Theexit tax is a tax on the latent capital gains of taxpayers wishing to transfer their tax residence abroad. This mechanism is designed to compensate for the loss of tax revenue for the country of origin, and can have an impact on entrepreneurs who wish to relocate their tax home. In this article, we'll look at the principle of exit tax and business valuation, examples of countries that apply this tax, and the payment or guarantee mechanism in the event of relocation of the tax household.
The principle of exit tax
The exit tax is a tax on unrealized capital gains, i.e. the difference between the market value of assets (notably company shares) and their acquisition value. This tax is applied when taxpayers transfer their tax residence abroad. The aim of the exit tax is to ensure that the country of origin receives tax revenue on the capital gains generated during the taxpayer's period of residence.
- Xvala company valuation consultancy, can help you add value to your business: www.xval.fr
Examples of countries applying exit tax
Several countries have adopted an exit tax system to prevent tax evasion and ensure that capital gains realized on their territory are taxed. Here are a few examples of countries where exit tax applies:
- France: Since 2011, France has applied an exit tax on unrealized capital gains for taxpayers transferring their tax residence outside the European Union or the European Economic Area.
- United States: US citizens or permanent residents who renounce their citizenship or residency status are subject to an exit tax on their unrealized capital gains.
- Germany: Germany also imposes an exit tax on the unrealized capital gains of taxpayers who relocate their tax residence abroad.
With which countries does the Exit Tax apply in France?
In France, exit tax generally applies when taxpayers transfer their tax residence outside the European Union (EU) or the European Economic Area (EEA). This means that exit tax may apply when you move to countries outside these zones. Here are a few examples of major non-EU and EEA countries to which exit tax may apply:
- United States
- Canada
- Australia
- New Zealand
- Switzerland (although geographically part of Europe, Switzerland is not a member of the EU or EEA)
- United Kingdom (since Brexit, the UK is no longer a member of the EU or the EEA)
- Singapore
- Hong Kong
It is important to note that bilateral tax agreements, such as double taxation treaties, may influence the application of exit tax when moving to certain countries. It is therefore advisable to consult a tax or legal advisor about the specific tax implications of your move.
The obligation to value when the tax household moves abroad
When an entrepreneur decides to relocate his tax residence abroad, he must value his company before proceeding with the move. This valuation determines the value of the company at the time of the move, and therefore the potential amount of exit tax to be paid or guaranteed. XVAL has a team of company valuation experts who will help you determine the value of your company before you move. This valuation will enable you to determine the amount of exit tax to be paid or guaranteed.
- Xvala company valuation consultancy, can help you add value to your business: www.xval.fr
The payment or guarantee mechanism
Once the company has been valued, the entrepreneur is required to pay exit tax on the unrealized capital gain before transferring his tax home abroad. This tax is designed to compensate for the loss of tax revenue in the country of origin.
In certain cases, it is possible to benefit from a guarantee mechanism, which allows the payment of exit tax to be deferred. To do this, the entrepreneur must provide a financial guarantee, such as a bank guarantee, covering the amount of the tax. This guarantee is released when the entrepreneur returns to his home country.
Company valuation and exit tax
Exit tax can be a challenge for entrepreneurs wishing to relocate their tax domicile abroad. Thanks to XVAL's expertise and service, you can manage this tax efficiently and with peace of mind, allowing you to concentrate on your international move. Please contact us to find out more about our solutions:
