Leaving France to settle in Andorra quickly raises a question: What about the exit tax at the time of departure? One key difference sets this destination apart: unlike when moving to Spain or Portugal, a payment deferral is not automatic here, which means specific procedures and guarantees must be planned for in advance. This article details the mechanism, calculation, procedures, and legal strategies, drawing on official texts rather than the approximations circulating elsewhere.
What is the exit tax, and why does it apply to moving to Andorra?
The exit tax is codified in Article 167 bis of the General Tax Code. When a taxpayer transfers their tax residence outside of France, the tax authorities consider that they have fictitiously sold their securities on the day of their departure. Unrealized capital gains—that is, the theoretical value that has not yet resulted in an actual sale—are calculated and reported as if the sale had taken place.
Created in 2011, the measure is designed to prevent abuse: to stop a business leader from building up value in France and then relocating to a jurisdiction with more favorable tax rules just before selling, in order to avoid French capital gains tax. The Court of Justice of the European Union has upheld this principle, provided that the taxpayer is not immediately penalized in terms of cash flow; hence the existence of the deferral mechanism detailed below, which operates differently for Andorra than for a European destination.
Are you interested in setting up a business in Andorra? Check out our article on starting a business in Andorra.
Who is affected: the two cumulative conditions
The exit tax does not apply to all departures. Two conditions must be met simultaneously as of the date of the transfer of tax residence:
- Have been a French tax resident for at least six of the ten years preceding departure
- Hold corporate rights, securities, or shares with a total value of at least 800,000 euros, or representing at least 50% of a company's profits
The assets in question include stock options, bonus shares, receivables arising from an earn-out clause (in connection with a prior sale), as well as capital gains subject to a tax deferral regime, particularly those resulting from a contribution-in-kind pursuant to Article 150-0 B ter of the French General Tax Code (CGI).
One aspect that is often misunderstood concerns the stock savings plan (PEA). The PEA is excluded from the scheme as long as the plan has not been closed: the securities it holds are subject to a separate tax regime (Article 163 quinquies D of the General Tax Code) and are therefore not included in the taxable base or in the calculation of the 800,000-euro threshold. Only securities held outside of a PEA—for example, in a regular securities account—are taken into account. Digital assets, however, are not covered by Article 167 bis as the text currently stands.
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Calculating the exit tax: method and example with figures
Unrealized capital gains are calculated simply as the market value of the securities on the date of the change in tax residence, minus their purchase price or acquisition value. Since the Social Security Financing Act for 2026, the applicable overall rate is 31.4% (12.8% flat tax on income and 18.6% in social security contributions, with the CSG having been raised from 9.2% to 10.6%), to which may be added, for high-income earners, the exceptional contribution up to a limit of 4%.
As an option, taxpayers may choose the progressive tax scale instead of the flat rate, with a holding period deduction of 50% (for holdings between two and eight years) or 65% (for holdings beyond eight years). This choice is only relevant if the taxpayer’s actual marginal tax rate remains below the flat rate of 31.4%, which requires a detailed simulation prior to retirement rather than a default choice. A separate mechanism exists for executives retiring: Article 167 bis, I-3 of the General Tax Code (CGI) allows for the application of the fixed deduction of 500,000 euros provided for in Article 150-0 D ter, provided that the taxpayer has claimed their retirement benefits prior to the transfer and sells the securities within the following two years.
In the vast majority of cases, this amount is not immediately due. It all depends on the payment deferral period.
Payment Deferral to Andorra: Why It Isn't Automatic
This is the point that most content on this topic addresses only vaguely, even though it has a direct financial impact.
Article 167 bis, IV of the General Tax Code provides for an automatic deferral, without the need to post a security, for transfers to a Member State of the European Union or to a third country that has concluded with France both an administrative assistance agreement against tax fraud and a mutual assistance agreement for tax collection comparable to European Directive 2010/24/EU.
Andorra does not meet this two-part requirement. The tax administration’s official table (BOFiP, Annex BOI-ANNX-000508, current as of January 1, 2025) indicates that for Andorra: there is an information exchange clause in effect, stemming from the 2013 France-Andorra tax treaty, but no clause on international administrative assistance for tax collection. However, the exit tax requires this second provision to qualify for automatic deferral.
A move to Andorra therefore constitutes an optional deferral (Article 167 bis, V of the General Tax Code), which requires the fulfillment of three cumulative conditions: expressly filing the request; designating a tax representative established in France who is authorized to receive communications regarding the tax base, collection, and tax disputes; and providing security to the public treasurer prior to departure. Failure to meet any one of these three conditions results in the loss of the deferral, and the calculated tax becomes immediately due.
On this last point, a clarification is in order: the amount of the guarantees is not equal to the total calculated exit tax, contrary to what is sometimes reported. The text of Article 167 bis, V sets this amount at 12.8% of the gross amount of the capital gains in question, without applying any deductions. In the example above, the guarantees would amount to 153,600 euros, not 376,800 euros.
The request for a deferral and the capital gains declaration are made on a single form, Form No. 2074-ETD, which must be filed with the Nonresident Individuals Tax Office no later than 90 days before the transfer. There is no separate form specifically for a “deferred payment commitment.”
Tax Relief: When Is the Exit Tax Permanently Waived?
Once a stay of execution has been granted, it requires that the securities be retained without being sold for:
- 2 years, if the total value of the securities is less than 2,570,000 euros on the date of departure
- 5 years, if this value is equal to or greater than this threshold
Upon the expiration of this period, provided there has been no transfer or other triggering event, the exit tax is fully waived. The sale of the securities, their repurchase, the liquidation of the company, or the death of the taxpayer terminates the deferral before its expiration and renders the tax due. Throughout the deferral period, an annual follow-up return (Form 2074-ETS or its simplified version, Form 2074-ETSL) must be filed.
Legal Strategies for Reducing the Exit Tax Before Moving to Andorra
There are several options available, provided they are planned 12 to 24 months before departure.
The transfer of securities to a French holding company under the tax deferral regime provided for in Article 150-0 B ter allows for the deferral of taxation at the time of the transfer. Please note, however, that this deferred capital gain remains expressly subject to the exit tax at the time of departure; it does not eliminate the tax liability.
The partial sale of securities prior to departure reduces the remaining unrealized capital gain by the same amount and may, in some cases, bring the value back below the 800,000-euro threshold. Dilution to less than 50% of the capital—through a capital increase open to a new partner—is also an option, but must be based on sound economic rationale; otherwise, it may be reclassified as an abuse of rights.
For executives nearing the end of their careers, the fixed deduction of 500,000 euros mentioned above remains the most directly actionable option. These transactions cannot be carried out without the assistance of a tax specialist.
Who Can Become an Andorran Tax Resident: The Criteria to Meet
The exit tax is triggered upon the transfer of tax residence, but this transfer is recognized only once tax residence in Andorra has been effectively established. Obtaining an Andorran residence permit—whether active or passive—is an administrative procedure that, on its own, is not sufficient to change one’s tax residence.
The protocol annexed to the France-Andorra tax treaty specifies the criteria: a resident of Andorra is any person who stays there for more than 183 days per calendar year, or who has the center of their economic interests there, or who carries out their main professional activity there. The text explicitly excludes individuals who are presumed to be residents solely on the basis of their Andorran nationality or possession of a residence permit without meeting any of these criteria.
A miscalculated discrepancy between the date of the residence permit and the date of actual tax residency may result in temporary dual residency or a challenge to the transfer by the French authorities.
Exit tax and the France-Andorra tax treaty: two mechanisms that should not be confused
The exit tax is levied on unrealized capital gains as of the date of the transfer of tax residence. It is governed exclusively by French domestic law and applies even before the taxpayer becomes a tax resident of Andorra.
The France-Andorra tax treaty, signed in Paris in 2013 and in effect since 2015, applies at a different stage: it allocates the right to tax capital gains actually realized after the taxpayer has effectively taken up residence in Andorra. Article 13, however, distinguishes between two situations that should not be confused. For equity interests classified as substantial—that is, representing at least 25% of the profits of a company resident in France or Andorra—France has negotiated a specific exception to the OECD model: the right to tax the capital gain on the sale remains with the company’s country of residence, not with the seller’s country of residence. For non-substantial equity interests, by contrast, the right to tax lies exclusively with the seller’s country of residence.
This nuance has a practical consequence that is often overlooked: the 50% threshold of corporate profits that triggers the exit tax far exceeds the 25% threshold used in the treaty to classify a stake as “substantial.” For many executives subject to the exit tax under this criterion, France therefore retains the right to tax the capital gain actually realized upon a subsequent sale, even after full Andorran tax residency has been established. It is only for equity interests below the 25% threshold that the transfer of residency effectively neutralizes French taxation on future capital gains. In any case, this does not affect the exit tax itself, which has already been calculated and, where applicable, deferred at the time of departure: these are two distinct layers of taxation. For income from French sources received after departure (dividends, rent), the treaty also provides mechanisms to eliminate double taxation, generally in the form of a tax credit.
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Beyond the Exit Tax: Other Formalities to Plan for
The exit tax is not the only step involved in moving to Andorra. Declaring a change of tax residence, updating social security records, filing the annual declaration of foreign bank accounts (Form 3916), and handling French life insurance policies are all part of a broader checklist that goes beyond the scope of this article.
