OD FLASH | Residence in Monaco and exercise of executive functions in France: tax domicile in France.

Marseille Administrative Court of Appeal, 16 January 2025, No. 23MA00735

In a ruling dated 16 January 2025, the Administrative Court of Appeal of Marseille reiterated that the exercise of executive functions in France by a Monegasque resident constitutes a determining criterion for tax residence in France and may result in liability for social security contributions.

In this case, following the death of her spouse in March 2016, the wife, who declared herself to be a Monegasque tax resident, was subject to income tax and social security contributions by the French tax authorities for the period from March to December 2016. The tax authorities, on the basis of Article 4B of the French Tax Code, have considered that the taxpayer was carrying out her main professional activity in France.

At the time, the taxpayer held several paid corporate functions in France:

• Chair of the supervisory board, then chair of the board of directors of a company listed on a regulated market, of which she also held nearly 56% of the capital.
• Chair of the board of directors and managing director of a French financial holding company that owned shares in the first company.

She also received survivor’s pensions paid by French pension organizations. Altogether, her French-source income was higher than her worldwide income, notably those from a securities account in Switzerland.

Following a ruling by the Nice Administrative Court[1] on 30 January 2023, which rejected her request for exemption from social security contributions, the individual filed an appeal.

The taxpayer argued that the activity carried out in France was accessory and that, moreover, the provisions of the tax treaty signed between France and Monaco prevented her from being subject to social security contributions in France.

The Marseille Administrative Court of Appeal rejected the individual’s appeal and confirmed the position of the French tax authorities under Article 4 B of the French Tax Code, which provides that a person is domiciled for tax purposes in France when they carry out a professional activity there, unless this activity is accessory.

The Court of Appeal thus held that:

• The functions exercised in France necessarily implied a presence and an activity in France, in particular through participation in meetings;
• The individual did not provide any evidence demonstrating the exercise of her functions from Monaco;
• Given the nature of the functions and the substantial remuneration, the activity exercised in France could not be qualified as incidental.

Finally, the Court reiterated that the tax treaty signed between France and Monaco does not prevent the taxation of social security contributions as long as the taxpayer is domiciled in France for tax purposes under domestic law.

Therefore, the fact that the taxpayer resides in Monaco does not prevent the characterisation of a tax residence in France due to a main professional activity carried out there.

In the context of an international professional activity, it is crucial to carry out an analysis of tax residence to anticipate the related tax implications.

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[1] Nice Administrative Court of Appeal, 30 January 2023, No. 2003804