18 October 2018

Towards simplification of taxation for French citizens abroad

In the context of the 2019 draft budget, Gérald Darmanin is proposing a series of measures aimed at reforming taxation of French citizens living abroad. The goal: simplifying taxation on expatriates and making it fairer.

Good news for French expatriates: their taxation will be simplified in 2019. Currently, the Contribution sociale généralisée (CSG -   General Social Contribution) and the Contribution à la réduction de la dette sociale (CRDS – Social Debt Repayment Contribution) are paid by French citizens abroad. These taxes go to finance social protection, which expatriates do not benefit from as they are affiliated to the social protection schemes of the States they live in.

The CSG and CRDS abolished for French citizens abroad

On 17 October 2018, the Minister of Public Action and Accounts, Gérald Darmanin, announced a series of measures to transform their taxation.

  • Abolition of the CSG and CRDS for "individuals not coming under France’s Social Security system but under the Social Security system of another Member State of the European Union, the European Economic Area, or Switzerland", he explained to the National Assembly.
  • Replacement of the mechanism for flat-rate withholding tax on income from French sources by a PAYE (pay as you earn) system.
  • Similarly, a number of tax relief schemes, including the Pinel scheme, which grants tax reductions in the event of acquisition of real-estate property, will be extended to expatriates.

These upcoming measures will serve to redress an inequality in the tax system.

Why reform taxation on French expatriates?

These measures are inspired by the report on “French Citizens’ International Mobility” by Anne Genetet, Member of Parliament for French citizens living outside France. Delivered to the Prime Minister on 11 September, it shows that “French citizens living abroad wish to be regarded as members of their national community in their own right. In this respect, they want to benefit from comparable taxation that takes their specificities into account.”

According to Ms Genetet’s report, 2 to 3 million French citizens live outside national borders. They account for 0.6% of taxpayers but pay 1% of income tax. “It is time we stopped regarding all non-residents as would-be tax exiles and making them pay for the underhandedness of a tiny minority”, the Parliamentary Report concluded. The upcoming measures will provide a response to these problematic situations.