Leaving France for the United Arab Emirates: exit tax, tax residency and procedures

Moving to the Emirates is not enough to escape the French tax system. The tax authorities examine three criteria, and only one is sufficient to maintain your tax status in France. If you hold securities, the exit tax may apply upon departure: it targets taxpayers who have been tax residents of France for at least six of the ten years preceding the transfer, who hold at least 50% of the profits of a company or securities whose total value reaches the threshold of €800,000 (the exact threshold is specified below).

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.

Be wary of outdated sources. Some pages of administrative doctrine, which have not been updated, cite different thresholds and do not reflect the 2019 reform.

Payment deferral: automatic or upon request

A payment deferral is available. It is sometimes automatic, sometimes it must be requested. When it is not automatic, the request must be submitted with form 2074-ETD, no later than 90 days before departure, for transfers that took place since 22/11/2019.

The official documents don't quite agree. The information sheet states "no later than 90 days before this transfer," a phrase repeated in several places in the instructions. The instructions also state "within the ninety days preceding the transfer," which can be interpreted as a 90-day window rather than a deadline. The discrepancy is real. If in doubt, the application should be submitted no later than 90 days before departure, and this point must be settled before the departure date, not after.

Is a deferment automatic for your departure to the Emirates? The answer depends on your situation and is assessed on a case-by-case basis. We cannot provide a definitive answer here.

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, the securities are sold, bought back by the company, cancelled or liquidated.

Declare the exit tax

• Without a deferment on request, 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 no later than 90 days before departure.
• According to the instructions, this declaration is only available in paper format. Check the filing method applicable to your departure year.
• In case of deferment, annual monitoring is mandatory: 2074-ETS monitoring declaration, or 2074-ETSL simplified if nothing happened during the year.

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 guarantee your safety. If your home, your business, or the center of your economic interests remains there, only one criterion is necessary. No single number of days is sufficient to resolve the issue.

Once you are a non-resident, you are only taxable in France on your French-source income, subject to tax treaties.

If both France and the Emirates consider you a resident

When two states each consider you a resident, the tax treaty makes the final decision. Its definition of resident takes precedence over domestic tax domicile. According to administrative doctrine, the usual order of precedence is as follows: permanent home, center of vital interests (closest personal and economic ties), habitual residence, nationality. The text of each treaty should be consulted, as it may differ from this framework. For the Franco-Emirati treaty, see our dedicated page.

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 only required if you retain French-source income taxable in France after leaving the country. It will then only include your French-source income taxable in France, from your departure date to December 31st.

If you still have income from French sources, the non-resident tax office will take over your case. In subsequent years, non-residents file their taxes online and complete the sections of form 2042. Paper forms are only accepted in exceptional circumstances.

Steps to take before leaving

• Report your new address to the public finance center.
• Ask your bank if you need to close any accounts or products.
• Check with the tax authorities in your country of residence.
• Address your health insurance needs, which the official procedures page also mentions.

Numerical example (fictitious profile)

Situation. A fictitious Lyon-based business owner, who has been a tax resident in France for over ten years, holds 60,130 shares in his company. He is planning to move to the United Arab Emirates in 2026. His shares are worth €3,000,000, representing an unrealized capital gain of €2,000,000.

Issue. He meets the exit tax requirements: at least six years of residency out of ten, ownership of at least 50% of the profits, a total value of €3,000,000, exceeding the €800,000 threshold regardless of the applicable limit. He doesn't know what leaving would cost him, nor how long it would take to receive a tax refund.

Strategy. Before leaving, he calculates the tax, checks if the deferral is automatic or needs to be requested for his destination, and prepares his tax return.

Result. The tax liability amounts to €628,000: €256,000 in income tax (12.8 times the % tax bracket) and €372,000 in social security contributions (18.6 times the % tax bracket), representing 31.4 times the % tax bracket of the unrealized capital gain. Since his securities exceed €2,570,000, the tax relief period is 5 years. With securities valued at €2,400,000, it would be 2 years. Without a deferral upon request, form 2074-ETD must be filed in 2027. With a deferral upon request, it must be filed no later than 90 days before departure.

What changes depending on your situation

• The value of your securities on the date of the transfer determines the tax relief period.
• The share of profits you hold determines whether the first test is applied.
• Whether or not the suspension is automatic depends on your situation.
• The French-source income you retain determines your tax treatment in France.
• 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. No result can be announced without this examination.