The French exit tax is one of the few in Europe that most departing shareholders will never pay, and not because the charge is small. It is because the statute pairs the charge with a suspension of payment that, in the ordinary case of a move inside the European Union, applies automatically and then extinguishes the tax altogether after a fixed period.
French exit planning is therefore not really about the tax. It is about the suspension: whether it is automatic or has to be requested, what it costs to obtain, what ends it early, and how long the holder must survive before the liability is written off. Get those four points right and the charge is a filing exercise; get one wrong and it becomes payable in full.
Who is inside the charge
Article 167 bis of the code général des impôts applies to a person who transfers his tax domicile out of France and who has been fiscally domiciled in France during at least six of the ten years preceding that transfer. The ten year period runs from date to date, and the six years need not be continuous, as the guidance on the persons within the charge confirms. Below six years there is no exit charge on unrealized gains, whatever the size of the holding.
Where the residence condition is met, a threshold test follows. The taxpayer is within the charge if, at the date of transfer and together with the members of his tax household, he holds either a participation of at least 50 per cent of the bénéfices sociaux of a company, or a portfolio of company rights and securities whose global value exceeds 800,000 euros. Where the second limb applies, the unrealized gains on the whole portfolio come into charge, not merely on the part above the threshold.
Indirect holdings count for the percentage test, and where the holding is indirect the official notice to the departure declaration requires the participations to be multiplied to see whether the 50 per cent minimum is reached.
What sits inside the field, and what sits outside it
The assets covered are wider than shares. The charge reaches company rights, securities and titles within the ordinary capital gains provision of article 150-0 A, rights over those securities such as usufruct or bare ownership, and titles representing the same securities, including SICAV shares and units in fonds communs de placement. For transfers made from 1 January 2019 the field also extends, on the administration’s own reading, to the unrealized gains on the shares and units within article 244 bis A, the French levy on real estate gains realized by non residents.
The exclusions are deliberate too. Securities held in a PEA or a PEA-PME are outside the field. So are units in property dominant companies falling under article 150 UB, and units in fonds communs de créances whose duration at issue exceeds five years.
That is a genuine pre departure lever: the wrapper is a matter of how the portfolio was built. Where a French resident has held a PEA for years the exclusion is already earned, and where he has not it cannot be manufactured in the weeks before a move.
What is taxed, and at what rate
In the general case, the income tax on the gains and receivables within the scope of the exit tax is determined by applying the flat rate of 12.8 per cent fixed by article 200 A, with an option for the progressive scale. It is computed at departure on unrealized gains, on receivables arising from earn out clauses, and on gains previously placed under a deferral regime. The social levies run on the same bases, except for gains held over under article 150-0 D bis or 150-0 B quater, which already bore them when the deferral was created.
Those levies are charged separately, and for a departure made in 2025 their rate is not settled. The gains of article 167 bis fall within the contribution on income from capital, and the law that raised that contribution to 10.6 per cent applies the increase from the taxation of 2025 income, which puts the global rate at 18.6 per cent. The published guidance, still in force, instead sets the levies at the global rate in force on the date of the transfer, which for a 2025 departure was 17.2 per cent. A taxpayer who applied a published interpretation that the administration had not withdrawn at the date of the operations cannot be reassessed on a different one, under article L. 80 A of the livre des procédures fiscales. For a departure made in 2026 the two readings converge on 18.6 per cent.
Because the two components are separate, the events that release one do not always release the other. Where a gain is later effectively taxed on disposal under article 244 bis B and an applicable treaty, only the income tax on that unrealized gain is written off or refunded. The social levies follow their own path.
Gains previously placed in deferral under the contribution regime of article 150-0 B ter keep their historic rate on expiry of that deferral, for the social levies as well as for income tax, whichever method applies to the current year. A shareholder who has contributed shares to a holding he controls therefore carries two rate regimes across the border, the older one fixed by the year the deferral was created.
The automatic suspension, and the one that has to be asked for
Where the destination is a European Union member state, or a state or territory bound to France by an administrative assistance convention against fraud and evasion together with a recovery assistance convention comparable to Directive 2010/24/EU, and which is not a non cooperative state or territory within the meaning of article 238-0 A, the sursis de paiement applies automatically. Nothing is requested, no guarantee given, no fiscal representative appointed. The declaration is filed the year following departure, with the ordinary income tax return, at the tax office on which the French domicile depended.
Where the destination is outside that category, the tax is in principle immediately due. The taxpayer may nonetheless obtain a suspension on express request. He must declare the gains and receivables, designate a representative established in France authorized to receive communications on assessment and recovery, and constitute guarantees with the tax authority. The guarantee is 12.8 per cent of the gains and receivables taken gross, before the holding period and fixed allowances, except for gains held over under the contribution regime, where it follows their historic rate.
Where the suspension on option is sought, a declaration 2074-ETD must be filed at the latest 90 days before the transfer of the domicile, with the non residents office, accompanied by the proposed guarantee. It is a pre departure obligation in a regime that otherwise operates after the event, and a client who takes advice only after landing has missed it.
What ends the suspension
The statute lists the events that make the tax payable. The principal ones are the disposal of the securities, their redemption by the issuing company, their cancellation and the receipt of sums under an earn out clause. Donation ends the suspension on the unrealized gains where the donor is domiciled in a state outside the automatic category, unless he demonstrates the absence of a principally fiscal purpose behind the gift, and it ends the suspension on gains reported under the older regimes whatever the donor’s domicile. Death appears in the list, but only for the tax on those same older reported gains; on the unrealized gains themselves it writes the tax off instead.
A second departure is its own trigger. Where a taxpayer entitled to the automatic suspension moves on to a state that does not qualify, that suspension ends. He may then apply for the suspension on option for the securities and receivables still in his estate, subject to the guarantee and representative conditions. The reverse move works in his favour: a taxpayer who returns to the automatic category has the suspension on option replaced by the automatic one, may ask for the guarantees to be released, and no longer needs a fiscal representative.
Two years, or five, and the number that separates them
The suspension is not perpetual. The tax attributable to unrealized gains, both income tax and social levies, is written off or refunded on the expiry of a period of two years where the global value of the securities and rights was below 2.57 million euros at the date of transfer, and of five years where it exceeded that figure.
The condition is that the securities on which the unrealized gain was computed are still in the estate at the expiry of that period. Exchanges and contributions made after departure do not defeat the relief, but the securities received in their place must themselves still be held at that date. The relief is not a reward for the passage of time alone. It is a reward for holding.
The 2.57 million euro line is the most consequential number in the regime: it more than doubles the holding period. And the architecture makes the exit tax a temporary constraint on disposals rather than a permanent cost: a founder who intends to sell within eighteen months is in a different position from one holding for a decade, even though their charges at departure are identical.
The monitoring obligation that outlives the move
The taxpayer files the 2074-ETD, which exists only on paper and cannot be filed online, and thereafter, for departures from 1 January 2014, a follow up declaration 2074-ETS3 to record payments, write offs and refunds. A further change of domicile has to be reported within two months.
This administrative tail is the practical weakness of most files. The follow up runs for two or five years, often across a change of adviser, and it is nobody’s principal responsibility. The written off tax is not written off automatically: it is written off on a record that someone has to maintain.
The notice describes a copy of the original 2074-ETD as indispensable for the later monitoring of the assessment.
Where the French regime actually bites
Read as a whole, article 167 bis is less a tax on leaving France than a set of conditions on the right to sell afterwards. For a shareholder moving inside the Union who holds his position for the statutory period, the tax on the unrealized gains is written off. For one moving to a third country, the cost is a guarantee, a representative and a pre departure filing. For one who intends to realize soon after the move, the charge is real and payable, at 12.8 per cent in income tax and, for a 2026 departure, 18.6 per cent in social levies.
That is a coherent design, and it explains why the same regime is called ferocious by some advisers and harmless by others. The variable that separates them is not the size of the holding but the intended holding period after departure, which is the one fact rarely on the file when the planning starts.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.