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The notion of “Tax Domicil”
The notion of “Tax Domicil” is profoundly different from that of the nationality of a person or from the main home. From a tax point of view, the «tax domicile» of a person can be sometimes difficult to determine in particular when a person arranges several housing in several countries or pay taxes in several states.
Yet, this notion of ‘’domicile’’ is important because it allows the taxpayer to know the tax regime he depends. The notion of ‘’domicile’ is defined by every State. Nevertheless, this definition is not identical in all the countries. That is why, to avoid domiciliation in two different countries, international treaties can differ from the reserved definition on the national level. What is the interest to determine the place of his tax domicile?
It is important to determine the tax domicile of a person to know his system of taxation so much at the level of the direct taxes, such as the income tax, such as at the level of transfer taxes, such as the inheritance or donation taxes.
Indeed, the ‘’domicile’’ of a person influences very certainly the applicable tax system with sometimes totally different consequences.
The persons having their tax residence in France are taxable on the totality of their income, whatever is the source and even if they result from foreign countries. The nonresidents are taxed only on their French source income.
How is the tax domicile defined in France?
The article 4 B of the General Code of the Taxes defines the notion of’’domicile’’according to three alternative criteria:
- The persons who have their home or their place of main stay in France.
It is about the usual residence of the person or of its family (child and spouse). A person working abroad can be so considered as French taxpayer if his family lives in France and even if he stayed longer abroad as in France. An international treaty signed between France and host country can allow to break this principle.
It is enough to stay more than 183 days in France (including in the hotel) to fill this condition.
- The persons who exercise in France a professional, salaried activity or not, unless this activity is exercised in secondary title there. An activity is considered as main and thus not secondary to which the interested dedicates cates more than half its time, or, failing that, which gets him more than half his world income.
Example: a Frenchman lives in a foreign country with which France concluded no treaty. This person perceives income of assets situated in France widely superior to what he perceives in his state of residence.
His tax domicile must be thus considered as being situated in France and not in the state in which he lives.
- The persons who have in France the centre of their economic interests. This notion, rather vague, can concern, for example, the destination of the investments, the head office of companies, the place of professional activity, etc. If the taxpayer has several activities or revenue streams, the Council of State considers that the centre of its interests is in the country where from the interested gets the major part of his income.
These criteria must be examined in the statutory order.
A single criterion is enough to determine the tax domicile of the taxpayer.
If the first examined criterion is not relevant, we pass in the second and so on. If none of the criteria is relevant, it is because you are not a French taxpayer.
The tax domicile is sometimes very complex to determine. Besides, in certain cases, the taxpayer can, in application of the laws of every country to be considered as having a tax domicile in two countries.
The incidence of the international tax treaties
These criteria apply only for countries not having signed a tax treaty relative to the doubles-taxations. It is about bilateral agreements intended to define the criteria of taxation between two countries. Indeed, in case of agreement between France and another country, it is the treaty itself which defines the tax domicile.
All the treaties have no same criteria as the French law. Some get closer to it. Others define the resident of a country as the one who is considered as such by the law of the country, then apply alternative criteria. Sometimes the definition of the tax domicile makes reference only to the internal law. In case of conflict of address between two countries, mechanisms of amicable settlement are planned between the administrations of both countries.
www.lepetitimmoNo 25 Juin, Juillet, A
