Special Expatriate Tax Regime – Article 155B of the French Tax Code


special expatriate exemption scheme exists to help attract company directors and employees to France by providing partial income tax exemption, subject to certain conditions and for a period of up to eight years.

 Designed to attract foreign executives, the expatriate tax regime applies to employees and managers who were not residents of France for tax purposes during the five calendar years prior to their taking up of their duties in a company based in France. Their recruitment can result from an intra-group transfer, or from an external hire, i.e. directly recruited abroad for a position in a company in France. To be eligible for this regime, the employee must have their household or principal place of residence in France, in addition to a primary occupation in France.

The special expatriate tax regime provides income tax exemptions for eight years on expatriate bonus and the share of compensation relating to the foreign activity carried out in the interests of the employer. Moreover, the bonus may be assessed at a 30% flat-rate of total remuneration in case the contract does not fix it.

However, these tax advantages are capped at the taxpayer’s discretion: it can be an overall cap, which means that these two elements may not exceed 50% of the total remuneration, or a cap solely on the exemption corresponding to the assignment carried out abroad, which may not exceed 20% of the taxable remuneration net of the expatriate bonus.

This exemption for active income is correlatively accompanied by a tax exemption for passive income. Indeed, taxpayers falling within the personal and temporal scope of the special expatriate tax regime can benefit from a 50% tax exemption for passive income from foreign sources, such as income from investments, intellectual property rights or capital gains on securities.

These conditions have recently been reiterated by the French Administrative Supreme Court (Conseil d’État, 21-10-2020, n°442799). The French Tax Authorities subordinated, in their guidelines, the benefit of the tax exemption of passive income to the effective and actual receipt of activity income, thus creating an additional condition not provided for by law, which was annulled by the French Administrative Supreme Court.

In addition to this favorable income tax regime, there is also a favorable wealth tax regime for new French tax residents. Indeed, the Article 964 of the French Tax Code (FTC) provides, that for five years, these French tax residents are liable to property wealth tax (Impôt sur la Fortune Immobilière) only on property and property rights located in France, thus avoiding the global territorial scope of this taxation.


Eligible employees and company directors of any nationality called upon to work full-time in a permanent or temporary position for a company established in France.

The following types of company director are eligible for the scheme:

  • Within a société anonyme (SA) or société par actions simplifiée (SAS):
    • Chairman of the Board.
    • CEO.
    • Deputy CEOs.
    • Non-executive directors with temporary delegation.
    • Members of the executive board.
    • Any non-executive director or member of the supervisory board with special responsibilities.
  • Within a société à responsabilité limitée (SARL): Any directors who are minority or equal shareholders.
  • Within other companies or establishments subject to corporate tax (impôt sur les sociétés – IS): Any directors who are considered as employees from a tax perspective.

The option to elect the capping mechanism must also be indicated in the “other information” section of the Income Tax Return No. 2042.

For persons recruited abroad by a French company, the option for the lump-sum assessment of the impatriation bonus must be expressly mentioned in the declaration.

Helpful tip: This special expatriate exemption scheme is designed for:

  • Pople recruited abroad by a company established in France; and
  • People called upon by a foreign business to work for a company in France.

Conversely, people coming to fulfill a position in France having changed their domicile at their own initiative are ineligible.

Conditions of the scheme


To be eligible, beneficiaries must fulfill two conditions:

  • They must be resident in France for tax purposes during the year in question ; and
  • They must not have been domiciled in France for tax purposes during the 5 calendar years prior to taking up their duties.
Helpful tip:

These conditions must be fulfilled within the same calendar year. Where this is not the case, beneficiaries lose their entitlement in that year alone, with no effect on previous or  future years.

Validity period


The period for which this provision applies to inpatriates is 8 years for any eligible employees and directors who took up their duties on or after 6 July 2016.

This period was previously 5 years.


  • Those assuming their positions before July 6, 2016 are eligible for the scheme until December 31 of the fifth year following the date they take up their post.
  • Those assuming their positions on or after July 6, 2016 are eligible for the scheme until December 31 of the eighth year following the date they take up their post.



Exemption on items of remuneration from professional activity

  • Additional expatriation-related remuneration

The part of the beneficiary’s remuneration directly related to expatriation, i.e. “expatriation bonus”, is exempt from income tax. Other pay components are not affected.

The actual bonus amount must, in principle, be provided for in the employment or directorship contract, or in an additional clause drafted prior to taking up the post.

The part of the beneficiary’s remuneration directly related to expatriation, i.e. “expatriation bonus”, is exempt from income tax. Other pay components are not affected.

The actual bonus amount must, in principle, be provided for in the employment or directorship contract, or in an additional clause drafted prior to taking up the post.

Without the amount needing to be specified expressly, in order to be exempt the bonus needs to be determined on the basis of objective and precise criteria mentioned in the employment or directorship contract.

For persons recruited directly abroad by a company established in France, the bonus may be assessed on a flat-rate basis.

In such cases, it is deemed to be equal to 30% (maximum) of an individual’s total remuneration.

Exemption from income tax on expatriation bonuses may be full or only partial. The portion of income that is exempt is not subject to withholding tax.

The share of income that is exempt from income tax under inpatriation rules is not included in the tax base used to calculate withholding tax.

It remains subject to the following condition: the beneficiary’s net taxable income (excluding the bonus) must be at least equal to the net taxable income received by employees fulfilling similar roles in the company (« Rémunération de référence »).

If this is not the case, the difference between the two pay packages must be reintegrated into the expatriate’s net taxable income.

A certificate from the employer specifying the reference income (“rémunération de référence”) and explaining this comparison may be provided to the individual, who can then present this document to the tax authorities to prove that this condition has been fulfilled.

Eligible beneficiaries of the special expatriate exemption scheme may also receive an exemption from income tax for the part of their remuneration (basic salary and additional remuneration) corresponding to work performed abroad.

Exemption is subject to the trips being made outside France for the “direct and sole” interest of the company established in France where the beneficiary is working full-time. Proof of this may be furnished by providing details of expenses claims, travel orders or tickets.

Helpful tip: To calculate how much of the beneficiary’s remuneration may receive exemption from income tax, days worked abroad may be counted and compared with the number of days effectively worked during the year. It may be useful to keep a day-by-day record



Income tax exemption on specific items of remuneration from paid employment is subject to a cap.

Every year, eligible employees and directors may choose between two capping options, depending on whichever is more advantageous in their case:

  • Either an exemption on additional expatriation-related remuneration (expatriation bonus) and the fraction of remuneration corresponding to work performed abroad is calculated and capped at 50% of all net income;
  • An alternative option upon request, whereby only the fraction of remuneration relating to work performed abroad is exempted, up to 20% of net taxable income, excluding expatriation bonuses.

Other exemptions


Eligible beneficiaries of the special expatriate exemption scheme may also claim income tax exemptions on:

  • Many mobility-related allowances (e.g. payments for a reconnaissance trip, agency fees, moving fees and travel costs, etc.).
  • Half of all income from securities, capital gains from transfers of shares and ownership interests. Payment of the sums in question must have been made by a person established outside France in a country that has signed a tax treaty with France containing an administrative assistance clause.
  • Social security contributions paid to a scheme in a foreign country: contributions paid into statutory social security schemes, as well as supplementary pension and life insurance schemes, may be deducted from taxable income.

Furthermore, eligible beneficiaries are only subject to pay the wealth property tax (impôt sur la fortune immobilière – ISI) on their assets located in France for 5 years.

Helpful tip: The items of remuneration affected by the special expatriate exemption scheme are now also exempt from payroll tax (taxe sur les salaires). This extra tax break for employers only applies to remuneration paid out from January 1, 2017.

Risks to consider


French tax residents should be aware that the applicable expatriate regime is the one in force upon the beginning of expatriation. Subsequent favourable legislative amendments on that regime are not available for the individuals already residing in France, even if there are still benefiting from such a regime. Consequently, attention should be paid, during all length of this regime, to the rules applicable upon the arrival in France.

Similarly, the concepts inherent in this regime are strictly construed, as shown by a recent ruling (Conseil d’État, 22-12-2020, n°427536). In this case, a taxpayer has been employed for more than 20 years in a company in the UK, before breaking all legal ties with this entity, then being hired by the French entity of the same group, while benefiting from an exemption from the probationary period and the full reinstatement of his seniority in the group.

The French Administrative Supreme Court has approved the reasoning of the French Tax Authorities to deny the benefit of the 30% flat-rate expatriate bonus method to this taxpayer. The judges considered that he was recruited in 2010 from an intra-group mobility and not as an external hire (as this optional regime, initially provided for taxpayers recruited from an external hire, only became available for intra-group hires since Finance Law dated December 31 2018).

Furthermore, the new French tax residents should not omit to complete annually certain declarations, e.g. concerning the holding of bank accounts abroad, which they could have kept from their former residence abroad, or trust returns (to be filed notably when a settlor or a beneficiary of a trust arrangement is a French tax resident).

Arousing discussion on the ground of the principle of equality, Article 155B of the FTC provides a safeguard clause, according to which the employees shall be taxed in France on an amount at least equivalent to the remuneration earned in the same company by a non-expatriate employee. Therefore, the expatriate bonus can be limited with respect to this reference remuneration.

In practice, the main issue is based on the notion of analogous functions and the identification of suitable benchmarks. Furthermore, since the expatriate bonus is exempt, the idea is to make sure that the employment contract does not provide for an artificially low remuneration, with a high bonus.


Changing jobs


The special expatriate exemption scheme continues to apply when the employee or director changes jobs within the same company or to another company within the same group, whether this is to fulfill a similar role or otherwise.

The scheme’s validity period may not be extended through a change of job, and remains limited to eight years at most.

Table of Contents: Special Expatriate Tax Regime – Article 155B of the French Tax Code

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