Individuals domiciled in France are, unless otherwise provided by an applicable tax treaty, taxable in France on their worldwide income. Similarly, resident individuals who are both ordinarily resident and domiciled in the UK are liable to tax on their worldwide income and gains, wherever these arise.

In France, individuals are also subject to wealth tax (impot de solidarite sur la fortune) with respect to assets (owned on 1 January of a given tax year) valued at more than E790,000 (£679,000) for 2009. French residents are liable to this tax with respect to their worldwide assets, whereas non-residents are liable to wealth tax with respect to their French assets only (this being one of the main reasons why wealthy French individuals move abroad).

Differences between the French and UK rules
The new legislation in France allows employees and managers, either directly employed by a French company or employed by a foreign company and seconded to France, to benefit from an impatriate exemption bonus for the year of their taking office until 31 December of the fifth year of their stay in France.

To qualify for such an impatriate exemption, employees and/ or managers must:

• become tax resident in France with commencement of their professional activity, therefore becoming subject to French income tax; and
• have not been resident in France for the five calendar years immediately preceding their taking office.

Firstly, the UK's remittance basis regime applies to all unremitted income, which remains tax-free for persons who are resident but non-domiciled in the UK. In other words, there is no cap on the amount of, or restriction to the type of, income covered.

The opposite is true for France where the impatriate exemption is limited to certain income and is also subject to a minimum salary test, i.e. in theory, the impatriate bonus is not capped but the remuneration of the French impatriate that is subject to income tax must be at least equal to that paid for employees who have similar functions in the same company or, failing that, in similar companies established in France.

Secondly, French impatriates receiving foreign investment income (e.g. dividends, capital gains and intellectual or industrial property rights) benefit from a 50% exemption on their income (either remitted to France or not), whereas in the UK the taxpayer may receive a full exemption on all income remitted out of the UK.

The final layer to the French regime comes where an employee moves to other countries during their employment contract in France. Here, individuals may benefit from either a 20% exemption on their salary for the days that they spent abroad or a 50% global exemption up until the time spent abroad.

Suppose now that an employee moves to France and begins work in one company, say in 2010, and in 2012 moves to a different company. The employee would loose their impatriate exemption, as at commencement of the second post the employee would have already been resident in France for two years.

Contemporaneously, UK taxpayers are able to opt to pay the remittance basis charge in one year, and opt out in the next year.

In the UK, benefits under the remittance basis do not "expire" (unlike in France). However, the rules are tightened to include a remittance basis charge of (currently) £30,000 where the taxpayer has £2,000 or more in unremitted foreign income and/or gains and has been resident in the UK for at least seven of the previous nine tax years.

It is also worth noting that the French rules do not penalise impatriates, whereas individuals opting for the UK's remittance basis lose their entitlement to any personal allowances (currently £6,475 for tax year 2009/10). Therefore, it is important for UK taxpayers to consider whether the personal allowances, any annual exempt amount (and remittance basis charge) outweigh savings on the unremitted income.

Finally, and perhaps disappointingly, the new impatriate rules only provide for a partial wealth tax exemption, which applies to both professionals and non-professionals. The rules allow individuals who become tax resident in France to exclude foreign assets from their wealth tax base during a five-year period (from their arrival date in France), provided that they have not been French tax residents during the five years preceding their arrival. This limits the impact of wealth tax but does not exactly compete with the UK, where no wealth tax exists.

Serious challenger?
Do the new French impatriate rules seriously challenge the UK's remittance basis? It seems likely that they would attract people back to France, at least in the short term. Though it is difficult to attribute any sustained immigration to the rules given the fixed period impatriate exemptions enjoy and uncertainty surrounding changes the 2012 French elections may bring. On the other hand, these rules have seen a general trend for French taxes to lower and, as the UK's increase, people may think twice before moving across the Channel.

Those who have been long-term expatriates may seriously consider coming back to France.

Dimitar Hadjiveltchev and Panayiota Petrou are lawyers at CMS Bureau Francis Lefebvre