Tax residence and international taxation
Tax residence is the cornerstone of international taxation. It determines the country in which a taxpayer is taxed, the extent of its tax obligations and the application of international tax treaties.
In a context of increased mobility of people and capital, situations of tax residence are increasingly complex: expatriation, impariation, double residence, international telework, leaders of foreign groups, families with interests in several states.
Poor assessment of tax residence can have major financial consequences, including heavy international tax adjustments. Accompaniment by a lawyer specializing in tax residence and international taxation is therefore essential.
What is tax residence?
Tax residence refers to the country in which a person is considered to be a resident in the fiscal sense and therefore subject to tax in accordance with the rules of that State.
The criteria for tax residence in French law
Under French tax law, a person is considered a tax resident in France when he or she meets at least one of the following criteria:
- home or main place of residence in France;
- main professional activity in France;
- centre of economic interests located in France.
These criteria are subject to a thorough factual assessment by the tax administration.
Tax residence and international taxation: why is this a risk issue?
Global or territorial taxation
Tax residence determines the extent of taxation:
- a French tax resident is taxed in principle on all his world income;
- a non-resident is taxed solely on his or her income from French sources.
Misqualification can lead to double taxation or even taxation in several states simultaneously.
Tax dual residence situations
It is not uncommon for a taxpayer to be considered a tax resident by two different states.
The role of international tax treaties
International tax treaties, based largely on the OECD model, are used to determine dual residence situations using hierarchical criteria:
- permanent home;
- centre of vital interests;
- place of usual residence;
- nationality.
The interpretation of these criteria requires sophisticated legal expertise and a perfect knowledge of administrative and litigation practice.
Impact of tax residence on international taxation
Tax residence and income tax
Tax residence conditions:
- taxation of international professional income;
- tax treatment of dividends, interest and capital gains from foreign sources;
- whether or not international tax credits are charged.
Tax residence and taxation of assets
Tax residence plays a key role in:
- Property Tax (IFI);
- taxation of immovable property held abroad;
- taxation of international heritage structures;
- taxation of capital gains.
Fine analysis is essential to secure the holding and structuring of the international heritage.
Tax residence and international succession
In the case of inheritances and donations, the tax residence of the deceased, the donor and the heirs shall condition:
- the State competent to tax transmission;
- taxable base;
- application of inheritance tax treaties.
Poor anticipation can lead to confiscatory taxation for heirs.
Reporting obligations related to international tax residence
Tax residence carries strict reporting obligations, including:
- reporting of bank accounts held abroad;
- reporting of life insurance contracts outside France;
- Specific obligations related to foreign trusts and entities;
- International income tax returns and gains.
Failure to comply with these obligations exposes the taxpayer to very high financial penalties, even in the absence of fraud.
Cabinet expertise Edouard Pruvost in tax residence and international taxation
Strategic and personalized support
The Edouard Pruvost Cabinet supports its clients on all issues related to tax residence and international taxation:
- determining and securing tax residence;
- accompanying expatriations and impariations;
- management of dual residence situations;
- international heritage and professional structure;
- Declarative compliance.
Each situation is analysed individually, taking into account the customer's personal, professional and heritage realities.
Recognized expertise in international tax control and litigation
The firm regularly intervenes in:
- tax controls on tax residence;
- procedures for requalification by the administration;
- international tax disputes;
- negotiations with the French and foreign tax authorities.
The aim is to secure the customer's situation and to effectively defend his interests.
Why use a lawyer in tax residence and international taxation?
Tax residence is a highly sensitive subject, at the heart of strategies to combat tax evasion in states.
Using a specialized lawyer allows you to:
- anticipate the risks associated with international mobility;
- secure an expatriation or return to France;
- avoid double taxation;
- Legally structure its international assets and revenues;
- defend themselves effectively in cases of control or litigation.
Edouard Pruvost: Your partner in tax residence and international taxation
Thanks to extensive technical expertise and a pragmatic approach, the Cabinet Edouard Pruvost has established itself as a focal point for tax residence and international taxation.
The firm accompanies its clients rigorously, confidentially and efficiently, whether upstream of international projects or in a litigation context.
