A Universal Tax for French Residents in Tax Havens
The newly adopted amendment by the National Assembly adds another layer to the taxation of French residents abroad, specifically targeting those who have chosen to settle in countries with much lighter taxation. This initiative aims to curb tax exile while establishing a ‘fairer tax framework for French taxpayers’, whether they reside in France or abroad.
The recently adopted amendment modifies the French General Tax Code to establish a taxation system that applies to French nationals who have resided in France for at least three years in the past ten years and have subsequently moved their tax residence to a country with a taxation rate more than 50% lower than that of France.
These individuals, although living outside of France, will now be subject to additional taxation on their income from work, capital, and assets. However, they will receive a tax credit equivalent to what they have already paid in their country of residence. This measure directly combats tax exile to tax havens and aims to ensure that the wealthiest taxpayers cannot avoid contributing to the national budget simply by relocating to low-tax countries.
An Immediate Impact on Residents Abroad and Crypto Sector Players
For French residents abroad, particularly in jurisdictions known for their favorable tax regimes – often favored by crypto investors – this new regulation could disrupt the management of their assets. French residents in countries like Portugal or Dubai, where crypto profits are lightly or non-taxed, will now have to take this new universal taxation into account.
However, one aspect of the amendment could save them. Since it ‘respects all of the hundreds of tax conventions already signed by France with other countries,’ this amendment would ultimately have little impact, as France has already signed tax conventions with the majority of countries worldwide.
This comes amidst an increasingly restrictive fiscal environment for crypto holders. Concurrently, with the planned increase of the Flat Tax from 30% to 33% in 2025, the French government is exerting more pressure on income from financial investments, including crypto gains. This dual measure – both national and international – highlights France’s efforts to combat tax evasion and preserve its tax revenue.
Fighting Tax Dumping in Europe and Beyond
This new vote is part of a broader approach to limit the effects of tax dumping between states. In an environment where capital freely flows across borders, this tax competition is seen by some as an obstacle to tax justice. With this new taxation, France seeks to align its fiscal policies with those of other European countries, such as Sweden or Germany, which already implement similar mechanisms.
The idea is also to strengthen France’s voice in international negotiations for global tax harmonization, particularly within the European Union, to avoid a race to the bottom in taxation that inevitably favors the wealthiest taxpayers and multinational corporations at the expense of the lower and middle classes.
Taxation Targeting Digital Assets and Capital Gains
The implications for investors in the crypto sector should not be underestimated. While this new legislation mainly focuses on traditional income and general capital gains, it also directly affects investors in digital assets. With the upcoming Flat Tax increase and the universal taxation targeting tax havens, some French individuals investing in cryptocurrencies abroad will likely need to reassess their tax strategies to optimize their gains. Favorable crypto regimes in certain foreign countries may lose their appeal as a result.
Therefore, 2025 could represent a turning point in the management of digital assets, especially for those seeking to benefit from more lenient tax regimes outside of France.
