Confusion About Being a “Non-French Fiscal Resident”

We are American citizens and residents, and would like to move our primary residence back to France. We each have a French carte de résident. You have provided us with a lot of information and we are planning to qualify as residents based on time spent in France this year.

I just read your newsletter and am confused by a statement on the topic of capital gains. When you refer to “non-French fiscal residents” do you mean people who are not fiscal residents of France or do you mean people who are fiscal residents of France but are not French?

It is true that the term could be understood both ways; what I meant was people who are not fiscal residents of France. Your question also raises a much bigger issue, however, concerning the current debate about linking fiscal responsibility and possibly liability to the simple fact of being a French citizen even if the citizen in question does not live in France.

This situation is very familiar to American expatriates, who have long been liable for US taxes even though they live abroad. French nationality currently does not entail fiscal obligations. What determines almost all fiscal obligations in France is residency, or “domicile,” as discussed earlier in this column – i.e., where “home” is; where you sleep most of the time, where you keep your most personal things. So regarding tax matters I just distinguish between those who live in France most of the time and those who do not.

If the day ever comes when French nationality starts to play a role in French taxation, I will let people know – and I will be a lot more careful with the wording I use to discuss this distinction. The current administration is talking about making such a change, since it is feared that many wealthy French people are planning to move out of France because they think the new administration’s fiscal policy is confiscatory for people of high net worth. The reasoning behind any such proposal would be that if moving out of France makes no difference to whether rich people are taxed, this should discourage them from moving.

There is also an element of concern for lower-income people residing in France, since such a policy would keep their taxation level unchanged.

I am not qualified to evaluate the chances of this change being made, but I can state that it would be an earthshaking move, since it goes against French logic and the tradition that residency supersedes nationality. To put it another way: France believes that loyalty and allegiance to France is measured by where your feet take you, and that there are more benefits than liabilities to living in France, since the level of protection exceeds its cost. I am not saying this statement is true, but it does reflect the logic that the system follows.

Nevertheless, we should remember that in recent years this traditional French belief has been eroded by globalization, which has brought a more “Anglo-Saxon” way of reasoning. Therefore, even with a Socialist administration I do not dismiss this possibility as incompatible with France.

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