The tax advantage takes the form of an exemption of the additional remuneration linked to settling in France, until 31 December of the eighth calendar year following the year in which the employee took up their position.
Inpatriates are exempt from tax on the additional remuneration linked to their settling in France and taxable on only 50% of their interest, capital gains on sales of shares or dividends received from abroad.
They benefit from these advantages until 31 December of the eighth calendar year following the year in which they took up their position, for the years in respect of which they are tax domiciled in France
The aim is to grant tax advantages to employees, under certain conditions, in respect of the components of the remuneration paid to them that are linked to inpatriation, in order to encourage senior executives or investors to settle or return to France.
For Whom?
This concerns not only employees in the strict sense but also executives treated as employees for tax purposes (presidents of SAS companies, certain managers (gérants) of SARL companies, chairmen of the board of directors of an SA, etc.); they may be of French or foreign nationality and the nature of their duties is irrelevant.
Coming or Returning to France
Please note: to benefit from the exemptions, you must not have been tax domiciled in France during the five calendar years preceding the year in which you took up your position.
The date of taking up the position corresponds to the moment when performance of the contract, whether an employment contract or a corporate office, actually begins within the company located in France.
The tax authorities (administration fiscale) accept that professional constraints in particular (the person's probationary period, the spouse's professional situation, etc.) or family constraints (children's schooling, etc.) justify allowing a reasonable period of a few months between the inpatriate taking up their position and their household settling in France
Who Is Concerned?
The scheme applies to persons called by a foreign company to work for a company established in France, as well as to those who are recruited directly from abroad by a company established in France. This condition appears to have recently been somewhat relaxed. In some cases, it is accepted that the employee abroad may have sought a position in France without having first been approached by a company. This results from a decision of an Administrative Court of Appeal (Cour administrative d'appel, CAA Paris, 10 June 2022).
Focus on this point:
In view of the legislature's objective of encouraging not only employees recruited by a foreign entity of a French company, but also employees based abroad, to settle in France for a limited period, the provisions of Article 155 B of the French General Tax Code (Code général des impôts, CGI), in the version resulting from Law 2008-776 of 4 August 2008 applicable to the dispute, are not intended to, and cannot have the effect of, excluding from the tax regime they establish, insofar as they reserve the benefit of this exemption to "employees called from abroad", taxpayers who, from abroad, applied for a job offer published in France or actively sought employment in France.
Thus, a computer systems developer domiciled abroad when negotiations began with a view to his recruitment by a company established in France and his settling in France with his wife may benefit from the scheme under Article 155 B of the CGI, even though he does not establish that his recruitment resulted exclusively from an initiative of the French company.
CAA Paris 10-6-2022 no. 20PA02279: RJF 10/22 no. 846
You must also be able to provide evidence that, when the recruitment took place, your actual domicile was still located abroad and that you had not already transferred it to France; this evidence may consist, for example, of documents attesting to contacts with the company, proof of address, proof of travel undertaken, your family situation or other…
What Is Exempt?
It is either the actual amount of the inpatriation bonus (prime d'impatriation) or a flat-rate amount.
Actual amount:
Inpatriate employees and executives are exempt from tax on the components of their remuneration directly linked to their inpatriation, that is, in practice, their inpatriation bonus.
The exemption applies until 31 December of the eighth year following the year in which they took up their position in France.
In this case, the bonus, which corresponds to the additional remuneration directly linked to the temporary performance of the professional activity in France, is exempt from income tax for its actual amount.
Of course, only the additional remuneration directly linked to inpatriation may be exempt; the exemption does not extend to the other components of remuneration provided for in the contract.
The actual amount of the bonus must appear separately in the employment contract or corporate office agreement of the persons concerned or, where applicable, in an amendment thereto, drawn up before taking up the position in France.
Where the "inpatriation bonus" cannot be set in advance for its exact actual amount to the euro, it is sufficient that it be determinable on the basis of the employment contract or the corporate office;
30% flat-rate bonus:
Inpatriates may opt for the flat-rate assessment of their inpatriation bonus, including where the amount of this bonus is specified in their employment contract or corporate office agreement.
If this option is exercised, the inpatriation bonus is deemed to be equal to 30% of total net remuneration.
Please note: dividends, capital gains and interest are in all cases subject to social security levies (prélèvements sociaux) (18.6% since the 2026 Social Security Financing Act (LFSS), 17.2% previously), even for the portion exempt from tax!
Please note: in all cases there is a cap: the remuneration for similar duties
The idea is that at least the portion of remuneration corresponding to similar duties must remain taxable.
If the portion of remuneration subject to income tax is lower than the remuneration paid for similar duties within the company or, failing that, within similar companies established in France, the difference must be taxed.
Focus on the key texts relating to the reference salary:
The last paragraph of Article 155 B, I-1 of the CGI makes the exemption of the inpatriation bonus, or of the portion of remuneration deemed to represent it, subject to the condition that the inpatriate's remuneration subject to income tax be at least equal to that received for similar duties within the same company or, failing that, within similar companies established in France.
Inst. 30-7-2009, 5 F-13-09 no. 42; BOI-RSA-GEO-40-10-20 no. 110, 21-6-2017
The persons concerned must be able to prove this by any means. To this end, they may produce a certificate from their employer.
Inst. 30-7-2009, 5 F-13-09 no. 43; BOI-RSA-GEO-40-10-20 no. 120, 21-6-2017
Example
An executive employed by an American company is seconded by their company to a French company to carry out their activity in France under a contract providing for an annual net remuneration of €200,000, including an "inpatriation bonus" of €60,000. In this case, the "additional salary linked to inpatriation", i.e. €60,000, is exempt:
– either in full if the inpatriate proves that the "reference remuneration" in France is equal to or lower than their net remuneration excluding the bonus (€140,000);
– or up to €50,000 if, for example, the comparable net salary in France is €150,000; indeed, the taxable salary in France cannot be lower than that paid for similar duties by the French company or, failing that, by similar companies established in France.
Exemption of the Portion of Remuneration Relating to Activity Carried Out Abroad
The portion of remuneration corresponding to the activity carried out abroad by inpatriates is exempt from tax in France if the stays abroad are made in the direct and exclusive interest of the employer.
It may be assessed on a flat-rate basis, provided that it is consistent with the number, duration and location of the trips abroad.
The tax authorities nevertheless reserve the right to challenge the exemption in the event of a clear disproportion between the amount of remuneration for the activity carried out abroad and the amount of remuneration for the activity carried out in France.
As a practical rule, and in the absence of information making it possible to identify it, the tax authorities accept that the portion of remuneration corresponding to the activity carried out abroad may be determined by taking into account the number of days of activity abroad relative to the total number of days of actual activity in the year. To determine the number of days of activity abroad, travel time to and from abroad is not taken into account.
Combination of the Inpatriation Bonus Exemption and the Exemption for Activity Abroad with Flat-Rate Assessment
The exempt portion of remuneration, in respect of both French and foreign activities, cannot, all other conditions being met, exceed 50% of total remuneration (or, by option, the exemption of the foreign portion is limited to 20% of taxable remuneration).
Tax Returns to Be Filed by the Inpatriate
If the inpatriate opts for the flat-rate assessment of the bonus (rather than the actual amount), they must indicate this in the "other information" (autres renseignements) section of the overall income tax return (form 2042).
The inpatriate must also report the exempt salaries and bonuses on line 1DY or 1EY of their supplementary return no. 2042 C; this box is not intended to subject the income in question to income tax, but to enable the calculation of the reference tax income (revenu fiscal de référence).
The net taxable salary after deduction of the exempt portion must be entered in boxes 1AJ or 1BJ of the main return 2042.
Exemption of Half of Foreign Interest, Capital Gains on Sales of Shares and Dividends
Inpatriate employees are exempt from tax on 50% of the amount of interest, capital gains on sales of shares and dividends from foreign sources.
Important: this interest, these capital gains or dividends must be paid by an entity established in a country that has signed with France a tax treaty containing an administrative assistance clause aimed at combating tax fraud or evasion, or at least a tax information exchange agreement.
In the case of capital gains on shares, you will also need to complete a return of capital gains or losses on the disposal of securities (no. 2074-IMP-SD), providing the information necessary for the calculation; if there are also other capital gains or losses on shares (other than those benefiting from the 50% exemption), you will also need to file return no. 2074, accompanied where applicable by the appendix return no. 2074-ABT.
