«"Alexis, I have time, the elections aren't until 2027."»
That's the phrase I hear most often these days during my exit audits. My answer is always the same: In taxation, tomorrow is already yesterday.
The history of French wealth management is paved with tax "corpses": entrepreneurs who thought they had signed their sale or departure under a lenient regime, only to discover six months later that a law passed in haste was retroactively applied to their transaction.
At the house of Balmont Conseil, As the first AI-enhanced wealth management firm, we do not simply read the current law: we model the risk of the one that has not yet been passed.
Tax retroactivity is the possibility that a new law (such as an Amending Finance Law passed in the summer) applies to transactions or income prior to its publication.
Tax retroactivity refers to the situation in which a finance law or an amending finance law has effects on transactions prior to its publication. French tax law distinguishes three forms of retroactivity. Strict legal retroactivity, which modifies the regime applicable to transactions already completed, is exceptional and constitutionally regulated.
Minor retroactivity applies to income from the current calendar year at the time the law is adopted: this is the general rule for annual finance laws, passed in December and applicable to income from the entire preceding year. Retrospection applies to ongoing situations not yet settled (for example, a tax deferral not yet resolved). For taxpayers preparing their expatriation, The main risk is the small retroactivity of an amending finance law passed in the summer of 2027, applicable to transactions carried out since January 1, 2027.
The three forms of tax retroactivity
Strict legal retroactivity
Modification of the rules applicable to transactions completed before the publication of the law. The Constitutional Council allows this in exceptional circumstances, provided it serves a sufficient public interest and does not infringe upon acquired rights or legitimately expected effects (consistent case law since decision no. 2013-682 DC of December 19, 2013). In practice, this type of retroactivity is rare in tax matters.
A little bit of retroactivity
This applies to income earned during the current calendar year at the time the law is adopted. A finance law for 2027 passed in December 2026 may modify the tax regime applicable to income received in 2026, provided that the taxable event for income tax is conventionally set at December 31. This practice is consistent and constitutional.
Retrospective
Application to ongoing situations not yet settled. A reform of the contribution-sale regime (article 150-0 B terThis could apply to ongoing deferrals that have not yet been settled. The change to the regime for unrealized capital gains subject to exit tax could also affect earlier departures if the securities in question have not yet been sold.
Notable historical precedents and forms of retroactivity
The 2011 exit tax
The amending finance law for 2011 (law no. 2011-900 of 29 July 2011) established the’exit tax in its modern version, effective March 3, 2011, i.e., prior to its publication. Taxpayers who transferred their residence between March 3 and July 29, 2011, were subject to a system that did not exist at the time of their departure. This retroactive application was upheld by the Constitutional Council (decision no. 2011-638 DC of July 28, 2011) on the grounds that the objective of combating tax evasion justified the measure.
150-0 B ter and Surrender: Why even the past is not safe
The danger doesn't just concern your income tax. It concerns your stocks of deferred capital gains. If you hold a holding company with a tax deferral (contribution-sale), the legislature may decide in 2027 to change the rules for the future, but only for deferrals originating in 2020. This is what is called the retrospective.
We are currently seeing scenarios where the reinvestment quota (currently 60 %) could be tightened or the deadlines shortened. Failing to clear or secure these carryovers before a year of legislative transition is a major risk.
Protection strategy: The "Hard Close 2026" protocol«
For our customers at Balmont Conseil, We recommend the following protocol for any departure planned for 2027:
- Forecast as of 31/12/2026: Transfer of actual residence and closure of French bank accounts not required.
- Date confirmed: Systematically use notarial deeds or registrations at the land registry service to remove any doubt about the chronology.
- Audit of reports: Check whether an early release of the 150-0 B ter deferral in 2026 is not preferable to a risk of increased taxation in 2027.
The exceptional contribution on high incomes (CEHR)
Introduced by the 2012 Finance Act (Law No. 2011-1977 of December 28, 2011), it applied to income for the entire year of 2011, that is, the year preceding the publication of the law. This is a typical case of minor retroactive application, accepted by the Constitutional Council.
The differential contribution on high incomes (CDHR)
Introduced by the 2025 Finance Act and applicable to 2024 income, it illustrates the common practice of taxing the previous year's income through legislation passed in December. [TO BE VALIDATED — Alexis Sagnier: specify the potential extension period provided for by the 2026 Finance Act.]
Which transactions are subject to the risk of retroactive taxation?
- Income received during the current calendar year at the time of voting (dividends, capital gains on securities, property income, salaries and wages).
- Transfer operations where the triggering event (signing of the deed, effective transfer of ownership) occurs during the year of the vote.
- Transfers of tax residence carried out during the year of the vote, which may be subject to exit tax whose parameters would be tightened.
- Current tax deferrals not yet settled (contribution-sale 150-0 B ter, deferral exit tax), subject to retrospective reform.
- Transfers made free of charge (gifts, inheritances) initiated before the publication of the law but not yet settled.
How to protect oneself from retroactive risk?
Three operational principles. First, finalize significant transactions before the end of the calendar year preceding a potential amendment to the tax law: an effective transfer of residence by December 31, 2026, at the latest, secures the tax regime applicable to 2026 income. Second, prioritize transactions with a definite and dated triggering event (notarized deed, registered declaration, establishment of a guarantee) rather than transactions with a deferred effect. Third, rigorously document the chronology: proof of effective transfer (moving, leases, school enrollment, bank accounts) and simultaneous execution of all financial transactions before the end of the year.
Alexis Sagnier's opinion
Retroactivity is not an exception; it is the French rule. Every annual finance law is retroactive by default, since it applies to the income of the previous year. The real question is not whether an amending law can apply to 2027, but whether it will.
The economic programs published in 2024-2025 by the main political parties all contain measures with immediate revenue, financed by retroactive activation for the previous year. The prudential rule is therefore clear: any asset transaction whose net return depends on the 2026 regime must be executed and closed in 2026. Anything exceeding this threshold is exposed to the legislative risk of the following year.
Conclusion: Legal certainty has a price, and unpreparedness has a cost.
In France, taxation is a fluid substance. It adapts, it flows, and sometimes it overwhelms those who thought they had a firm footing. Retroactivity is not an anomaly; it is a precise budgetary tool.
If your wealth management strategy for 2027 isn't already on my desk by 2026, you're not optimizing, you're gambling. And when we're talking about 30, 40, or 50% of your capital, the taxman (the taxman) always ends up winning.
FAQ: The burning questions about retroactivity
Can the state really tax money that I have already received and spent?
Yes, through "minor retroactivity." Since the taxable event for income tax is set at December 31st, a law passed in December can legally tax all income received since January 1st of the same year. This is standard practice for Finance Acts in France.
Does a change of tax residence during the year protect me?
Not entirely. If you leave on July 1, 2027, and a law passed in September 2027 tightens the Exit Tax with retroactive effect to January 1, you will be subject to the new regime. Only a confirmed departure Before the year of the reform (therefore no later than December 31, 2026 for a reform in 2027) offers total legal certainty.
Doesn't the Constitutional Council protect taxpayers?
It protects against "strict" retroactivity (applicable to past and closed years), but it almost systematically validates "minor retroactivity" in the name of the public interest and the fight against tax evasion. Relying on a constitutional appeal is a risky and costly strategy.
What happens to my tax deferral 150-0 B ter if the law changes?
This is the risk of "retrospection." A new law could modify the conditions for maintaining a deferral granted five years ago (for example, increasing the reinvestment quota from 60 to 80). The deferral is not an immutable contract with the State; it is a legislative tolerance that can evolve.
