
In a decision dated August 22nd 2008, the French administrative Court of Nancy ruled that the provisions of Article 123 bis of the French Tax Code run counter to the principles of European law, namely freedom of establishment and free flow of capital. The French Court justifies its position by explaining that the measures provided for by Article 123 bis are out of proportion with the objective of fighting against tax evasion, since they presuppose tax evasion as the motive for all investments made by French tax residents abroad in a structure with a preferential tax regime.

Improvements in the impatriates’ regime
The law for the Modernization of the Economy has significantly improved the impatriates’ regime in France as of January 1st, 2008.

Concerning the income tax exemption:
1. The condition of a transfer made by a foreign employer has been removed. The regime is now applicable to all employees and managers directly hired from foreign countries.
2. The regime will be also applicable, under conditions, to independent workers.
3. There are now two options for the exemption:
- Exemption of the remuneration that corresponds to the activity exercised abroad by the impatriate (“expatriation bonus”) plus the additional remuneration linked to the exercise of a professional activity in France (“impatriation bonus”), received on top of the equivalent compensation received by a local hire performing comparable activities, with a global limitation to 50% of the total compensation for the activity performed in France and abroad;
- Total exemption of the “impatriation bonus” plus (if applicable) exemption of the “expatriation bonus” within a limit of 20% of the taxable salary in France.
4. The exemption also applies to 50% of “passive” foreign revenues, namely dividends, interests, royalties and capital gains on shares transfers during the five first years of residence in France.

With respect to wealth tax, the exemption now applies to foreign assets of all the people who have not been French tax residents for 5 years prior to their move to France, whether they have an activity or not.

In terms of social security, foreigners working in France for a limited period will not be obliged to contribute to the French retirement plan regime, even without international social security treaty linking the two countries.

Statute of limitation
The statute of limitation has been extended to 10 years for French tax residents who failed to declare their bank accounts, life insurance contracts, assets, shareholdings in some companies established in jurisdictions which have not signed an administrative assistance Treaty with France (Article 52 of the 2008 rectified Finance Bill).

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