Leaving France for the US: the French exit tax, its deferral and the double-tax trap

Contents

1. The short answer
2. What the French exit tax is
3. Who is caught: six years and €800,000
4. What is taxed, and at what rate
5. The deferral: automatic for the US, provided you file
6. What triggers the tax later, and what cancels it
7. Double taxation: no step-up in US basis on arrival
8. Worked example: a sale in year three, taxed in both countries
9. What to file, and when
10. Arriving in the US: the other half

The short answer

If you have been French tax-resident for at least six of the last ten years and your household’s shares are worth more than €800,000 in total (or reach 50% of a company’s profits), France taxes the unrealised gain when you leave: 12.8% income tax plus 18.6% social levies for a 2026 departure, 31.4% in all. For a move to the United States, payment is deferred automatically, without guarantees, because the US is on the official list of qualifying states (published for 2025 departures; confirm it for 2026). It is not unconditional: declare the gain on form 2074-ETD the following spring and file the follow-up returns, or the tax becomes payable.

Sell within two years (five if your holdings exceeded €2.57 million) and the French tax falls due; hold longer and it is cancelled. The bigger trap is American: the US gives no general step-up in basis when you become resident, so on a sale it taxes the whole gain since purchase, in dollars. A sale inside the window is taxed in both countries on the same pre-departure gain. France credits part of the US tax; the US is unlikely to credit the French tax. Plan before you leave.

What the French exit tax is

The French exit tax is article 167 bis of the Code général des impôts (CGI, the French tax code): the day your tax residence leaves France, the unrealised gain on qualifying shares becomes taxable in France, although you have sold nothing.

Two features soften it: for a move to an EU state or to one of the other countries on the official list, the United States included, payment is automatically deferred until a later event such as a sale, provided you meet the filing obligations; and if you still hold the shares after two or five years, the tax on the unrealised gains is cancelled.

The transfer is deemed to occur the day before you cease to be liable to French tax on your worldwide income (article 167 bis, III); everything is valued at that date.

Who is caught: six years and €800,000

Two conditions must both be met at departure (article 167 bis, I-1):

• Residence: tax resident in France for at least six of the ten preceding years, counted date to date.
• Holdings: shares, securities or rights held directly or indirectly by your tax household represent at least 50% of a company’s profits, or have a global value exceeding €800,000.

The 50% test is applied company by company and looks through intermediaries. The €800,000 test covers the whole portfolio; once passed, every unrealised gain in it is taxable, not just the excess.

In scope: shares of French or foreign companies, bonds, fund units and dismembered rights in them; out of scope, per the notice, PEA and PEA-PME holdings (French tax-advantaged equity savings plans). Earn-out receivables from a past share sale (on the residence test alone, whatever their value) and gains already under a deferral regime (plus-values en report, whatever the length of residence) are also taxed on departure (article 167 bis, I and II).

What is taxed, and at what rate

The gain is the value at departure minus the acquisition cost (or the gift or inheritance value if received free). Listed shares: last price or 30-day average; unlisted shares: the market value you estimate and must be able to defend. Unrealised losses are ignored (article 167 bis, I-5).

Income tax is 12.8% by default (article 200 A). Social levies are due under article L136-6 of the social security code (I, e bis, income from assets), not L136-7. The social security financing act for 2026 (loi n° 2025-1403, art. 12) raised the CSG (a French social contribution) on L136-6 income from 9.2% to 10.6% (L136-8, I, 2°) from the taxation of 2025 income; exit-tax gains are not among the categories kept at 9.2% (L136-8, IV). With the 7.5% prélèvement de solidarité (solidarity levy; CGI, art. 235 ter) and the CRDS (a further social contribution), social levies on a 2026 departure are 18.6%, as the 2074-ETD notice announces: 31.4% in all.

The rate is fixed by the year of departure: on a later sale, the 2074-ETS3 notice (line 167) applies the rate in force at the transfer, so shares taxed on a 2026 departure and sold in 2029 bear 18.6%. For a 2025 departure, both the 2074-ETD and the 2074-ETS3 notices apply 17.2% (transfers from 2018 to 2025), while the act points to 18.6%, and we found no official commentary resolving this; the prudent approach is to budget for 18.6% and ask the non-residents’ tax office (SIP non-résidents of the DINR, Noisy-le-Grand) before you file. Gains deferred under article 150-0 B ter keep the rate of their year of realisation.

A US move brings no reduced rate: the CSG exemption for people covered by an EU, EEA or Swiss social security scheme (L136-6, I ter, referring to Regulation 883/2004) does not extend to US social security, and the prélèvement de solidarité applies even where it does (art. 235 ter, II). Form 2074-ETD also includes the high-income surcharge (CEHR) in the deferred amount; its application to your gain is not analysed here, so budget for it and have it checked if your income is high.

Under the global option for the progressive scale (box 2OP), shares acquired before 1 January 2018 get holding-period allowances on the income-tax base only; the retiring-manager allowance (article 150-0 D ter) needs retirement before the transfer and a sale within two years (I-3).

The deferral: automatic for the US, provided you file

Article 167 bis, IV grants an automatic deferral (sursis de paiement de plein droit) for a move to an EU state, or to another state that has concluded with France both an administrative-assistance agreement against tax fraud and evasion and a mutual-assistance agreement on recovery of similar scope to Directive 2010/24/EU, and that is not on the non-cooperative list.

On the official sources, the United States meets both conditions. The 2074-ETD notice lists “Etats-Unis” among qualifying states for transfers from 1 January 2025. BOFiP (the tax authority’s official commentary) annex BOI-ANNX-000508 (published 8 October 2025, agreements in force at 1 January 2025) names article 167 bis among the provisions needing both clauses and shows the US with both for income tax; article 28 of the 1994 treaty provides for assistance in collection. Three cautions:

• The list for 2026 departures was not yet published in October 2026: confirm it before you leave.
• BOFiP’s exit-tax commentary (BOI-RPPM-PVBMI-50-10-30) dates from 2013, before the 2019 reform, and still limits automatic deferral to EU and EEA states. Rely on the law and the current notice instead.
• For US citizens, article 28(5) of the treaty excludes US collection assistance against them. The law tests the state’s agreements, not the person, and the notice lists the US without reservation, but we found no official statement on this point.

Automatic does not mean unconditional. No guarantees, no representative and nothing to file before leaving; but you must declare the gains the following year on form 2074-ETD, ticking the automatic-deferral box (line 701), and file the follow-up 2074-ETS3 when due. A missing or incomplete return makes the deferred tax payable (IX-4; CGI annex III, art. 41 tervicies E) once a formal notice has gone unanswered for 30 days. While the deferral runs, the limitation period for collection is suspended (VI): the claim ends only by payment after a triggering event or by relief.

If the conditions are not met (a state outside the list, or a later move from the US to one), the tax is due immediately unless you request deferral (V): form 2074-ETD filed at least 90 days before departure, a representative in France, and guarantees lodged before departure equal to 12.8% of the gross gains.

What triggers the tax later, and what cancels it

The deferral ends and the tax falls due on one of the events in article 167 bis, VII-1: a sale (any transfer for value, including a contribution or exchange, except post-departure exchanges or contributions qualifying under articles 150-0 B or 150-0 B ter), a buy-back, redemption or cancellation of the shares, or receipt or assignment of an earn-out. A gift made while US resident does not end it.

Relief (dégrèvement) cancels the tax on unrealised gains (VII-2):

• Time: two years after departure, or five years if the global value exceeded €2.57 million at departure, provided you still hold the shares. This covers income tax and social levies (notice).
• Return to France before then, while still holding the shares (VII-2, VII-3).
• Death.
• Gift of the shares while resident in a qualifying state such as the US, for the fraction given.

If a sale triggers the tax, it is recomputed on the actual gain when that is lower, and cancelled on a loss (VIII-1 and VIII-2); a higher actual gain does not increase it. Part of the US tax on the sale can then be credited: see the next section.

Double taxation: no step-up in US basis on arrival

The United States does not, as a rule, reset the basis of your assets when you become resident. Basis is cost (Internal Revenue Code, section 1012), and we found no provision stepping it up on arrival. The only residency-date step-up we found is in the expatriation tax (section 877A(h)(2)), and it applies “solely” to a covered expatriate who later gives up US residence. Nor does the treaty help: unlike the US-Canada treaty (article XIII(7)), which lets a person taxed on a deemed sale at departure elect a matching basis in the other country, the France-US treaty contains no such election. So when you sell the French shares as a US resident, the US taxes the whole gain since purchase, including the part France taxed at departure.

The US gain is measured in dollars: the IRS requires foreign-currency items to be translated at the rate prevailing when paid or received, in practice the cost at the purchase-date rate and the proceeds at the sale-date rate. Currency movements alone can create a US gain or loss that does not exist in euros.

French relief. When a sale, buy-back, redemption or cancellation ends the deferral, the tax paid in your state of residence on that event is credited against the exit tax, within the final French tax (article 167 bis, VIII-5): first against the social levies, including the prélèvement de solidarité, then the remainder against income tax, each time in proportion to the French gain over the foreign tax base. BOFiP’s commentary (BOI-RPPM-PVBMI-50-10-40, §470-530, 2012, on the earlier version of the same mechanism, whose method the current 2074-ETS3 notice repeats) adds that the foreign tax must be a personal income tax computed from the same acquisition cost, with no credit for a tax computed from the departure value; that it is converted at the rate on its payment date; that you need an official document from the foreign authority showing its base and amount; and that the credit is given by relief if the foreign tax was paid first, otherwise by refund. Paradoxically, the absence of a US step-up is what makes this credit available. Whether US state and city taxes and the 3.8% net investment income tax count is not settled in the sources we found.

US relief. The treaty obliges the US to credit French income tax only “subject to the limitations” of US law (article 24(1)). Gain on a sale of personal property by a US resident is US-source (section 865(a)), and the credit is limited to US tax on foreign-source income (section 904). The treaty re-sources income as French only for US citizens resident in France (article 24(1)(b)(ii)), and article 13(6) gives the right to tax such gains to the seller’s state of residence. On that reading, expect little or no US credit for the French exit tax on this gain; have a US adviser confirm it. The IRS no longer challenges the creditability of CSG and CRDS as such, but the same limit applies.

Timing. The US taxes the sale that year; France collects only with the 2074-ETS3 the following year (IX-3). Keep the US proof of payment.

Planning. Some advisers discuss realising gains before departure so that the US basis starts at market value. In France that is an ordinary sale while resident, taxed at once at 31.4% with no deferral or later relief, and it must be checked against both countries’ rules. Discuss it with your French and US advisers before setting a departure date; it is not a default recommendation. Holding beyond the two- or five-year period cancels the French tax, not the US tax on the full gain.

Worked example: a sale in year three, taxed in both countries

Illustrative and simplified: round figures, US federal tax only, no CEHR, French credit computed as the 2074-ETS3 notice prescribes (lines 169 and 192, applying article 167 bis, VIII-5). A founder, French resident since 2012, bought shares in 2019 for €1,000,000, at $1.10 per euro: a US basis of $1,100,000. She moves to New York in September 2026, when the shares are worth €3,000,000.

1. Departure, France. Gain €2,000,000. Income tax at 12.8%: €256,000; social levies at 18.6%: €372,000. Total €628,000, deferred automatically. Her holdings exceed €2.57 million, so the relief period is five years.
2. Sale in 2029, France. She sells for €3,500,000, inside the five years, so the deferral ends. The actual gain (€2,500,000) exceeds the departure gain, so the French tax stays at €628,000: France does not tax the €500,000 earned after departure.
3. Sale, US. At $1.20 per euro the proceeds are $4,200,000 and the US gain from her original basis is $3,100,000, about €2,583,000, of which about €83,000 is currency effect alone. At an assumed 23.8% (the 20% top long-term rate plus the 3.8% net investment income tax), US federal tax is $737,800, about €614,800 (assuming $1.20 per euro also on the date the US tax is paid, the rate France uses to convert it).
4. French credit. The French gain is 77.4% of the US base (€2,000,000 / €2,583,000). First, €614,800 × 77.4% = €476,000, capped at the €372,000 of social levies, which are cleared. Then the remainder of the US tax after that credit (€614,800 − €372,000 = €242,800) × 77.4% = €188,000 against the €256,000 of income tax. French tax left: about €68,000, due with her 2074-ETS3 in 2030.
5. US credit. Probably none for that €68,000, since the gain is US-source.

Total French and US federal tax: about €683,000, against €1,243,000 if neither side gave relief; New York State and City tax would add to the US cost and is not quantified here. This credit counts the 3.8% net investment income tax as tax paid in the state of residence. If it does not count, the creditable US tax is about €516,700, the credit about €484,000, and about €144,000 of French tax remains, for a total of about €759,000; until this is confirmed, budget for the higher figure. Had she kept the shares until September 2031, the €628,000 would have been cancelled, but the US would still tax the full gain from her 2019 basis. Also unsettled: the exchange rate used for the US base in the ratio, and whether state and city taxes count.

What to file, and when

Year of departure, automatic deferral: nothing before you leave. The following spring, file form 2074-ETD, paper only, ticking the automatic-deferral box, with your 2042 and 2042 C (the French income tax return and its annex), at the tax office of your last French address. Keep a copy: the notice calls it indispensable for follow-up.

Following years: the follow-up form is 2074-ETS3. With only unrealised gains under deferral, file it only for a year in which an event ends the deferral or triggers relief; with earn-outs or deferred gains as well, file every year (the lighter 2074-ETSL suffices when nothing happened). It goes to the SIP non-résidents with a 2042 and 2042 C by the non-resident deadline, and any tax due is paid on filing (IX-3). A missing return not corrected within 30 days of a formal notice makes the deferred tax payable (IX-4; CGI annex III, art. 41 tervicies E).

Moving again: tell the SIP non-résidents your new address within two months (IX-5).

Arriving in the US: the other half

The French exit tax settles nothing in the United States. Under the substantial presence test your US residency generally starts on your first day of presence in that calendar year; under the green card test, on your first day present as a permanent resident. From then on you are taxed like a US citizen: worldwide income, Form 1040. If you hold a US 401(k) or IRA, your custodian will then need a W-9 rather than a W-8BEN, to be given within 30 days of becoming resident.

Coordinate the French and US filings on any sale. See our guide on social security when relocating from France to the US.

How Expand CPA can help

Expand CPA works on both sides of the move. We can review your situation before departure, explain the French exit-tax obligations (form 2074-ETD, the 2074-ETS3 follow-up, the conditions for relief) and the US position on arrival, and help you or your advisers meet those filings. We coordinate with whoever values unlisted shares and with your US advisers, so the French and US positions are consistent. On the points this article flags as unsettled, we set out the prudent course; the outcome cannot be guaranteed. See our global mobility services and US tax services.

If your employer is organising the move, our employer checklist for sending an employee from France to the US covers the payroll and social-security side.

Frequently asked questions

Does moving to the United States qualify for the automatic exit-tax deferral?

Yes, on the official sources: the 2074-ETD notice lists the United States for transfers from 2025, and BOFiP annex BOI-ANNX-000508 shows both agreements the law requires. Confirm the list for 2026 departures. The deferral is not unconditional: file 2074-ETD the following year and the 2074-ETS3 when due, or the tax becomes payable.

Do I pay anything when I leave France?

Not under the automatic deferral. The tax is declared on form 2074-ETD the year after departure, but payment is suspended until a triggering event or until relief applies.

Which social-levy rate applies to the exit tax?

18.6% for a 2026 departure (CSG at 10.6% since the 2026 social security financing act, plus the prélèvement de solidarité and CRDS). The 2074-ETS3 notice applies the rate in force at departure, so a later sale does not change it. For a 2025 departure both notices say 17.2% and the law 18.6%: budget for 18.6% and ask the SIP non-résidents. A US move brings no reduced rate.

Does the US give me a step-up in basis when I arrive?

Not as a general rule. Your US basis is your original cost, translated into dollars at the rate when you bought, so the US taxes the pre-departure gain when you sell. The only residency-date step-up we found applies solely to the US expatriation tax on a later departure from the US.

What if I sell my shares while living in New York?

Within the two- or five-year period, the French tax falls due with the 2074-ETS3 filed the following year, recomputed if the actual gain is lower. The US taxes the gain from your original cost. France credits part of the US tax, never beyond the French tax; the US is unlikely to credit the French tax. See the worked example.

Do I need a French tax representative?

Not for the automatic deferral. A representative and guarantees of 12.8% of the gross gains are required only for the optional deferral, when moving to a state outside the list.