Exit tax: you cannot outwait recovery (Conseil d'État, 15 December 2025)

The payment deferral suspends the limitation period for recovery

The French exit tax rests on a deemed-disposal fiction: on the eve of the transfer of tax residence out of France, certain unrealised gains on shares and corporate rights, certain earn-out claims and certain deferred gains become taxable (Article 167 bis CGI). To avoid forcing the taxpayer to sell the portfolio in order to pay, the law organises a payment deferral — statutory (paragraph IV) or on-election (paragraph V).

That deferral has a crucial, often underestimated consequence: it suspends the limitation period for the recovery action until the date of the event terminating it (sale, buy-back, redemption or cancellation of the securities, in some cases a gift, return to France). For as long as the deferral runs, the four-year limitation period under Article L. 274 of the French Book of Tax Procedures does not elapse, and the Treasury's claim remains recoverable, sometimes many years after departure.

The facts: a 1998 departure, social levies still due in 2016

Taxpayers had transferred their tax residence to Switzerland on 8 December 1998, under the former exit-tax regime derived from the 1999 Finance Act (1 bis of Article 167 and Article 167 bis CGI). A previously deferred gain became taxable on that occasion; on their request, a payment deferral was granted.

From 2003, they stopped reporting on their annual returns the amount of the deferred social levies. They argued that this omission had made the tax immediately due (4 of II of Article 167 bis) and that the recovery action was time-barred, no interrupting act having occurred within four years. Having finally paid those levies in 2016 — after the administration registered mortgages — they sought their refund on limitation grounds.

A reporting failure does not restore enforceability without a formal notice

The Conseil d'État dismissed the appeal. For the application of 4 of II of Article 167 bis, Article 91 sexdecies of Annex II to the CGI subordinated the restoration of enforceability of the deferred tax to the service of a formal notice to regularise that had remained ineffective within thirty days. As no such notice had been sent following the taxpayers' omission, enforceability had never been restored; the limitation period had remained suspended, so that the levies paid in 2016 were not time-barred.

The Court further confirmed that those regulatory provisions breach neither 4 of II of Article 167 bis nor the legislature's competence (Article 34 of the Constitution): they merely specify how the administration may establish the reporting failure. In substance, a taxpayer cannot rely on his own wrongdoing — his reporting default — to escape payment of the tax.

Significance for the current regime (transfers since 2011)

The case concerned the former regime, but its solution is transposable to the regime in force, applicable to transfers made since 3 March 2011: the reporting obligations and the sanction for breaching them are built along similar lines. Under the current regime, immediate enforceability following a reporting failure is restored only after a formal notice to regularise has remained unanswered for thirty days, under Article 91 quaterdecies of Annex II to the CGI, taken for the application of paragraph IX of Article 167 bis.

In practical terms, ceasing to file the follow-up 2074-ETS returns does not "erase" the exit tax: it instead exposes the taxpayer to forfeiture of the deferral, to default interest and surcharges, while keeping the claim recoverable. Time does not work in favour of the silent taxpayer.

Key takeaways

• The exit-tax payment deferral suspends the limitation period for recovery until the terminating event.
• A reporting failure (missing follow-up return) does not, by itself, restore immediate enforceability: an unanswered formal notice is required (Article 91 quaterdecies, Annex II, CGI, under the current regime).
• You cannot, therefore, rely on your own reporting default to invoke the limitation period and escape the exit tax.
• Best practice: keep Form 2074-ETD (year of transfer) and Form 2074-ETS (annual follow-up) up to date, notify any event affecting the securities without delay, and document the deferral's expiry.