The Côte d’Azur attracts new international residents every year, drawn by its exceptional quality of life. However, settling in France comes with lesser-known tax pitfalls that can prove costly. Here are the five most frequent mistakes observed among recently established expatriates.

Underestimating Worldwide Reporting Obligations

France applies the principle of worldwide taxation: once you are considered a French tax resident, all your global income must be declared, including income from foreign sources. This obligation extends to bank accounts held abroad (declaration no. 3916), life insurance contracts taken out outside France, and trusts.

Failure to comply with these reporting obligations carries significant penalties: €1,500 per undeclared account (€10,000 if the account is held in a non-cooperative state), plus late payment penalties of 80% on evaded taxes.

Ignoring Bilateral Tax Treaties

France has signed over 120 bilateral tax treaties to prevent double taxation. Each treaty assigns the right to tax certain income to one state or the other, according to specific rules. Dividends, interest, property capital gains and retirement pensions each follow different rules depending on the country of origin.

Failing to leverage these treaties can lead to effective double taxation. Conversely, careful analysis can sometimes significantly optimise the overall tax burden, particularly through the tax credit mechanism or the exemption with progression method.

Neglecting the IFI from Year One

The Impôt sur la Fortune Immobilière (IFI — wealth tax on real estate) applies once your net taxable real estate assets exceed €1,300,000. For new residents, a temporary exemption regime exists during the first five years: only assets located in France are taxable (Article 964 of the French Tax Code).

A common mistake: voluntarily declaring the entirety of one’s global real estate from the first year, when the impatriation regime allows a partial exemption. Conversely, omitting to declare French assets in the belief of benefiting from a total exemption constitutes a major reassessment risk.

Failing to Anticipate the Exit Tax

If you hold significant participations (more than 50% of a company’s rights, or a portfolio value exceeding €800,000), a transfer of tax domicile outside France will trigger the exit tax on latent capital gains. This mechanism, often overlooked at the time of arrival, can become a major obstacle upon future departure.

Anticipating this issue from the outset allows holdings to be structured in a way that limits future impact: contribution to a company, donation before transfer, or choice of an appropriate holding vehicle.

Overlooking Cross-Border Succession Planning

France has one of the heaviest succession regimes in Europe, with rates reaching 45% in direct line above €1,805,677. For expatriates holding assets in multiple jurisdictions, the absence of succession planning can lead to double taxation or even conflicts regarding applicable laws.

The European Succession Regulation (No. 650/2012) allows individuals to choose the law applicable to their succession (law of habitual residence or law of nationality). This choice, formalised by will, can have considerable consequences on the distribution of assets and the tax burden for heirs. A comprehensive review with a qualified wealth adviser is recommended before settling in France.

The information in this article is provided for informational purposes only and does not constitute personalised investment advice. Past performance is not indicative of future results. All investments carry risk, including potential loss of capital. Please consult a qualified adviser before making any investment decision. Riviera Wealth Management — CIF No. A325000 — ORIAS No. 11 060 879.