Exit tax: which securities and rights are concerned, and how are they valued?

The exit tax applies to unrealized capital gains on equity interests, securities, or fractional ownership rights as defined in Article 150-0 A of the French General Tax Code (CGI): shares and units in French or foreign companies, usufruct or bare ownership rights, and units in SICAVs and FCPs. The instructions for form 2074-ETD specifically exclude securities held in a PEA (equity savings plan) or PEA-PME (equity savings plan for SMEs). For these capital gains to be taxed, you must have been domiciled in France for at least six of the ten years preceding your departure and exceed one of two thresholds: at least 50% of a company's profits, or a total portfolio value of €800,000 (the instructions state "greater than" and the information sheet "at least"; the official pages differ, so you should verify). Unrealized capital losses are not taken into account.

Titles and rights in the field

Notice 2074-ETD (section IA1) aims to:

• the social rights, securities, shares or dismembered rights mentioned in paragraph 1 of section I of article 150-0 A of the CGI; ;
• shares of French or foreign companies, whether or not they are subject to corporation tax; ;
• the rights relating to these securities, in usufruct or in bare ownership; ;
• securities representing the same values, in particular SICAVs and FCP units; ;
• for transfers from 1 January 2019, the unrealized capital gains on the shares or stocks referred to in Article 244 bis A of the CGI.

What the instructions exclude

She writes that the following are "notably" excluded:

• securities held in a PEA or a PEA-PME; ;
• shares in companies whose assets consist primarily of real estate, falling under article 150 UB of the French General Tax Code (CGI); ;
• units of debt mutual funds with a term at issuance of more than five years.

The word "notably" means that the list is not presented as exhaustive. Regarding real estate-heavy companies, the information sheet on impots.gouv.fr and the explanatory notes do not agree: the information sheet indicates that the scheme now applies to shares of real estate-heavy companies subject to corporation tax on the date of transfer, while the explanatory notes exclude them in the case of Article 150 UB. This page does not clarify the relationship between them: have the treatment of your shares confirmed. This page does not address life insurance contracts or holding structures that it does not mention: these are examined on a case-by-case basis. For the plan itself, see PEA and departure from France: what happens to the plan?.

The two thresholds, which are alternative

The residency requirement is in addition to the two others: at least six of the ten years preceding the transfer. It is detailed in Exit tax: six years out of ten, tax relief and return.

Regarding the value threshold, two official documents differ. The explanatory note states "greater than €800,000"; the information sheet on impots.gouv.fr states "at least €800,000". This page does not provide a definitive answer, and you should verify with the source: if your portfolio is close to this amount, have it confirmed before leaving.

Indirect ownership: multiplying shareholdings

The guidance note clarifies that indirect ownership refers to ownership through one or more intermediaries, and that, to determine the minimum threshold of 50 %, the product of the shareholdings must be calculated. For example: Ms. X holds 45 % of company A, and Mr. X holds 20 % of a company that holds 80 % of company A. Together, they hold 45 % + 20 % x 80 % = 61 % of the rights in company A, and these shares fall within the scope of the exit tax.

The test is assessed with members of the tax household.

How is the value determined?

The unrealized capital gain is the difference between this value and the purchase price or value. This page does not address the choice between the two possible values of listed securities: have it confirmed, as it may affect the tax base. The income tax rate is 12.8% (%) at the flat rate, with an option for the progressive tax scale by checking box 2OP; social security contributions depend on the year of departure and are not calculated here.

Unrealized losses do not count

The information notice states that unrealized losses are not covered by this provision: they cannot be offset against unrealized gains on other investments, nor against realized capital gains or receivables, and they cannot be carried forward. In a portfolio that mixes unrealized gains and losses, losses are not deducted from gains. Shares, units in mutual funds and investment funds, and unlisted securities carry a risk of capital loss.

Beyond securities: deferred receivables and capital gains

Two other categories are included in the declaration. Receivables arising from a price adjustment clause are taxable if you hold them on the transfer date and if the six-year out-of-ten condition is met; the explanatory notes value them at their fair market value on the transfer date, which you are responsible for determining. In this section, the explanatory notes do not specify a threshold for these receivables. Deferred capital gains, such as those from a contribution of securities, become taxable due to the transfer, which terminates the deferral. See Exit tax and tax deferral (150-0 B ter).

Titles and evaluation: numerical example (fictitious profile)

Situation. An investor who has been a resident of France for over ten years is preparing to leave the country. Her portfolio, excluding her French equity savings plan (PEA), includes listed shares (purchase price €300,000, value €560,000 at the last closing price, or €520,000 on average over the last 30 closing prices), mutual fund units worth €180,000 (purchased for €210,000), and unlisted securities whose market value she estimates at €150,000 (purchased for €50,000). Her €400,000 PEA is treated separately: the policy document excludes these securities from the scope of the exit tax.

Issue. She wonders if the PEA counts in the value test (the notice does not say in what is read here), if the loss on the FCP is deducted, and what changes in the way of evaluating listed securities.

Strategy. It draws up an inventory title by title, excludes the PEA and calculates the base according to each of the two possible values for listed securities.

Result. Outside of the PEA (French equity savings plan), the portfolio is worth €890,000 at the last closing price, or €850,000 using the average price: in both cases, it exceeds €800,000, regardless of the interpretation of the threshold. With the PEA, it would be worth €1,290,000 or €1,250,000: the conclusion is the same, but the method used to treat the PEA in the valuation test needs to be confirmed. Unrealized capital gains amount to €360,000 (€260,000 for listed shares and €100,000 for unlisted shares); the €30,000 capital loss on the mutual fund is disregarded. Income tax at the flat rate is €46,080. Using the average of the last 30 closing prices, the capital gains fall to €320,000 and the tax to €40,960, a difference of €5,120. The PEA (equity savings plan) is excluded from the capital gains calculation, as the policy document specifically excludes its securities.

Securities concerned: what changes depending on your situation

• The nature of the securities (listed, unlisted, funds) determines the valuation method.
• The method of ownership, direct or through intermediary companies, changes the 50 % test.
• The composition of the tax household is taken into account in the calculation of the contribution.
• A previous contribution-sale, an additional price payment to be received or a division of ownership adds lines to the declaration.

These points are examined case by case, on the notice for the year of departure.