French exit tax is one of the most misunderstood — and most feared — issues for people considering leaving France to establish themselves in Andorra. Yet with proper planning and the right advice, it is entirely possible to manage this tax efficiently, and in many cases to minimise or defer it entirely. This complete guide explains how French exit tax works, what triggers it, and the key optimisation strategies available in 2026.
What is French Exit Tax?
French exit tax, codified in Article 167 bis of the French General Tax Code (CGI), is a mechanism for taxing unrealised capital gains on certain financial assets when an individual transfers their tax domicile outside France. It was introduced to prevent French taxpayers from waiting until they become residents of a low-tax country before selling their shareholdings, thereby avoiding French capital gains tax.
Who is Affected?
Exit tax applies to individuals who meet two cumulative conditions at the time of their departure from France:
- Having been tax-resident in France for at least 6 of the preceding 10 years
- Holding qualifying assets with a total value exceeding €800,000, OR holding a participation exceeding 50% of the profits of a company
If either condition is not met, exit tax does not apply. For example, a French national who has lived in France for fewer than 6 of the last 10 years is not subject to exit tax, regardless of asset value. This is worth checking carefully for those who have already spent time abroad.
Which Assets Are Covered?
Exit tax covers unrealised gains on: securities and company shares (SARL, SAS, SA interests), rights to profits (BSPCE, stock options, warrants), deferred consideration clauses (earn-outs), and collective investment fund units where the total value exceeds €800,000. Importantly, exit tax does not apply to real estate (which remains taxable in France on disposal regardless of the seller’s residence), ordinary bank accounts, or euro-denominated life insurance contracts.
The Deferral Mechanism: The Key to Exit Tax Management
The most critical point about French exit tax is the automatic deferral of payment available to taxpayers who move to a country with which France has a tax recovery assistance agreement — which includes Andorra. This means you do not have to pay exit tax when you leave France. The tax is simply declared and its payment suspended. It only becomes payable if you sell the qualifying assets after departure, make a gratuitous transfer (gift or inheritance), transfer your domicile to a non-treaty third country, or — if you return to France, it is cancelled entirely.
Exit Tax Cancelled on Return to France
Since the 2019 reform, if you return your tax domicile to France within 5 years of departure without having sold the assets in the meantime, the exit tax is entirely cancelled. This safety net makes the mechanism far less burdensome than it appears for those considering a temporary Andorran residency.
Optimisation Strategies
1. Sell Before Departure
In some cases it can be more advantageous to sell shares before the tax domicile transfer — particularly if you qualify for duration-of-holding allowances (available for shares acquired before 2018 under the standard tax regime). The French tax actually paid may be lower than the exit tax calculated on the full unrealised gain.
2. Use the Deferral — Sell from Andorra
By using the payment deferral, you transfer your domicile to Andorra, then sell your shares from Andorra. The realised gain is taxable in Andorra at 10% (vs 30% in France). The exit tax declared at departure becomes payable, but it is calculated on the unrealised gain at departure date — if the share value has not increased significantly between departure and sale, the two amounts approximately offset each other, with a net tax saving from the rate differential.
3. Contribution-Sale Rollover
Contributing your shares to a French holding company before departure, using the tax rollover regime (Article 150-0 B ter CGI), can defer the capital gains tax on the contribution itself. Combined with exit tax and the Franco-Andorran convention, this strategy can in some cases significantly reduce the overall tax burden. This type of structure requires very precise legal and tax analysis by qualified professionals.
Frequently Asked Questions
Important notice: This guide is provided for information purposes only. Each taxpayer’s situation is unique, and we strongly recommend consulting our experts before making any decisions. Contact our tax advisors for a personalised assessment, or discover our Andorra residency services.