OD FLASH | Impatriate regime: the judge reiterates that the favorable regime must be interpreted strictly

Paris Administrative Court of Appeal, 5th Chamber, 6 March 2025, No. 23PA02864

In a ruling dated 6 March 2025, the Paris Administrative Court of Appeal reiterated the importance of the criterion of main professional activity when determining the tax residence of a taxpayer engaged in cross-border activity. The Court also emphasized the requirement of being effectively hired from abroad in order to benefit from the impatriate tax regime.

In this case, the taxpayer had initially been hired by a French company in 2006 to serve as “Managing Director Spain”, and subsequently carried out his duties within the Spanish subsidiary of the group pursuant an amendment to his employment contract signed in 2007. He had transferred his tax residency to Spain.

Following the closure of the Spanish subsidiary in 2012, he was reassigned to the group’s headquarters in Paris. As of 2014, he had been responsible for developing a network of reseller partners in France, Spain, and other territories. His travel and accommodation expenses in France continued to be covered until the end of 2014. Moreover, the latest amendment to his employment contract, dated 7 March 2014, provided that his functions could be performed either in Madrid or at the French headquarters.

Although the taxpayer claimed to have carried out his professional activity mainly in Spain between January and October 2014, and in France for the rest of the year, the French tax authorities considered that the activity had been primarily exercised in France throughout the entire year, without distinction. Accordingly, they considered the totality of the taxpayer’s remuneration received between 2014 and 2016 was taxable in France.

Following a judgment[1] by the Paris Administrative Court dated 6 June 2023, which rejected their claim for relief, the taxpayer filed an appeal.

The taxpayer argued that:

• The salary received between January and October 2014 should have been taxed in Spain rather than in France, as the attachment of his employment contract to the French office had not changed his activity, which was mainly carried out in Spain, as evidenced by frequent travels between the two countries;
• The impatriate regime provided for under Article 155 B of the French Tax Code should apply to the income received from November 2014 to December 2016.

The Administrative Court of Appeal rejected both claims and upheld the taxation of the income in France, holding that the professional activity had been predominantly carried out on French territory.

In addition, the Court noted that the taxpayer did not meet the conditions of Article 155 B of the French Tax Code, as he could not be considered to have been called from abroad to take up employment in a company established in France.

This decision is a reminder that the legal criteria governing access to the impatriate regime are to be interpreted strictly, and that an effective recruitment from abroad is essential to qualify for the tax benefits associated with the regime.

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[1] Paris Administrative Court, 2^nd chamber, 6 June 2023, No. 2101020