A French national moving to the United Arab Emirates

Tax residence in the Emirates

An individual may in particular be treated as tax resident in the Emirates where they meet one of the following criteria:

• they have their usual or principal place of residence and the centre of their personal and financial interests there;
• they are present there for at least 183 days in a consecutive twelve-month period;
• they are present there for at least 90 days in a consecutive twelve-month period, hold an Emirati residence permit and have a permanent home in the Emirates or are employed or carry on an activity there.

A tax residence certificate may be requested from the Emirati authorities, in particular in order to benefit from the France-UAE tax treaty.

Loss of French tax residence

French nationality does not, on its own, preserve French tax residence. Unlike a move to Monaco, a French national can therefore become non-resident in France for tax purposes by moving to the Emirates.

They may nevertheless remain a French tax resident if they keep in France:

• their family home or principal place of stay;
• their main professional activity;
• the centre of their economic interests.

These criteria are alternative. Keeping a single one of these elements in France may therefore be enough to establish a French tax domicile under domestic law.

If the person is treated as resident of both States, article 4 of the France-UAE tax treaty applies the following criteria in turn:

• the permanent home;
• the centre of vital interests;
• the habitual abode;
• nationality;
• an agreement between the tax authorities where the previous criteria do not settle the matter.

Particular attention must be paid to company directors who continue to manage a French company from the Emirates, and to directors of large French companies who may be presumed to carry on their activity mainly in France.

The Emirates currently levy no personal income tax, either at federal level or at the level of the individual Emirates.

The following, in particular, fall outside the Corporate Tax applicable to individuals:

• salaries;
• income from personal investments;
• income from personal real estate investments that does not correspond to a licensed business activity.

However, an individual carrying on a business activity in the Emirates falls within the scope of Corporate Tax where total turnover from that activity exceeds AED 1 million in the calendar year. The Emirati Corporate Tax rules may then apply, with a standard rate of 9% subject to the conditions of the regime.

Once effectively non-resident in France for tax purposes, the taxpayer may still be taxed there on certain French-source income and assets.

This may in particular concern:

• rental income from property located in France;
• French real estate capital gains;
• remuneration relating to an activity carried on in France;
• certain French pensions;
• profits attributable to a French permanent establishment;
• certain capital gains on French shareholdings;
• income from French structures, depending on its nature.

The treaty provides that income from property located in France may be taxed in France.

It also contains specific rules for dividends, interest and capital gains on securities. Their treatment must be checked item by item, taking into account the recipient’s treaty residence, their status as beneficial owner and the documentation required.

Keeping a French holding company after departure does not necessarily require moving its registered office to the Emirates.

The following should nevertheless be examined:

• where strategic decisions are actually taken;
• the composition of the management bodies;
• the substance of the company in each State;
• the functions personally performed by the director;
• the taxation of remuneration and dividends;
• the risk of a transfer of effective management;
• the risk of a permanent establishment of the French company in the Emirates or of an Emirati company in France.

The treaty uses, in particular, the place of effective management to settle the residence of a company treated as resident of both States. It also provides that a fixed place of business or, in certain circumstances, a person habitually exercising authority to conclude contracts may constitute a permanent establishment.

Leaving France may trigger the exit tax under article 167 bis of the French Tax Code (CGI) where the taxpayer:

• has been tax resident in France for at least six of the ten years preceding departure;
• and holds shares with an aggregate value of at least €800,000 or representing at least 50% of a company’s profits.

The exit tax may concern:

• unrealised capital gains on shares;
• certain earn-out receivables;
• certain capital gains previously placed under tax deferral (report d’imposition), in particular under article 150-0 B ter of the CGI.

Deferral of payment

On a move to the UAE, deferral of payment of the exit tax is not granted automatically. It must be requested before the change of tax residence, with the appointment of a representative in France and the provision of security. The request must be made on form no. 2074-ETD, together with a proposal of security, no later than 90 days before the move.

A person who has become non-resident in France for tax purposes remains, as a rule, liable to the French real estate wealth tax (IFI) on their real estate assets and rights located in France, held directly or indirectly, where their net taxable value exceeds €1.3 million.

The following may in particular be concerned:

• real estate held directly;
• interests in SCIs (French property-holding companies);
• shares in French or foreign companies, for the portion of their value representing French real estate;
• certain loans or receivables financing real estate structures, under the applicable anti-abuse rules.

The France-UAE treaty contains an article 16 A on the taxation of wealth, which provides a specific mechanism for certain French real estate held by a resident of the Emirates. The French tax authorities’ published guidance on this point, however, concerned the former wealth tax (ISF).

The authorities state that a treaty applicable to the ISF is not necessarily applicable to the IFI and that a case-by-case analysis is required.

The prudent position is therefore:

• to identify the French real estate within the scope of the IFI;
• to calculate the tax under domestic law;
• then to examine separately whether article 16 A can be relied on;
• without presenting the treaty exemption as automatically available.

Successions

The France-UAE tax treaty expressly covers inheritance tax.

The treatment depends in particular on:

• the treaty residence of the deceased;
• the nature and location of the assets;
• the residence of the heirs;
• whether French assets are held directly or indirectly.

Planning must also take account of the applicable civil law rules, in particular the law governing the succession, wills, protection of the surviving spouse and local rules on the transfer of assets held in the Emirates.

Gifts

French gift tax is not expressly listed among the taxes covered by the France-UAE treaty.

A gift must therefore be analysed under the French territorial rules, in particular article 750 ter of the CGI.

France may in particular tax:

• assets located in France;
• French and foreign assets where the donor is a French tax resident;
• under certain conditions, French and foreign assets received by a recipient who is a French tax resident and has been one for at least six of the ten years preceding the gift.

The absence of a general gift tax in the Emirates therefore does not prevent French gift tax from applying where the French territorial criteria are met.

Before the move, the following should in particular be reviewed:

• the effective date of the change of residence;
• the home and household kept in France;
• the functions held in French companies;
• the valuation of the shares for exit tax purposes;
• capital gains already placed under tax deferral;
• any planned sale, contribution or gift transactions;
• bank accounts and investments;
• French real estate;
• the holding structure of the companies;
• the succession and beneficiaries living in France;
• social security cover and health insurance.