Tax-free year to benefit expatriates

Retirees who will be moving abroad towards the end of the year will benefit fully from the tax-free year linked to the introduction of the prélèvement à la source (withholding tax).

With the introduction of the prélèvement à la source (withholding tax), income received in 2018 will be exempt from tax (excluding exceptional income and/or income excluded from the scope of the reform). Over the course of a lifetime, everyone will save a year's tax thanks to this "white year". But in reality, very few households will really feel the effects immediately, since they will pay withholding tax in 2019 on their 2019 income, in an amount roughly equivalent to that which they would have had to pay with a year's delay on their 2018 income.

The real winners are those whose incomes will fall between 2018 and 2019... or those who will not be taxed or will be taxed at a lower rate on their 2019 income. In other words, those who will be leaving France for more favorable tax jurisdictions.

Until now, French nationals moving abroad were taxed twice during their first year abroad: once in France on last year's income, and once in their new country of residence on the current year's income, since the vast majority of foreign countries already apply withholding tax. With the introduction of the withholding tax in France, this "black year" will become a "white year".

In concrete terms, retirees who have the good idea of moving abroad at the end of 2018/beginning of 2019 will not have to bear this double taxation, as they will not have to pay tax in France on their 2018 retirement pensions. If they move to a country that has signed a tax treaty with France, their retirement pensions received in 2019 will not be taxed in France but in their country of expatriation, unless it is a pension paid by the civil service scheme.

They will benefit all the more from this windfall effect, if they settle in a country where the level of taxation is lower than in France, and a fortiori in a country that has set up a specific status for foreign retirees. Portugal, for example, offers French retirees who move there the opportunity to benefit from an income tax exemption on their retirement pension for the first ten years following their move!