Deputies have approved a revision of the ‘exit tax’ in France’s 2025 budget to deter tax exiles, restoring a 15-year holding period for company directors’ capital gains upon relocating abroad. Proposals to raise capital income taxes from the left were rejected, with support from the RN and right-wing parties. Amendments were also passed to address tax evasion practices and tighten regulations on housing capital gains. Additionally, a tax relief for widows and widowers was reinstated, though its final inclusion is uncertain.
On Wednesday, deputies reviewing the 2025 state budget approved measures to enhance the ‘exit tax’, a levy established in 2011 aimed at reducing tax evasion by residents moving abroad. They dismissed a leftist proposal to increase taxes on capital income.
A significant coalition, which included members from the left, the RN, and LR, opted to revert to the original structure of the ‘exit tax’ that was introduced during Nicolas Sarkozy’s administration. This tax targets unrealized capital gains of corporate leaders who relocate their tax residences outside France, unless they retain ownership of their shares for a minimum of 15 years after the move.
In 2018, Emmanuel Macron had adjusted this requirement, allowing a two-year period instead under the premise of attracting investors. However, the Assembly decided to restore the 15-year condition.
The objective is clear: to prevent individuals from departing France with significant holdings without incurring any tax obligations, as Aurélien Le Coq (LFI) put it succinctly.
Opposition to this decision came solely from the ‘Ensemble pour la République’, Horizons, and Modem factions.
Conversely, the Assembly dismissed various left-leaning amendments that proposed increasing the ‘flat tax’ on capital gains. The RN united with Macron’s party and right-wing members to oppose these amendments, defending the interests of ‘small investors’ and ‘business owners’.
This flat tax was introduced in 2018 following the abolition of the ISF by Emmanuel Macron, aimed at encouraging affluent taxpayers to invest in the economy.
Recently, the Finance Committee proposed raising the flat tax rate from 30% to 33%, a change facilitated by the RN’s abstention.
However, during the session, the Assembly rejected all leftist efforts to augment this tax, with the RN opting to oppose those this time.
– Tackling ‘Speculative Practices’ –
Jean-Philippe Tanguy remarked that ‘small investors and corporate executives felt disproportionately impacted by this tax measure’.
He stated, ‘We aimed to avoid piling on taxes that give the false impression it’s the opposition imposing these costs, while the government benefits from 30 billion in taxation’, he explained to AFP following the voting.
The RN, fearful of a possible 49-3 situation, was focused on sustaining the Barnier government, as noted by LFI’s David Guiraud. He accused them of prioritizing their political survival over the need for equitable taxation on high earners.
Additionally, deputies passed amendments aimed at effectively combating ‘CumCum’ schemes, which involve avoiding taxes on dividends by temporarily transferring shares to an intermediary located abroad.
On the subject of housing, an approved amendment tightens the criteria for exemptions from capital gains tax when homeowners sell their primary residences. Homeowners must now reside in the property for five years to qualify for this exemption, an increase from the previous six-month requirement, intended to dissuade ‘speculative fluctuations’ that drive up property values.
Furthermore, deputies implemented stricter regulations on ‘vente à la découpe’ transactions concerning buildings by approving heightened taxes on those generating capital gains exceeding 2%.
Lastly, the Assembly reinstated the ‘half-tax share for widows and widowers’, a provision removed in 2014 under François Hollande’s presidency. This reinstated benefit will assist all widows and widowers who have raised at least one child, resulting in reduced tax obligations.
This measure, potentially impacting around two million taxpayers and costing the government approximately one billion euros, is not expected to be included in the final budget, as noted by Anne Le Hénanff (Horizons), one of the supporting MPs, who commented to AFP.