France is modifying rather than removing its “exit tax” on capital gains made by business owners or investors, maintaining a more limited version to target those trying to optimise their taxes.
In an interview with Forbes in May, French president Emmanuel Macron said that he would remove the so-called exit tax as it was damaging for France's image as a place to do business.
The tax requires those entrepreneurs or investors who hold more than €800,000 in financial assets or at least 50 per cent of a company to pay capital gains up to 15 years after leaving France.
However, Mr Macron has now decided to introduce a new “anti-abuse” tax targeted at assets sold within two years of someone leaving the country.
A finance ministry spokesperson on Saturday confirmed “the removal of the exit tax as it existed and its replacement by a targeted anti-abuse device to combat tax optimisation”.
“The new system will henceforth target divestments occurring shortly after leaving France – two years – to avoid letting people make short trips abroad in order to optimise tax efficiencies,” added the spokesperson.
Mr Macron had suggested a full removal was coming.
"Regarding foreign companies and the exit tax, I want to suppress it. The exit tax sends a negative message to entrepreneurs in France, more than to investors. Why? Because it means that, beyond a certain threshold, you are penalised if you leave," Mr Macron had said to Forbes.
“I don’t want any exit tax. It doesn’t make sense. People are free to invest where they want. I mean, if you are able to attract [investment], good for you, but if not, one should be free to divorce,” added the French president.
The new tax will come into effect at the start of next year, said the government spokesperson, adding the original scheme had been “an administrative headache for taxpayers.” – Copyright The Financial Times Limited 2018