Frequently asked questions about the France-Spain exit tax
What holding thresholds trigger the exit tax when leaving France?
The French exit tax primarily applies where you hold, directly or indirectly, more than 50% of the rights to a company’s profits, or where the total value of your shareholdings, claims, securities or rights relating to such instruments exceeds 800,000 euros at the time of the transfer of your tax residence. These thresholds are assessed at household level. Specific rules also apply to shareholdings held during the six years preceding departure. Exceeding these thresholds triggers a theoretical taxation of latent capital gains recorded at the date of transfer, even if no actual disposal takes place.
How is the latent capital gain subject to exit tax calculated?
The latent capital gain is calculated as the difference between the market value of the shares and interests on the date of transfer of your tax residence outside France and their original acquisition price or initial value. This valuation must be carried out using standard valuation methods, such as adjusted net asset value, discounted cash flow or earnings multiples. For listed securities, the market value is easily determined. For unlisted companies, a formal valuation may be required, which complicates the determination of the taxable base. The French tax authorities may challenge valuations they consider insufficiently justified.
Can I benefit from a deferral of payment of the exit tax if I move to Spain?
Yes. An automatic deferral of payment applies where you transfer your tax residence to a Member State of the European Union, such as Spain, or to a State that is party to the European Economic Area agreement and has concluded an administrative assistance agreement with France. This deferral suspends the payment of the tax for as long as you retain the relevant shares. However, you must submit an annual declaration to the French tax authorities confirming that the conditions for deferral continue to be met. The deferral automatically ends in the event of disposal of the shares, a gift, a transfer without consideration, or a transfer of tax residence outside the EU or EEA, in which case the tax becomes immediately payable.
What happens if I sell my shares after moving to Spain?
The disposal of shares after your move to Spain constitutes a triggering event for the French exit tax if you were benefiting from the deferral regime. On the date of disposal, the French tax calculated at the time of your departure becomes payable. You must declare and pay it in France, even if you are now resident in Spain. At the same time, Spain, as the State of tax residence at the time of disposal, may also tax the capital gain realised under its own rules. The France-Spain tax treaty provides mechanisms to prevent double taxation, generally through the granting of a tax credit corresponding to the tax paid in France, but this coordination requires precise filing steps in both countries.
Does the exit tax also apply if I retire to Spain without selling my shares?
Yes. The exit tax applies as soon as you transfer your tax residence outside France, regardless of the reason for departure and without the need for an actual disposal of your shares or securities. The mere fact of ceasing to be a French tax resident while holding substantial shareholdings triggers the theoretical taxation of latent capital gains. Even if you retire to Spain and retain your shares, the exit tax may apply if the holding thresholds are met. The deferral regime allows payment to be postponed provided the conditions are satisfied, but annual reporting obligations remain in force.
What are my reporting obligations after leaving France?
After your departure, you must continue to comply with reporting obligations in France for the entire duration of the deferral of payment of the exit tax. In practice, you must submit each year, before the deadline set by the authorities, a specific declaration confirming that you still hold the relevant shares, that you continue to reside in a State eligible for deferral and that no triggering event has occurred. In the event of a triggering event, you must declare it immediately and pay the tax due. Failure to comply with these obligations may result in the immediate payment of the tax and the application of penalties.
Can I transfer my shares to my children without triggering the exit tax?
No. A transfer without consideration (gift or inheritance) of shares subject to exit tax generally constitutes a triggering event that ends the deferral of payment and makes the tax immediately payable in France. Even if the beneficiaries reside in a Member State of the European Union, the transfer in principle ends the deferral. Specific arrangements may exist in the event of death allowing, under strict conditions, the continuation of the deferral for the benefit of the heirs. Estate planning in the presence of exit tax is therefore particularly complex and requires a detailed analysis of the tax consequences in both countries.
How can I estimate my exposure to exit tax before moving to Spain?
To estimate your exposure, first identify all shares, interests, securities and rights that you hold, directly or through intermediary structures. Calculate the current market value of these assets and compare it with their acquisition price in order to determine the latent capital gains. Then verify whether you exceed the triggering thresholds, namely a holding of 50% or a total value of 800,000 euros. If you are concerned, assess the theoretical tax by applying the French tax rate applicable to capital gains on securities. Finally, identify the available deferral options and their conditions. Such an assessment often requires the assistance of a specialised adviser in order to secure the valuations and anticipate interactions with Spanish taxation after your move.
