France to replace ‘Exit Tax’ on capital gains, target fiscal cheats

French President Emmanuel Macron waits for the arrival of Armenian Prime Minister Nikol Pashinyan (not seen) at the Elysee Palace in Paris, France, 14 September 2018. REUTERS

Paris (Reuters): France will abolish a tax imposed on the capital gains of top earners and entrepreneurs who leave France and sell their assets with a more-targeted levy designed to deter tax optimisation, a finance ministry spokesman said on 15 September.

France imposed the so-called “Exit Tax” in 2011 during the presidency of Nicolas Sarkozy. It required individuals who held assets in stocks and bonds of more than 800,000 euros or at least 50% of the capital of a company to pay capital gains on assets sold up to 15 years after they left France.

Its aim was to stop individuals temporarily changing their tax domicile in order to skirt French taxes but pro-business President Emmanuel Macron says it damages France’s attractiveness as an investment destination.

A finance ministry spokesman said the new “anti-abuse mechanism” would concern asset sales made up to two years after an individual leaves France.

“The Exit Tax as it is today will be scrapped,” the ministry spokesman said. “The new scheme will target asset sales made shortly after leaving France - two years - to stop people moving back and forth over a short period to optimise tax efficiencies on capital gains.”

The new rules will come into effect on 1 January 2019. The Government is due to present its budget to Parliament later this month.

The broad details were first reported on Saturday by business daily Les Echos.

“The text is not yet finalised,” the newspaper quoted one source within Parliament’s finance committee as saying.