Tax Residency in France
1. Criteria for Determining Tax Residency in France
According to Article 4A of the French Tax Code, an individual is considered a tax resident in France if they meet any of the following criteria:
- Domicile in France: An individual is considered domiciled in France if they have their permanent home in the country. This is typically determined by factors such as the location of their family, social ties, and professional activities.
- Principal residence in France: An individual is considered to have their principal residence in France if they spend more than 183 days in the country during a calendar year.
- Professional activity in France: An individual is considered to have their professional activity in France if they carry out their main professional activity in the country. This includes both salaried employment and self-employment.
2. Impact of International Tax Treaties on Tax Residency
France has entered into numerous tax treaties with other countries to prevent double taxation and promote cross-border trade and investment. These treaties may modify or provide exceptions to the standard criteria for tax residency as defined in domestic law.
One of the key provisions in these treaties is the "tie-breaker" rule. This rule is used to determine which country has the primary right to tax an individual who is considered a resident of both countries under their respective domestic laws. The tie-breaker rule typically considers factors such as the individual's permanent home, family ties, and economic interests.
For example, the France-United States tax treaty provides that an individual who is considered a resident of both countries under their respective domestic laws will be deemed a resident of the country where they have their permanent home. If the individual has a permanent home in both countries, the tie-breaker rule will consider factors such as their family ties and economic interests to determine their primary residence.
The treaty-specific modifications and exceptions to the standard criteria for tax residency are designed to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between France and the other treaty partner to facilitate tax compliance and enhance economic cooperation between the two countries.
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