The Finance Act for 2025, passed by the French National Assembly on February 5, introduces a major change in the tax auditing of non-resident taxpayers: the tax authorities’ recovery period is now extended to ten years (plus the current year) in the event of a challenge to the tax domicile abroad.
A measure targeting false declarations of non-residence
This reform responds to a long-identified problem: some taxpayers wrongly declare a tax residence outside France in order to avoid taxation on their income, assets or transfers. However, according to the legislator, proving the fictitious nature of this non-residence requires long and complex investigations, often incompatible with the standard three-year recovery period.
The legislator therefore felt that extending the time limit was justified in these situations, following the example of the time limit already applicable to failure to declare foreign bank accounts or capitalization contracts.
Extending the scope of the ten-year recovery period
Until now, the extension of the recovery period to ten years only concerned taxpayers who failed to declare certain assets held abroad, and only income or assets linked to these accounts.
The Finance Act for 2025 extends this extended deadline to all situations where the tax authorities dispute the taxpayer’s foreign tax residence, even in the absence of undeclared accounts. The aim of this provision is to make control procedures more secure, and to give the tax authorities greater leeway in complex cases, particularly where evidence is scattered across several countries.
Extended scope of application
According to the explanatory memorandum, this new recovery period applies to several taxes and procedures:
- Income tax
- Property wealth tax (IFI)
- Free transfer duties (gifts and inheritances)
The text specifies that this extension applies to recovery periods expiring from the day after publication of the Finance Act.
Increased vigilance for expatriate taxpayers
This measure calls for particular attention on the part of taxpayers who have transferred their tax residence outside France or are considering expatriation. Justification of tax residence is based on objective criteria, such as home, center of economic interests or place of professional activity. Any situation that is ambiguous or poorly documented can now be the subject of an audit over a much longer timeframe than was previously the case.