OD FLASH | International mobility and non-compete agreement : tax regime

Court of cassation, 9th chamber, December 19, 2025, no. 24PA01120

In this case, an employee who was a French tax resident entered into a contractual termination agreement on December 4, 2014, accompanied by a non-compete clause lasting twelve months, before transferring his tax residence to Morocco, thereby making this clause applicable in several territories.

The employment contract ended on January 13, 2015. The taxpayer transferred his tax residence to Morocco on January 4, 2015.

Following a document-based audit, the tax authorities considered that these sums constituted French-source salaries and wages taxable in France, pursuant to Article 164 B of the French General Tax Code (CGI). This analysis was confirmed by the Paris Administrative Court (TA Paris, Jan. 31, 2024, No. 2127704), on the grounds that the disputed compensation originated from the employment contract performed in France.

On appeal, the CAA overturned this ruling. It pointed out that, although the non-competition compensation was in the nature of a salary, it could not be regarded as remuneration for work performed prior to the termination of the employment contract. It constituted specific consideration for a non-competition obligation, arising only from the termination of the contractual relationship.

Consequently, the taxable event must be assessed in relation to the period during which the non-competition obligation is actually performed, and not in relation to the period of performance of the initial employment contract.

Since the taxpayer was resident in Morocco for tax purposes at the time the compensation was paid, it cannot be classified as income from an activity carried out in France within the meaning of Article 164 B of the CGI.

It follows that, when the beneficiary of non-compete compensation is resident for tax purposes outside France during the period of enforcement of the corresponding obligation, this compensation is not subject to French taxation, as there is no territorial link with an activity carried out in France.