Exit tax: the three most costly timing mistakes

The exit tax applies to unrealised capital gains on securities when their total value reaches more than €800,000¹, or when they represent at least more than 50%² of a company's profits, for a person who has been a French tax resident for at least from 6 years³ out of the last ten years.

A payment deferral makes it possible to postpone settlement. It is automatic for a move to a European Union member state or to another European Economic Area state bound to France by an administrative assistance agreement.

For any other destination, it requires an express application, the appointment of a tax representative in France and the provision of guarantees. And this application must be filed no later than from 90 days⁴ before the transfer of domicile.

This deadline is the most common trap. A departure decided within six weeks for Dubai, Singapore or Panama makes the application impossible, and the tax becomes payable immediately on gains that have not been realised.

The choice of destination is therefore not neutral for cash flow at departure. The same assets benefit from automatic deferral for Portugal and from a cumbersome procedure for the Emirates.

A useful clarification: the deadline is counted from the actual transfer of tax domicile, a notion that does not always coincide with the date of the move or with the start date of the employment contract abroad. Having this date set by an adviser, and documenting it, is part of preparing the departure.

The tax is not final. It is relieved, or refunded if it has been paid, when the taxpayer keeps their securities for a set period after leaving.

This period is 2 years⁵ when the total value of the securities is below €2,570,000⁶, and 5 years⁷ above that amount.

A sale during this period makes the tax definitively payable. Yet it is often the planned sale that prompted the departure, which creates a contradiction that few people leaving anticipate.

The difference between two and five years is also considerable for an entrepreneurial project. A business owner whose assets cross the €2,570,000⁶ threshold sees their timing constraint more than double.

Deferral is not granted once and for all. It requires a declaration of unrealised capital gains in the year of departure, then a follow-up declaration every year for as long as the deferral runs.

Failure to make these follow-up filings can make the tax immediately payable, even if the taxpayer meets all the substantive conditions and has sold nothing.

This is the most unfair of the three mistakes, because it penalises administrative negligence rather than behaviour. It is also the most common, as the follow-up stretches over several years after a departure one has stopped thinking about.

We do not publish the tax rate applicable to unrealised capital gains, the rate of social security contributions or the exact procedures for follow-up declarations: they do not appear in the extracts we have been able to verify.

1. More than three months before leaving: value the securities portfolio and determine whether the thresholds are crossed.
2. At least from 90 days⁴ before the transfer: file the deferral application if the destination is outside the European Economic Area.
3. In the year of departure: file the declaration of unrealised capital gains.
4. Every following year: file the follow-up declaration for as long as the deferral runs.
5. At the end of 2 years⁵ or 5 years⁷: apply for relief or a refund.

One last remark on the substance. The exit tax does not penalise leaving: it draws the consequences of gains built up during the French period. A taxpayer who keeps their securities for a few years after settling abroad comes out fully relieved. This mechanism is therefore less a barrier than a timing constraint — provided you know about it before leaving, rather than discovering it afterwards.