Leaving France for Luxembourg: exit tax, tax residence and procedures

Moving to Luxembourg is not enough to escape the French tax system. The tax authorities examine three criteria for tax residency, and only one is required to maintain your status. If you hold securities, the exit tax may apply upon departure. According to form 2074-ETD, a deferral of payment is automatic for a transfer to a non-cooperative EU member state. A state's classification is determined on the date of departure.

Exit tax: are you affected?

The exit tax taxes unrealized capital gains on your securities at the time you transfer your tax residence outside of France. Two conditions must be met.

A period of residence. You have been tax resident in France for at least six of the ten years preceding the transfer.

A level of detention. You hold, directly or indirectly, at least 50% of the profits of a company. The other test concerns the total value of your shares on the date of the transfer: €800,000. The instructions for form 2074-ETD state "greater than €800,000," while the public information sheet uses "at least €800,000." The exact threshold can be verified in your file. The two tests are alternative. Only one is required.

The rates. Income tax is 12.8% by default, with an option to use the progressive tax scale. Social security contributions are 17.2% for a transfer in 2025 and 18.6% for a departure in 2026.

Payment deferral: automatic or upon request

The tax administration's information sheet states that the deferral of payment is either automatic or granted upon request. The notice 2074-ETD (2025 transfers, Part III.A) specifies that the automatic deferral applies when the taxpayer transfers their residence to a Member State of the European Union that is not non-cooperative within the meaning of Article 238-0 A of the French General Tax Code (CGI), or to a non-EU country that has concluded an administrative assistance agreement with France (the notice lists these countries: 70 for 2025 transfers). Luxembourg is a member of the European Union. The list of non-cooperative countries is based on the decree of February 12, 2010, most recently amended by the decree of April 15, 2026: the classification is verified on the date of departure.

Apart from automatic deferment, a deferment request must be made using form 2074-ETD. The instructions require a tax representative established in France and collateral. For transfers since November 22, 2019, the information sheet states "no later than 90 days before this transfer," while the instructions state "within ninety days preceding the transfer": have the deadline confirmed by the tax authorities.

Tax relief: 2 years or 5 years

If you still hold your securities after a certain period, the tax is waived (or refunded if it has already been paid). For transfers since January 1, 2019, this period has been reduced from 15 years to 2 or 5 years.

The tax relief does not apply if, in the meantime, there is, in particular, a sale, a buyback by the company, a cancellation of the securities or a liquidation.

Declare the exit tax

• Without deferment on request (therefore with automatic deferment or without deferment), the 2074-ETD declaration is filed with the same deadlines as the income tax return, i.e. in year N+1 for a departure in year N: a departure in 2026 is declared in 2027. With a deferment on request, it is filed before the departure.
• According to the notice, this declaration only exists in paper format.
• In case of deferment, annual monitoring is mandatory: declaration 2074-ETS3, or simplified declaration 2074-ETSL when the conditions of the notice are met.

If you have made a contribution-sale

Transferring tax residence outside of France terminates the deferral of taxation under Article 150-0 B ter of the French General Tax Code (CGI). The capital gain is then taxed at the rate that would have applied in the year of the contribution. Form 2074-ETD specifies that the deferral of exit tax also covers "capital gains that have been deferred but become taxable as a result of this transfer," with a dedicated section in the tax return. An exception exists for certain contributions falling under the "Mergers and Acquisitions Directive.".

Tax residence: the three criteria of Article 4 B of the French General Tax Code

The administrative doctrine (BOI-IR-CHAMP-10), which comments on article 4 B of the CGI, identifies three criteria. It is sufficient for one of them to be met.

Spending less than six months in France does not therefore protect you.

When both France and Luxembourg consider you a resident, the tax treaty prevails, and its definition of resident takes precedence over domestic tax domicile. The current treaty was signed in Paris on March 20, 2018, entered into force on August 19, 2019, and is applicable from January 1, 2020. The BOFiP (French Official Tax Bulletin) also cites an amendment dated October 10, 2019, without specifying its entry into force. An amendment dated November 7, 2022, published in the Official Journal on April 29, 2025, is listed by impots.gouv.fr (the French tax authority's website) among the texts not yet in force. The usual order of precedence is: permanent home, center of vital interests, habitual residence, nationality. The text of the treaty should be consulted: it may differ from this framework.

What France continues to impose after departure

Once you are a non-resident, you are only taxed in France on your French-source income, subject to tax treaties. The sale of securities is generally not taxed, except for substantial shareholdings: more than 25% of the rights to profits of a company subject to corporate income tax and headquartered in France, held directly or indirectly, with the family group, at some point during the last five years. The levy is then 12.8%. It is 75% if the beneficiary is domiciled in a non-cooperative state or territory, regardless of the percentage. Capital gains on real estate are subject to a levy of 19%, to which social security contributions may be added depending on the country of residence: see our page on capital gains from securities for non-residents.

The year of departure: one or two statements

Filing declarations is mandatory for the year of departure.

1. Form 2042 includes your income from January 1st to the date of departure.
2. Form 2042-NR is required if you have French-source income taxable in France that remains after you leave. It will only include your French-source income taxable in France, from your departure date until December 31st.

In subsequent years, non-residents file their returns online. Paper returns are only accepted in exceptional circumstances.

Luxembourg side: declare your arrival

For stays of less than three months, France Diplomatie indicates free entry with a valid passport or national identity card. For longer stays, French citizens are treated as citizens of the European Union: they must register their arrival with the local municipality within 8 days, then apply for a registration certificate within 3 months, providing proof of sufficient resources, employment status, or enrollment in a training program. Working less than 10 hours per week is not sufficient to obtain this certificate for salaried employees. The guichet.lu portal adds, for the unemployed, proof of health insurance covering all risks in Luxembourg, and for students, proof of health insurance coverage. This page is undated: check before taking any action.

Numerical example (fictitious profile)

Situation. A fictitious Lyon-based business owner, who has been a tax resident in France for over ten years, holds 55,130 shares in his company. He is planning to relocate to Luxembourg in 2026. His shares are worth €1,200,000, representing an unrealized capital gain of €700,000.

Issue. He meets the exit tax requirements: at least six years of residency out of ten, 55% of profits, a total value of €1,200,000, and above €800,000 regardless of the threshold used. He doesn't know what leaving would cost, nor when to declare it.

Strategy. Before leaving, he calculates the tax, checks the deferment and sets the schedule for his tax returns.

Result. The tax liability amounts to €219,800: €89,600 in income tax (12.8 times the % tax bracket) and €130,200 in social security contributions (18.6 times the % tax bracket), representing 31.4 times the % tax bracket of the unrealized capital gain. Since the value of the securities is less than €2,570,000, the tax relief period is 2 years. With securities valued at €2,700,000, it would be 5 years. Without a deferral upon request, the 2074-ETD tax return must be filed in 2027. A deferral upon request must be requested before departure, with the deadline to be confirmed.

What changes depending on your situation

• The value of your securities determines the tax relief period.
• The automatic deferment depends on the list of non-cooperative states at your departure date.
• A previous contribution-sale alters the analysis.
• Your home, your business and your economic interests determine whether France remains your tax residence.

These points are examined on a case-by-case basis.