Covid-19:Will lockdown affect French tax residence?

The French tax authorities have recently released guidance addressed to people who reside abroad and were forced to self-isolate in France at the time lockdown took effect.

Relying on precedents, the tax authorities consider that a temporary stay in France due to lockdown or a local travel ban is not likely to characterise French tax residence.

Here are a few observations on the matter.

Under Section 4 B-1 of the French tax code, individuals, regardless of their nationality, will be deemed a French tax resident if:

1. their home or their main place of abode is in France;
2. they carry on a professional activity in France (employment or freelance) unless they can prove that it is a secondary activity;
3. they have the centre of their economic interests in France.

Those criteria apply unless a tax treaty prevails.

The tax authorities rely on a 1995 Supreme administrative court precedent ( CE 3 November 1995, n°126513, Larcher) whereby judges ruled that, for the purpose of the application of section 4B-1, home refers to the place where the taxpayer and his nuclear family usually live, regardless of time spent abroad on business or due to exceptional circumstances, and that the taxpayer’s main place of abode may be effective to settle his tax residence only where he does not have a home.

In the case at hand, judges ruled that the claimant had is home in New Caledonia where his family lived, regardless of his trips to mainland France to visit and look after his sick mother-in-law which was to be regarded as exceptional circumstances. Judges add that his home could be determined so much so that the main place of abode criterion was ineffective to settle his tax residence.

Application to Covid-19 exceptional circumstances

The tax authorities clearly specify that a temporary stay in France due to lockdown or a local travel ban is not likely to characterise French tax residence under section 4 B-1 of the French tax code.

As a result, someone who lives with their family in the United-States, for instance, and who has been forced to stay in France indefinitely because of lockdown, retains their home in the US. Then, unless another French tax residence criterion is met, they are not to be deemed French tax resident.

Since a 2010 Supreme administrative court precedent established that the home of a single person with no dependents is the place where they usually live and where they have the centre of their personal interests (CE 17 March 2010,n°299770, Blanc), someone single who usually lives in the US and gets stuck in France because of lockdown retains their home in the US and,  unless another French tax residence criterion is met, they are not to be deemed French tax resident.

Impact of tax treaties

According to the tax authorities, where someone is temporarily forced to stay in France due to a force majeure event, it is not reason enough to consider that they fall within the scope of tax treaty residence definition to the extent that they would have a permanent home available or the centre of their vital interests in France.

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