French Exit Tax: who is concerned and what you need to prepare

Transferring your tax residence out of France can trigger a specific tax on latent capital gains attached to certain shareholdings: the French Exit Tax. The regime, often seen as technical and off-putting, affects a limited number of taxpayers but calls for careful preparation well ahead of the move. VV Avocat, based in Toulouse, advises executives, investors and entrepreneurs facing these issues.

What is the French Exit Tax?

The French Exit Tax is a tax on unrealised capital gains on certain securities, charged when a taxpayer transfers their tax residence out of France. In other words, the authorities tax gains that have not yet been realised, as if the departure were a deemed disposal of the securities.

The regime was introduced in 2011 and substantially reformed in 2019. Its purpose is to stop taxpayers from moving their residence out of France shortly before selling securities with large gains in order to escape French tax.

Legal framework

The Exit Tax is governed by article 167 bis of the French Tax Code (CGI). The practical rules are set out in the administrative guidelines published in the official tax bulletin (BOFiP, BOI-RPPM-PVBMI-50).

The 2019 Finance Act narrowed the scope of the regime for departures on or after 1 January 2019: deferral on request now only applies to moves to a non-cooperative jurisdiction or to a non-EU State that has not concluded administrative assistance and tax recovery conventions with France, and the period after which the deferred tax is discharged was cut from 15 years to 2 or 5 years.

The French tax authorities (DGFiP) summarise the regime and the filing steps on their page “Je quitte la France, suis-je concerné par l’Exit Tax ?” (I am leaving France: does the Exit Tax apply to me?), updated on 10 March 2026, and in the notice to Form 2074-ETD.

Who is affected?

Three cumulative conditions must be met for the Exit Tax to apply:

• French tax residence for at least six of the ten years before the departure. Someone who has lived in France for less than six years is therefore not affected (the period is counted from date to date).
• Transfer of tax domicile out of France within the meaning of article 4 B of the French Tax Code.
• Ownership of qualifying securities on the date of departure, reaching one of the thresholds set by law.

If any of these conditions is not met, the Exit Tax does not apply.

Qualifying assets and thresholds

The Exit Tax applies to three categories of assets:

• Shares, securities and other equity interests held directly or indirectly by the taxpayer (shares, partnership interests, bonds and so on);
• Claims arising from an earn-out clause (deferred or contingent consideration);
• Capital gains under a tax deferral (report d’imposition), for example after a contribution of shares to a holding company, which become taxable on departure.

Securities held in a PEA or PEA-PME (French equity savings plans) are notably excluded.

Two alternative thresholds apply, assessed on the date of departure and taking into account securities held by the whole tax household:

• either the aggregate value of the portfolio exceeds €800,000 on the day of departure, in which case the whole portfolio is taxed;
• or the taxpayer holds, directly or indirectly, at least 50% of the profits of a company, in which case that shareholding is taxed.

Unrealised capital gains are the difference between the market value of the securities on the day of departure and their acquisition cost.

How is the tax calculated?

Unrealised capital gains assessed on the date of departure are taxed under the ordinary rules for capital gains on securities. Two regimes are available:

• The flat tax (prélèvement forfaitaire unique, PFU): 12.8% income tax plus social contributions of 17.2% for a departure in 2025 (30% in total) or 18.6% for a departure in 2026 (31.4% in total);
• The progressive income tax scale, on express election by the taxpayer (box 2OP of Form 2042), plus social contributions. The election is global: it covers all of the household’s investment income and capital gains for the year of departure.

Holding period allowances only apply to securities acquired or subscribed before 1 January 2018, and only if the taxpayer elects for the progressive scale.

In practice, the calculation follows three steps: take the value of each holding on the day of departure (last known price or average of the last 30 prices for a listed security, estimated market value for an unlisted one); deduct its acquisition cost or value; apply the rate to the total of the gains obtained. An unrealised loss on one holding cannot be set off against unrealised gains on the others.

Filing obligations

Taxpayers who transfer their tax residence out of France and fall within the scope of the Exit Tax must file two specific forms:

• Form 2074-ETD, which reports the unrealised capital gains, earn-out claims and deferred gains and calculates the tax due. It is available on paper only;
• Form 2074-ETS (Form 2074-ETS3 for departures since 2014, or its simplified version, Form 2074-ETSL), used to follow up the tax in subsequent years.

Form 2074-ETD is filed in the year after the departure, together with the income tax return for the year of departure (Forms 2042 and 2042 C), with the tax office that covered the taxpayer’s former home in France. Where deferral must be requested (a move to a State that does not qualify for automatic deferral), Form 2074-ETD and the proposed guarantees must reach the tax office no later than 90 days before the transfer of residence.

In the following years, the amount of tax still deferred is reported in box 8TN of Form 2042 C. The notice sets out how often the follow-up form is due: if the taxpayer only holds unrealised gains, Form 2074-ETS3 is filed only for the year following an event; if they also hold earn-out claims or deferred gains, it is filed every year (Form 2074-ETSL may replace it in years without an event). Any event that ends the deferral (sale, redemption or cancellation of the securities) or leads to a discharge is reported on Form 2074-ETS3 filed in the year after the event, together with Forms 2042 and 2042 C and supporting documents.

Deferral of payment

One of the key features of the Exit Tax is the deferral of payment, which allows the taxpayer to postpone payment until a triggering event occurs. Two regimes apply, depending on the destination:

• Automatic deferral when moving to a European Union Member State, or to another State or territory that has concluded with France both an administrative assistance convention against tax fraud and evasion and a tax recovery assistance convention, and that is not on the list of non-cooperative jurisdictions. The list published in the Form 2074-ETD notice includes, for example, the United Kingdom, the United States and Norway. No guarantee or request is required.
• Deferral on request in all other cases (non-cooperative jurisdiction, or State lacking one of these two conventions): the taxpayer files Form 2074-ETD no later than 90 days before departure, appoints a tax representative in France and offers guarantees equal to 12.8% of the declared gains and claims for the income tax portion. Otherwise, the tax is payable immediately.

For a French national, moving to Monaco is not a transfer of tax domicile out of France: the taxpayer remains a French tax resident. During the deferral period, follow-up is carried out through Form 2074-ETS3 or 2074-ETSL and box 8TN of Form 2042 C (see above).

Without deferral, the tax is paid with the income tax for the year of departure, and a refund can then be claimed if the securities are still held at the end of the statutory period.

Events affecting the Exit Tax

Several events during the deferral period can change whether the Exit Tax has to be paid:

• Sale, redemption, repayment or cancellation of the securities ends the deferral and makes the tax payable. Where the gain actually realised is lower than the unrealised gain declared on departure (or in the event of a loss), the tax is partly discharged.
• A gift of the securities discharges the tax on the unrealised gain where the donor lives in a State that qualifies for automatic deferral. Elsewhere, discharge requires showing that the main purpose of the gift is not to avoid tax.
• A return to France discharges the tax (or triggers a refund if it was paid) for securities still held on the date of return.
• A further move from a State that qualifies for automatic deferral to one that does not ends the automatic deferral, unless deferral is requested no later than 90 days before that move.
• The death of the taxpayer also leads to discharge.

Discharge of the Exit Tax

For departures since 1 January 2019, the deferred tax is discharged at the end of a period cut from 15 years to 2 or 5 years, depending on the aggregate value of the securities on the date of departure:

• After two years of residence outside France where that value is below €2.57 million;
• After five years where it exceeds that threshold.

Discharge requires the securities to be kept until the end of the period (except after an exchange or contribution carried out under the conditions laid down by law, in which case the securities received must be kept). Where there was no deferral, the tax paid for the year of departure is refunded on the same conditions.

In practice, the expiry of the period is reported on Form 2074-ETS3 filed the following year with Forms 2042 and 2042 C, together with evidence that the securities were still held on that date.

Illustrative example (hypothetical)

A French business owner moves his tax residence to Lisbon. He holds 100% of a French SME valued at €1.5 million on the day of departure, for a historical acquisition cost of €100,000. The unrealised capital gain is €1.4 million.

For a departure in 2026, the Exit Tax is calculated at the 31.4% PFU rate: €179,200 of income tax (12.8%) and €260,400 of social contributions (18.6%), i.e. €439,600. For a departure in 2025, the overall rate would have been 30%, i.e. €420,000. As Portugal is an EU Member State, deferral of payment is automatic and no guarantee is required.

As the value of the securities on the day of departure (€1.5 million) is below €2.57 million, the discharge period is two years. If the business owner keeps his shares for those two years, he reports the expiry of the period on Form 2074-ETS3 filed the following year and the deferred tax is discharged. If he sells the shares before then, the deferred tax becomes payable, and it is partly discharged if the gain actually realised is below €1.4 million.

This example is purely hypothetical and does not take into account the election for the progressive scale, any allowances or bilateral tax treaties, which may change the final tax.

Can the Exit Tax be avoided?

There is no general exemption: once the three conditions are met, tax on the unrealised gains is assessed. However, four options provided by law can reduce or neutralise the cost:

• Check the thresholds before leaving: if the aggregate value of the securities does not exceed €800,000 and no holding reaches 50% of a company’s profits, the Exit Tax does not apply. The valuation must be documented.
• Choose a destination that qualifies for automatic deferral (European Union, or a State that has concluded the administrative assistance and recovery conventions with France and is not on the list of non-cooperative jurisdictions): no tax is paid on departure.
• Keep the securities until discharge: after two years (securities with an aggregate value below €2.57 million) or five years above that, the deferred tax is discharged without ever having been paid.
• Plan transactions ahead: a sale before the transfer of residence is taxed under ordinary French rules; a sale afterwards ends the deferral. A gift made after departure, by contrast, can lead to discharge, subject to conditions (no mainly tax-driven purpose where the State of residence does not qualify for automatic deferral). The timing of transactions is therefore decided before departure.

When to consult a French tax lawyer

Preparation for a departure that falls within the Exit Tax should start well before the actual transfer of tax residence. A French tax lawyer can:

• check whether the conditions for the Exit Tax are met;
• estimate the market value of the securities and document the valuation;
• prepare Forms 2074-ETD and 2074-ETS;
• secure the deferral of payment and set up any guarantees required;
• coordinate the Exit Tax with the applicable bilateral tax treaty and with the determination of your tax residence (for example the France-Portugal treaty for a move to Portugal);
• organise the assets you keep in France (real estate, companies) as part of your wealth tax planning and prevent the risks of keeping a second home in France;
• handle the annual follow-up throughout the deferral period.

Early tax advice often makes it possible to organise your assets efficiently before departure and to avoid filing errors that lead to disputes. VV Avocat, based at 9 allées François Verdier in Toulouse, advises French and international clients on Exit Tax and expatriate tax matters.