French Exit Tax for Dubai Expats: Article 167 bis CGI Explained

Understanding the French Exit Tax Framework

The French exit tax is codified at article 167 bis of the Code Général des Impôts (CGI). It was introduced by the loi n° 2011-900 of 29 July 2011 (loi de finances rectificative pour 2011) following the abolition of the previous 1998 regime, which had been struck down by the Court of Justice of the European Union in the de Lasteyrie du Saillant case (CJEU, 11 March 2004, C-9/02) for violating the freedom of establishment.

The regime applies to individuals transferring their tax domicile out of France who, on the date of transfer, hold either: (i) directly or indirectly, together with members of their tax household (spouse, ascendants, descendants, brothers and sisters), a participation of at least 50 % in the profits of a company subject to corporate income tax, or (ii) a portfolio of qualifying securities and rights the aggregate value of which exceeds EUR 800,000.

Legal Framework

Exit tax is codified at article 167 bis CGI. The provision was introduced by the loi n° 2011-900 of 29 July 2011, was substantially recast by the loi de finances pour 2014 (broadening the deferral conditions for departures to the EU / EEA), and has been adjusted on several occasions since.

The taxable gain is subject to the prélèvement forfaitaire unique of 30 % — 12.8 % at the income tax rate plus 17.2 % at the social levy rate — with a global option for the progressive scale (article 200 A 2. CGI). The taxpayer files Form 2074-ET, accompanied by Form 2042-C, with the income tax return for the year of the transfer of domicile (deadline as for ordinary income tax returns).

Payment deferral (sursis de paiement)

Article 167 bis of the CGI organises two distinct regimes of payment deferral, whose availability depends on a case-specific analysis of the texts in force at the date of transfer:

• Statutory (automatic) deferral — paragraph IV: the deferral applies by operation of law where the conditions set by paragraph IV are met, in particular by reference to the bilateral tax treaties in force and to the list of non-cooperative States and territories in the sense of Article 238-0 A of the CGI. Where the statutory test is satisfied, no guarantee is required.
• On-request deferral — paragraph V: the taxpayer may elect this regime by (i) expressly requesting the deferral, (ii) appointing a fiscal representative accredited in France, and (iii) lodging guarantees (bank guarantee, mortgage, lien) of an amount corresponding to the tax for which deferral is sought. The procedural framework is set in particular by Decree No. 2019-868 of 21 August 2019, which provides in principle that the proposal of guarantees must be lodged no later than ninety days before the transfer of tax domicile.

Documentation Requirements

Complete Asset Identification and Scheduling

Form 2074-ET now requires systematic identification of all moveable assets subject to exit tax. For each asset, you must provide:

• Direct shareholdings: ISIN code (or legal identification number if ISIN unavailable), company name, percentage ownership, acquisition date, original cost, and current fair market value
• Indirect holdings: Complete participation chains showing ownership percentages through intermediate vehicles. Example: if you own 100% of Holding A, which owns 50% of Holding B, which owns 100% of a SARL, both your interest in A and the consequent interest in the SARL are separately declared
• SARL and EIRL interests: Partnership interests in closely held corporations, including acquisition circumstances and cumulative distributions or reinvested earnings
• SCPI units: Real estate investment fund units, with reference to the fund's audited financial statements as supporting evidence
• Securities held in managed accounts: If you hold securities through a brokerage or investment fund, each underlying position must be individually declared, not the fund share itself

Valuation Standards and Supporting Evidence

The DGFIP now applies a rigorous standard to valuations. "Fair market value" means the price at which the asset would trade between a willing buyer and seller at the date of change of domicile, neither party under pressure to buy or sell. Acceptable evidence includes:

• For listed securities: Official closing price on the change-of-domicile date, obtained from the exchange or Bloomberg terminal
• For SARL or closely held corporations: Most recent audited financial statements of the company, with analyst reports, comparable company analysis, or discounted cash flow models if the company has material undisclosed goodwill or intellectual property
• For real estate via SCI or SCPI: Independent appraisal by a state-certified property appraiser, dated within six months of the change of domicile, or the fund's audited NAV statement
• For business valuations: Professional valuation reports prepared by accredited business appraisers (expert-comptable or chartered accountant with international credentials)
• For startup equity or private holdings: Contemporaneous third-party valuations (venture capital funding rounds, option pool valuations, or expert assessments) rather than owner self-assessments

The DGFIP has explicitly indicated that "notional" or "conservative" valuations (e.g., book value, cost basis, or round figures) will be challenged. The burden of proof rests on the taxpayer to demonstrate that the declared value represents fair market value as of the specified date.

Participation Chains and Indirect Ownership

A particularly complex requirement involves complete disclosure of participation chains. If you hold securities indirectly through one or more intermediate entities, each layer must be separately declared.

Illustrative example: An individual holds 100% of Holding Company A. Holding A owns 40% of Holding Company B. Holding B owns 100% of SARL C. The exit tax is imposed on the unrealized gain in the individual's interest in A (the direct holding). However, the declared value of A must reflect its underlying assets, including its proportionate interest in B. Thus:

1. Declare the exit tax on the individual's 100% interest in Holding A, valued as the sum of its net assets (including the 40% interest in B)
2. Show the value of the 40% interest in B within the valuation of A, derived from B's net assets (including B's 100% interest in SARL C)
3. Show SARL C's valuation supporting B's valuation, which supports A's valuation

This cascading structure requires detailed financial documentation for each entity in the chain. A single unsupported valuation anywhere in the chain exposes the entire exit tax calculation to challenge.

Filing Requirements and Timing

When and how to file

Form 2074-ET (declaration of unrealised gains and deferral) is filed with the income tax return for the year of the transfer of tax domicile, on the standard income tax return deadline. There is no requirement under article 167 bis CGI to file a separate pre-departure return or to obtain a "receipt" before leaving France. The taxpayer is expected, however, to anticipate the assessment well before the transfer because (i) the deferral of payment for non-EU / non-EEA destinations such as the UAE must be requested with the return, (ii) guarantees and a fiscal representative must be lined up in advance, and (iii) the valuation evidence must be ready.

For a transfer in year N, the exit-tax computations are reported in the income tax return filed in year N+1, alongside the conventional declarations for the year of transfer.

Penalties

Failure to file Form 2074-ET (or to declare deferral correctly) is sanctioned under the general regime of articles 1727 (default interest) and 1728 / 1729 CGI (penalties for failure to file or for inaccurate declaration). Deliberate omission triggers a 40 % penalty (article 1729 a) CGI); fraudulent manoeuvres trigger an 80 % penalty (article 1729 c) CGI). Late filing of itself attracts a 10 % surcharge (article 1728 1. a) CGI), increasing to 40 % if the return is not filed within thirty days of formal notice, and 80 % in cases of occult activity.

Impact on UAE Relocations: Specific Considerations

Article 167 bis of the CGI is triggered by the transfer of tax domicile outside France, where the thresholds of the article are met, irrespective of the tax policy of the destination State. The United Arab Emirates do not currently impose a personal income tax on natural persons under their domestic law, but have imposed a Corporate Tax on certain juridical persons since 1 January 2023 under Federal Decree-Law No. 47/2022, together with a Value Added Tax at the standard rate of 5 % in force since 2018. The articulation of the paragraph IV and paragraph V regimes of deferral of Article 167 bis with a transfer to the UAE is matter-specific and requires an analysis of the texts in force at the date of transfer, including by reference to the bilateral tax treaty of 19 July 1989 and to the list of non-cooperative States and territories in the sense of Article 238-0 A of the CGI.

Practical Example: Entrepreneur Relocating to Dubai

Jean-Pierre holds 100 % of a French SARL valued at EUR 500,000 at the date of transfer. His original tax cost in the shares is EUR 50,000. The unrealised capital gain is therefore EUR 450,000.

Computation of exit tax under the PFU (article 200 A CGI):

• Income tax component (12.8 %) on EUR 450,000 = EUR 57,600
• Social levies (17.2 %) on EUR 450,000 = EUR 77,400
• Total exit tax = EUR 135,000

The articulation of the paragraph IV and paragraph V regimes of deferral with a transfer of tax domicile to the United Arab Emirates requires a case-specific analysis of the texts in force at the date of transfer. Where the paragraph V regime is retained, the taxpayer must (i) expressly request the deferral on Form 2074-ET, (ii) appoint a fiscal representative accredited in France, and (iii) lodge guarantees (typically a bank guarantee or first-rank lien) of an amount equal to the deferred tax, within the procedural framework set in particular by Decree No. 2019-868 of 21 August 2019, which provides in principle that the proposal of guarantees must be lodged no later than ninety days before the transfer of tax domicile. In the absence of an applicable deferral, the EUR 135,000 would be due with the income tax balance for the year of the transfer.

Should Jean-Pierre eventually sell the shares while still resident in the UAE, the deferred tax becomes due (less any tax credit for an actual UAE tax on the gain, where applicable). If he ceases to be subject to the deferral conditions (e.g. early redemption of guarantees), the exit tax becomes immediately payable.

Interaction with UAE Corporate Tax (2023 onwards)

The introduction of UAE Corporate Tax (CT) effective 1 January 2023 adds complexity to exit tax planning for business owners. While the UAE CT applies only to corporations earning above USD 375,000 annually, it affects the valuation of business interests and the foreign tax credit calculations for exit tax purposes.

A French entrepreneur relocating to the UAE may now face both:

• French exit tax: On the unrealized gain in the business or investment holdings held at the time of departure
• UAE CT: On the ongoing income generated by the business after relocation, if the business meets the CT thresholds

The two regimes interact in complex ways regarding foreign tax credits and the timing of taxation. Professional coordinated planning between French and UAE tax advisors is essential.

Payment Deferral: Mechanics

Article 167 bis of the CGI organises two distinct regimes of deferral:

• Statutory (automatic) deferral — paragraph IV of Article 167 bis: the deferral applies by operation of law where the conditions set by paragraph IV are met, assessed in particular by reference to the bilateral tax treaties in force (convention for the exchange of information with a clause on administrative assistance in recovery) and to the list of non-cooperative States and territories in the sense of Article 238-0 A of the CGI. Where the statutory test is satisfied, the taxpayer is not required to lodge guarantees or appoint a fiscal representative.
• On-request deferral — paragraph V of Article 167 bis: where paragraph IV does not apply, the taxpayer may elect for the deferral by (i) expressly requesting it on the return, (ii) appointing a fiscal representative accredited in France, and (iii) lodging guarantees of an amount corresponding to the tax for which deferral is sought. The procedural framework is set in particular by Decree No. 2019-868 of 21 August 2019, which provides in principle that the proposal of guarantees must be lodged no later than ninety days before the transfer of tax domicile.

In all cases, the deferred exit tax remains assessed; only its actual collection is postponed. The deferral terminates and the tax becomes due upon the occurrence of a taxable event (sale, redemption, repayment, cancellation of the securities) and, in other circumstances contemplated by the article. Conversely, after the holding period fixed by Article 167 bis, the taxpayer may benefit, where its conditions are satisfied, from a total or partial relief (dégrèvement) of the tax still in deferral.

The deferral is granted by operation of law or on election, depending on the applicable paragraph, where the statutory conditions are satisfied. The administration retains the ordinary right to examine the valuation and the underlying gain and may, where appropriate, reassess on the ordinary statutory basis (article L. 169 of the LPF).

Valuation Challenges and the Extended Verification Period

The DGFIP retains its ordinary right of reassessment under article L. 169 LPF (three years for individuals, plus the year of the omission), with extensions for non-disclosure of foreign accounts (article L. 169 LPF, ten-year extension) and for fraudulent activity. Exit-tax valuations may be challenged within these standard frames; their robustness therefore matters during the entire reassessment window.

The DGFIP has demonstrated increasing expertise in valuation challenges, engaging business appraisers and financial analysts to contest valuations deemed excessive. Common challenge points include:

• Growth premiums: Valuations based on projected future growth are often reduced unless supported by conservative third-party analysis or comparable transactions
• Synergy discounts: Tax authorities frequently eliminate synergy premiums claimed by owners, arguing these do not reflect fair market value to a hypothetical buyer
• Goodwill assessments: Business valuations inflated by subjective goodwill assessments are systematically challenged
• Comparable company analysis: Multiples derived from comparable public companies are rejected if the taxpayer's company is significantly smaller, less established, or more illiquid

To defend against valuation challenges, valuations should be supported by:

• Independent third-party appraisals prepared by recognized valuers
• Conservative methodologies and explicit assumptions
• Comparable transaction analysis (actual M&A activity in the same sector)
• Published multiples from transactions of similar-sized businesses
• Contemporaneous market conditions documentation

Procedural Implications and Timing Considerations

Advance Planning Timeline

The new requirements necessitate a revised timeline for exit tax compliance:

• 4-6 months before departure: engage a French tax advisor; identify all assets within the exit-tax scope; commission contemporaneous valuations of business interests, illiquid securities, and real estate held through a société à prépondérance immobilière
• 2-3 months before departure: select a fiscal representative accredited in France; obtain a quotation for the bank guarantee or other security to cover the deferral request
• Departure: ensure that the fiscal representative is appointed and the guarantee is in place; document the date of transfer of domicile (lease, residence visa, social attestations)
• Year N+1: file Form 2074-ET and the income tax return for the year of transfer with the express deferral request, identifying the fiscal representative and the guarantees
• Subsequent years: file the annual follow-up Form 2074-ETS for each year during which the deferral is in force

Interaction with Other French Tax Compliance

Exiting France requires simultaneous management of several tax obligations:

• Exit tax filing: Form 2074-ET, as discussed above
• Final French tax return: Filed for the year of departure, reporting income through the change-of-domicile date
• Notification of non-residency: Formal notice to local tax authorities (SIE) confirming the change of residence
• Social security contributions: Termination of French social security coverage and enrollment in UAE systems or international mobility plans
• VAT adjustments: If self-employed or operating a business, VAT registration termination

These obligations must be coordinated to ensure consistent filing positions and avoid conflicting communications with the DGFIP.

Practical Risk Management and Compliance Strategy

Documentation Retention

Given the multi-year reassessment windows under article L. 169 LPF, all documentation supporting valuations and exit-tax calculations should be retained for at least ten years. This includes:

• Valuation reports and methodologies
• Audited financial statements of held companies
• Equity cap tables and acquisition agreements
• Bank statements and account holdings lists
• Correspondence with the DGFIP regarding the exit tax filing

Defensive Valuation Strategies

To minimize the risk of post-departure valuation challenges:

• Use conservative assumptions in valuation models; avoid inflated growth projections
• Engage recognized valuation firms with track records of credibility with French tax authorities
• Use comparable transaction approach where possible, rather than solely relying on income approaches
• Document market conditions as of the valuation date, showing the basis for conservative assumptions
• Prepare a detailed valuation report that anticipates and addresses potential DGFIP objections

Communication with the DGFIP

Proactive communication with the DGFIP before departure, through a tax representative, can clarify ambiguities and reduce post-departure disputes. If complex valuations or participation chains exist, consider requesting a preliminary DGFIP ruling (rescrit fiscal) addressing the valuation methodology before finalizing the exit tax filing.

Jonathan Sémon

Tax Attorney, Paris Bar

Jonathan Sémon is a senior international tax attorney with over 20 years of experience advising French and expatriate clients on cross-border taxation, corporate restructuring, and exit tax planning. Admitted to the Paris Bar in 2003, he specializes in France-UAE tax matters and advises entrepreneurs, investors, and executives on complex relocation and asset transfer scenarios.