France to replace ‘Exit Tax’ on capital gains, target fiscal cheats

France to replace ‘Exit Tax’ on capital gains, target fiscal cheats

PARIS,. France will abolish a tax imposed on the capital gains of top earners and entrepreneurs who leave France and sell their assets with a more-targeted levy designed to deter tax optimisation, a finance ministry spokesman said today.

France imposed the so-called “Exit Tax” in 2011 during the presidency of Nicolas Sarkozy. It required individuals who held assets in stocks and bonds of more than €800,000 (RM3.8 million) or at least 50 per cent of the capital of a company to pay capital gains on assets sold up 15 years after they left France

Its aim was to stop individuals temporarily changing their tax domicile in order to skirt French taxes but pro-business President Emmanuel Macron says it damages France’s attractiveness as an investment destination.

A finance ministry spokesman said the new “anti-abuse mechanism” would concern asset sales made up to two years after an individual leaves France.

“The Exit Tax as it is today will be scrapped,” the ministry spokesman said. “The new scheme will target asset sales made shortly after leaving France — two years — to stop people moving back and forth over a short period to optimise tax efficiencies on capital gains.”

An exception, the spokesman said, would be individuals who relocate to tax jurisdictions that have not signed fiscal assistance agreements with France. In those cases, the 15-year period would still apply.

The new rules will come into effect on January 1, 2019. The government is due to present its budget to parliament later this month.

The broad details were first reported today by business daily Les Echos.

“The text is not yet finalised,” the newspaper quoted one source within parliament’s finance committee as saying. — Reuters