French tax residency tests explained after €1.2m Dubai case ruling

The importance of understanding tax residency rules has been reinforced after a couple were ordered to pay more than a million euros after being judged to have retained French tax residency despite claiming to have moved to Dubai.

The couple, not named in coverage of the case, wrote to the Paris tax office saying they were, as of the start of 2016, resident in Dubai in the Palm Jumeirah district – land reclaimed from the sea to form the shape of a palm.

They considered this sufficient to be considered Dubai residents and to benefit from Franco-Emirati double tax treaty provisions.

However, after the Paris tax office ran checks on the years 2016-2017, it claimed €1.2million in back taxes and social charges, after deciding they had not ceased to be French tax residents.

Evidence included the fact they still had a home in Paris where they maintained a rented residence, with regular electricity usage, bills issued in names of family members and French health refunds. 

The couple had also got married in Paris and had been posting about their life there on social media. They were also making money from a French company owned by the husband.

Thus, even though they had residency permits for Dubai and accommodation there they were deemed to have closer economic and personal ties in France.

France’s national rules on tax residency include several tests, the first being where the person’s ‘home’ is in the sense of where they have their habitual residency and strongest ties. 

Other tests include spending more time in France than elsewhere, having the centre of one’s economic interests here or running a business here.

Where there is uncertainty, double tax treaties often include ‘tie breaker’ rules, such as based on nationality.