The United States tax system is almost unique in seeking to tax its citizens regardless of where they reside in the world. It is perhaps therefore not surprising that there were a record high number of US nationals renouncing their citizenship in 2016 of 5,411, a figure which fell only slightly in 2017 to 5,133.
Other countries typically base their personal taxation systems principally on whether an individual is considered tax resident in that country. The criteria of which will vary on a country by country basis and anybody leaving these countries may still have a hangover in terms of liability to certain taxes or fiscal implications after departure, or possibly in the event they ever return to the base country.
For the majority of countries however, a resident, whether a citizen or not, can usually escape the burden of high taxation by moving to a new country with a more favourable fiscal climate. There may however be certain restrictions in this regard when the country of departure does not recognise such relocation to be a genuine change in one’s economic centre of interest, or if too many ties are retained in the original country.
France has typically sought to restrict its nationals seeking the established preferential tax regime offered by Monaco. This is to the extent that French citizens newly arriving in Monaco are not able to benefit from the absence of personal income tax enjoyed by Monegasque residents.
In addition, those French nationals seeking to relocate to Switzerland, to take advantage of its favourable lump sum taxation regime, may also find the basis of calculation differing in nature from other nationalities, in order for the move to be accepted by the French authorities.
Following the election of the socialist President Hollande in 2012 it was no surprise to see that a large number of French citizens sought to avoid the impact of his high tax policies by taking advantage of more preferential tax regimes abroad.
Many French expatriates benefitted from the UK’s resident non-domiciled status and the Portuguese non-habitual resident regime. Whilst both remain popular options, the Probus group is also receiving increasing numbers of enquiries for la dolce vita of the Italian flat rate tax scheme for new residents.
Under Hollande’s successor, President Macron, a new potential threat has emerged with increasing consideration being given to the options available to France in seeking ways to ensure those citizens leaving the country increasingly remain within the scope of elements of the French tax system. This also raises the possibility of France seeking to tax on a citizenship basis regardless of where French nationals are actually resident.
Whilst any such move by the French government may be limited in its reach, and would need to comply with EU law, there are certainly attractions, both financial and political, for a country that has struggled to remain within EU budget deficit rules.
It should perhaps not be too surprising that such options are increasingly being talked about as France seeks to tackle the revenue lost due to an annual departure in the region of 500 of its larger individual tax contributors, each earning on average significantly in excess of EUR300,000 each year. Many French nationals currently living abroad, or considering leaving the country, will be watching developments with interest.
The Probus group has helped facilitate redomiciliation in a number of countries and would be happy to discuss individual circumstances or concerns further.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Probus Group to discuss these matters in the context of your particular circumstance. Probus Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.