Published on and written by Cyril Jarnias
Leaving France to Settle in the United States, as an executive or significant shareholder, is anything but a simple move. It is a shift in your tax center of gravity, with chain‑reaction consequences for your securities, your French real estate, your future U.S. investments, and, for some, on wealth tax and even the “exit tax” on both sides of the Atlantic.
Leaving is not just about moving: it requires a controlled break of French tax residency, optimization of the Exit Tax, anticipation of U.S. tax rules (including the local exit tax), management of French real estate, and the right choice of visa and U.S. investment structure. For an executive or founder, this sequence can represent a gain or loss of several million.
Understanding the Change in Tax Residency on the French Side
Before looking toward the United States, you must lock in the “departure” on the French side. The key question: from when are you no longer a French tax resident under Article 4 B of the French General Tax Code?
Criteria for Tax Residency in France
France considers a person to be a tax resident if even one of the following criteria is met:
– home or principal place of stay in France (spouse and children remaining in France may be enough)
– primary professional activity carried out in France, whether salaried or self-employed, unless it is incidental
– center of economic interests in France: where the main investments are managed, where the business headquarters is located, or where the majority of income comes from.
In other words, physically leaving is not enough. An executive who leaves their family in their Paris‑region home, retains their main executive role in a French company, and continues to receive the majority of their income from that company will have great difficulty arguing that they have “left” France.
Preparatory work involves organizing a credible break of ties by transferring the home, reorganizing professional activity, and moving the center of economic interests.
Formalizing the End of French Tax Residency
This break must be documented and notified. The tax authorities assess the situation on a case‑by‑case basis, but several steps are essential:
– inform your local tax office (SIP) by mail or via your personal account at impots.gouv.fr, stating the exact departure date and new foreign address
– file, in the year following departure, an income tax return for the year of departure (Form 2042) mentioning the exit date and distinguishing the residency and non‑residency periods
– if French‑source income continues after departure (rental income, dividends, French pension, etc.), also complete a Form 2042‑NR for the non‑resident portion
– notify pension funds, Social Security, and supplementary insurance organizations of the change of residence
– update your address with banks, insurers, notaries, and, where applicable, companies in which you are an executive or shareholder.
Include in the French file the certificate of tax residence issued by the host country’s tax authority (e.g., IRS Form 6166 in the United States) to invoke the France‑U.S. tax treaty, especially in case of an audit.
Planning the Departure Date Within the Calendar Year
French tax residency is assessed on a calendar‑year basis. Leaving early in the year can limit the portion of the year during which you are taxable in France on your worldwide income. But beware: the “home test” can maintain residency for the entire year if your family remains in France.
For an executive, the calendar must also account for other constraints:
– timing of a potential fundraising closing or securities sale
– triggering of management packages or stock options
– distributions of dividends or reserves
– possible reclassification of unrealized capital gains under the Exit Tax.
A wealth and tax review six to twelve months before departure helps align this calendar with your economic operations.
For an executive or founder, the central question is almost always the same: will I fall within the scope of the French Exit Tax when moving to the United States?
Who Is Subject to the Exit Tax?
The Exit Tax (Article 167 bis of the CGI) targets taxpayers who transfer their tax residence outside France and, at the same time, hold a “substantial” stake in one or more companies.
Two cumulative conditions must be met:
The market value threshold for the securities portfolio, indexed, exceeds this amount to trigger tax on unrealized capital gains when leaving France after six years of tax residence out of ten.
The securities concerned are those listed in Article 150‑0 A of the CGI: marketable securities and equity interests. Real estate held directly, patents, or other personal intangible assets are not within the scope of the Exit Tax.
How Is the Exit Tax Calculated?
The mechanism treats you as if, the day before your departure, you sold all the concerned securities. The tax authorities then calculate a “fictitious” capital gain:
Taxable gain = market value the day before departure – acquisition cost (adjusted for prior events)
This unrealized gain is taxed at the flat rate (PFU – Prélèvement Forfaitaire Unique):
| Tax component | Rate before LFSS 2026 | Rate after LFSS 2026 |
|---|---|---|
| Income tax | 12.8% | 12.8% |
| Social security contributions | 17.2% | 18.6% |
| Overall PFU rate | 30% | 31.4% |
For very large gains, a exceptional surtax on high incomes may slightly increase the effective rate.
The theoretical tax bill can be massive for a founder whose shares have a very high unrealized gain, even without an actual sale.
Monitoring Periods and Automatic Abatement
Fortunately, the Exit Tax is not always “collected” permanently. The regime provides for a deferral and abatement mechanism if you keep your securities long enough after departure.
The applicable monitoring periods upon departure vary depending on the value of the securities subject to the operation.
| Total value of securities subject to Exit Tax | Monitoring period | Effect if no triggering event (sale, redemption, etc.) during the period |
|---|---|---|
| ≤ €2,570,000 | 2 years | Automatic abatement of the tax and surcharges |
| > €2,570,000 | 5 years | Automatic abatement after 5 years |
If you do not sell your securities during these periods and do not become a French tax resident again, the tax claim disappears. However, any sale, redemption, repurchase, or event generating a capital gain during the period revives the debt: the tax becomes immediately due.
Deferral of Payment: Departure to the EU, the United States… and Guarantees
Two regimes coexist:
– Automatic and free deferral for departures to:
– another EU member state
– an EEA state linked to France by administrative assistance and recovery agreements
– certain states like Switzerland that meet the same conditions.
In these cases, the Exit Tax is calculated but its payment is automatically deferred, without collateral, until the triggering event (sale of securities, return to France, etc.).
Request a payment deferral for departures to other countries (including the United States) by meeting the following obligations:
File Form 2074‑ETD within the required timeframe: at the latest with the N+1 income tax return, or up to 90 days before departure for an “elected” deferral
Appoint a tax representative in France authorized to receive notifications
Provide a guarantee deemed sufficient by the tax authorities (bank guarantee, pledge of securities, mortgage, etc.), covering the calculated tax plus a 25% security margin
The guarantee covers the duration of the monitoring period (2 or 5 years for recent departures). Without a properly filed deferral request and a validated guarantee, the Exit Tax becomes due quickly, which can create a cash flow crisis at the time of your settlement in the United States.
Key Forms Not to Miss
The Exit Tax process involves several technical forms; failure to file them often results in losing the benefit of the deferral:
| Form | Role | When to use |
|---|---|---|
| 2074‑ETD | Initial declaration of unrealized capital gains, earn‑out receivables, deferred gains; request for possible deferral | To be filed with the income tax return for the year of departure (or, for certain deferrals, up to 90 days before departure) |
| 2074‑ETS (and variants) | Annual monitoring declarations during the deferral period (2 or 5 years) | Each year while the deferral is in place |
| 731‑SI (residence certificate) | Attests to tax residence in the host country | To obtain before finalizing the deferral file |
For an executive moving to the United States, filing discipline is as important as wealth strategy: a mistake can turn a free deferral into immediately due tax.
Strategies to Reduce or Neutralize the Exit Tax Before Departure
The earlier the departure is prepared, the greater the room for maneuver. Several levers are often combined.
Lowering the Taxable Value of Securities
Reducing the market value of your holdings the day before departure can bring you below the thresholds or reduce the tax base. Concrete examples:
– distribute accumulated reserves or profits before departure, which decreases the value of the securities (but increases taxable income that year)
– structure contributions or internal reorganizations when consistent with group strategy, being mindful of tax deferral schemes (some deferrals automatically fall within the scope of the Exit Tax).
For unlisted companies or start‑ups, an independent valuation is essential. The retained value may be based on:
To estimate the value of a business, first rely on the latest financing round if it is less than two years old. Otherwise, use a DCF (discounted cash flow) approach or comparable multiples, providing a detailed justification.
A cursory undervaluation is a poisoned gift in the event of an audit; a well‑documented report is, on the contrary, a protection.
Falling Below the 50% Ownership Threshold
If your exposure to the Exit Tax is based on the majority ownership criterion (≥50% of profit rights), partial gifts or sales to family members may allow you to reduce your stake to 49% or less.
On the French side, direct‑line gifts benefit from a €100,000 allowance per parent and per child, renewable every 15 years, but beyond that, progressive gift tax rates (up to 45%) apply. So you must weigh:
– immediate cost of the gift
– potential Exit Tax savings
– and impact on control of the company.
For a sole heir or founder executive, transferring a portion of the capital to adult children can make sense as part of an early succession strategy, provided it is consistent with future governance.
Executive
Playing on the Timing of Liquidity and Income
France and the United States have distinct Exit Tax rules, but both look at income and wealth trajectories over several years. Careful planning can achieve:
– position the French departure in a year of relatively moderate income to maximize, on the U.S. side, the use of foreign tax credits
– smooth large events (bonus, partial cash‑out, earn‑out) over several tax years rather than concentrating them all before departure
– in some cases, delay a major liquidity event until after the French monitoring period for securities, while anticipating the U.S. impact.
This approach requires modeling, year by year, French tax, U.S. tax, and the tax credits under the France‑U.S. treaty.
French Real Estate: Sell, Restructure, or Keep When Moving to the United States?
When leaving France for the United States, an executive often keeps at least one property in France, whether for personal attachment or as diversification. Yet French real estate remains taxable in France even after losing tax residency, whether for income tax, real estate wealth tax (IFI), or upon sale.
Taxation of a Non‑Resident Keeping a Property in France
Once fiscally resident in the United States, a former French resident is taxable:
– for IFI on the net value of their French real estate assets, if that wealth exceeds €1.3 million
– for income tax on rental income from French properties, via the non‑resident return
– for capital gains tax upon the sale of a French property.
For real estate capital gains, the non‑resident regime is unfavorable:
The real estate capital gain is fully exempt from income tax after 22 years of ownership.
The France‑U.S. tax treaty confirms that real estate gains are primarily taxable in the country where the property is located. The United States then taxes worldwide capital gains but grants, through the Foreign Tax Credit, a credit for French tax paid. In practice, French tax on a property sale is often enough to offset U.S. federal tax, but state taxes (California, New York, etc.) may add up due to the lack of a foreign tax credit in domestic state regimes.
IFI: An Issue That Does Not Disappear with Departure
IFI does not end with departure for holders of French real estate. A French non‑tax‑resident remains subject to this tax on their French real estate assets if the net value exceeds €1.3 million.
IFI rates range from 0.5% to 1.5%, calculated on a base that includes directly held properties and, through look‑through rules, companies primarily composed of French real estate, making structures via foreign companies ineffective at shielding that wealth from IFI.
For an executive who keeps a large Paris apartment or a villa, the question becomes: keep the property and accept an annual IFI bill, or sell before departure to invest in assets not subject to IFI (financial assets, foreign real estate, etc.)?
Should You Sell Before or After Departure?
The answer depends on several parameters: holding period, unrealized gain, plan to return or not, appetite for holding French real estate from a distance, and U.S. tax status (citizen, green card, simple resident).
A key point: timing can lead to radically different situations.
Imagine an executive moving to the United States who owns a highly appreciated Paris apartment. Three concrete scenarios:
– 1. Sale before departure
– Full taxation in France on the capital gain, according to the holding period.
– No IFI after departure on this property.
– On the U.S. side, if the sale occurs before the start of U.S. tax residency, the gain is not included in the U.S. tax base.
– 2. Sale in the year of departure, after the tax switch
– France: same real estate capital gains regime.
– United States: worldwide gain is generally taxable, but French tax comes in as a credit.
– The result depends on the level of gain, the U.S. marginal rate, and each state’s rules.
– 3. Keeping the property for several years of non‑residence
– Ongoing IFI exposure.
– Risk of a later sale with a higher gain, but with more holding‑period allowances.
The right choice requires modeling both the transfer tax and the recurring tax (IFI), while factoring in the opportunity cost of the immobilized capital.
Settling in the United States: Visa, Tax Residency, and Structuring
Leaving France is only half the equation. The other half plays out in the United States: what immigration status, what tax residency, what structures for investing and working.
Typical Visas for French Executives
Several statuses are particularly used by French entrepreneurs and executives:
– E‑2 Visa: Based on the investment treaty between France and the United States. It allows you to settle to develop and direct an enterprise in which you have invested a “substantial” amount of capital.
– L‑1 Visa: For executives and managers of a French company opening a subsidiary or branch in the United States. It allows an intra‑company transfer to run the U.S. entity.
– Talent/extraordinary ability visas:
– O‑1 (extraordinary ability) for top‑tier entrepreneurs or scientists
– EB‑1A, EB‑2 NIW for a more direct path to a green card based on remarkable achievements or national interest.
Non‑immigrant visas such as E‑2, L‑1, and O‑1 can lead to U.S. tax resident status under the Substantial Presence Test, without immediately granting a green card.
Becoming a U.S. Tax Resident
The United States determines tax residency based on two main tests:
– holding a green card (lawful permanent resident)
– or meeting the Substantial Presence Test (SPT), which combines:
– at least 31 days of physical presence in the current year
– and a total of 183 weighted days over three years:
– 100% of days in the current year
– 1/3 of days in year N‑1
– 1/6 of days in year N‑2.
An executive making multiple round trips to prepare their move may therefore become a U.S. tax resident without realizing it. This is crucial for the French “departure” date and for the application of the tax treaty.
A U.S. citizen or green card holder remains taxable in the United States on their worldwide income even while residing in France. A French national who has held a green card for at least eight years becomes a Long‑Term Resident and risks the U.S. exit tax if they abandon that status.
Investment Structures in the United States
Foreign founders overwhelmingly use a few key structures:
– Delaware LLC: very flexible, transparent by default for federal tax purposes (unless an election is made to be taxed as a corporation).
– Delaware C‑Corporation: the standard form for a start‑up or a group subsidiary, subject to U.S. corporate income tax.
– operational companies at the state level where activities are located (California, New York, Texas…).
The choice between LLC and C‑Corp directly affects the personal taxation of the executive, compatibility with institutional investors, and the treatment of dividends, distributions, or sale of interests. It must be coordinated with the French situation at the time of departure (Exit Tax) and with a potential return to Europe.
Overlap of French and U.S. Exit Taxes: The Two‑Tier Trap
For executives who are already American (citizens or long‑term green card holders) and lived in France, or for those who will become American and later renounce, a second layer appears: the U.S. exit tax (Section 877A).
When Does the U.S. Exit Tax Apply?
The IRS classifies as a covered expatriate any person who, upon renouncing citizenship or abandoning long‑term resident status, meets at least one of three tests:
The net worth threshold above which a U.S. expatriate may be subject to the exit tax is set at $2 million as of the date of expatriation.
In that case, the rule is similar to the French Exit Tax: all worldwide assets are deemed sold the day before expatriation, with taxation of net capital gains exceeding an exemption (nearly $900,000 in recent years, adjusted for inflation).
For an executive who first left France (potential French Exit Tax), then several years later left the United States (U.S. Exit Tax), coordinating the two mechanisms is a high‑wire act: the tax credits provided by the treaty help but do not neutralize everything.
How to Reduce the Risk of Being a “Covered Expatriate”?
Wealth strategies exist, but they must be implemented well in advance:
For American expats with no plan to return, three levers help avoid the Exit Tax: 1) deflate the balance sheet through unlimited gifts to a U.S. citizen spouse, transfers to adult children, or to irrevocable trusts to fall below the $2M threshold; 2) smooth income by spreading large sales, accelerating certain deductions, and using foreign tax credits to keep the average tax over the last five years below the threshold; 3) for recent green card holders, renounce before the eighth year of holding to avoid Long‑Term Resident status.
The key is not to wait until the last minute: the five‑year trajectory is decisive.
The France‑U.S. Tax Treaty: Safety Net… But Not a Full Shield
The 1994 treaty, effective 1996, organizes the allocation of taxing rights between France and the United States. It addresses the treatment of dividends, interest, royalties, salaries, pensions, and capital gains, and provides foreign tax credit mechanisms to avoid double taxation.
For an executive transferring tax residency and investing on both sides, three areas are particularly sensitive:
– real estate gains (taxable where the property is located)
– securities capital gains (generally taxable in the state of residence)
– and pensions or retirement income, where specific rules apply.
The treaty does not eliminate U.S. filing obligations (U.S. citizens must always file Form 1040, FBAR, etc.) or French ones (declarations of foreign accounts, trusts, interposed companies), but it generally keeps total tax reasonable provided both sides are accurately reported.
An Action Plan for an Executive Moving to the United States
Theory alone is not enough. Practically, an executive planning to leave within 12 to 24 months can structure their preparation around a few axes.
1. Map Your Wealth and Tax Situation
The goal is to draw up a complete inventory:
– holdings in French and foreign companies, management packages, stock options, BSPCE, any earn‑outs
– residential and rental real estate in France and elsewhere
– associated debts, current accounts with companies
– recurring income (salaries, dividends, royalties, pensions)
– any trust structures, SCI (French real estate companies), holdings.
On this basis, an audit checks: process efficiency and compliance with established standards.
– whether Exit Tax thresholds are met or not
– current or future IFI exposure
– potential friction points with U.S. rules (PFIC, CFC, transparent or non‑transparent trusts).
2. Test Different Calendar Scenarios
By varying: variant
– the date of breaking French tax residency
– the date of entering U.S. tax residency (via SPT or green card)
– the timing of major operations (fundraising, cash‑out, sale of a property, distribution of reserves).
The goal is to find a trajectory that:
Minimizes the French Exit Tax or makes it manageable via a deferral, while making the best use of treaty tax credits and avoiding later falling into the “covered expatriate” category in the United States.
3. Manage French Real Estate Before Leaving
Depending on the case, this may involve:
– selling one or more properties before departure to lock in the capital gain before entering U.S. tax residency
– restructuring through a genuine operating company if the property is linked to a professional activity (with potential IFI implications)
– keeping a single “emotional” property, accepting the IFI and future capital gains tax, but selling other assets to reduce the overall taxable base.
The objective is to avoid ending up as a French non‑resident, U.S. resident, with a portfolio of French real estate heavily subject to IFI and, upon sale, exposed to a double tier of France + U.S.
4. Prepare and File the Correct French Forms
In practice, the standard file for an executive includes:
When leaving abroad, you must file the income tax return 2042 (and 2042‑NR for non‑residents). If the Exit Tax applies, attach Forms 2074‑ETD and 2074‑ETS with supporting documents (valuations, capitalization table, proof of residence). Report IFI via Form 2042‑IFI if the threshold is exceeded. Finally, complete the declarations of foreign accounts, contracts, and trusts (Forms 3916, 3916‑bis and specific documents for trusts).
The documents must be kept for at least the statute of limitations period of the tax authorities, which can be up to ten years in cases of serious failures.
5. Anticipate Estate and Gift Tax Impacts
The treaties between France and the United States regarding estates and gifts are old but still play a role. For an executive with assets on both sides, the following questions deserve advance treatment:
– location of long‑term principal residence
– country of attachment of heirs
– existence of trusts or usufruct / bare‑ownership arrangements on French real estate
– alignment of transfer strategies with U.S. exemption thresholds (several million dollars) and French ones (lower but renewable allowances).
Again, the goal is not only to optimize death taxes, but to avoid locking the family into a double, or even triple, layer of incompatible rules.
Conclusion: Moving to the United States as an Executive – A Total Tax Project
Preparing your departure from France to the United States as an executive or majority shareholder is not just about managing a visa, finding a school, and opening a dollar account. It is about accepting that you are changing your reference tax system, while remaining, for a long time, connected to the previous one through real estate, any residual holdings, pensions, or even trusts.
The quality of preparation is rarely measured in the short term. It becomes apparent a few years later, during a major fundraising, the sale of a property left in France, a return to Europe, or an unexpected inheritance.
Anticipating the French Exit Tax, making smart choices about French real estate, choosing an immigration status and U.S. structures compatible with your situation, understanding the exact role of the tax treaty, and, if you are or become American, integrating the looming shadow of the U.S. exit tax from the outset: these are all steps in a single project.
This project is not managed with ready‑made recipes or with a single advisor. It requires close coordination between French and American specialists who can speak the language of both systems. The one thing that cannot be improvised, however, is time: the earlier you start organizing your departure, the more you can turn this strategic turning point into an opportunity rather than a tax shock.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
