Want to develop your entrepreneurial project? There are a number of important steps you need to take before you can start developing your business, such as setting up an administrative or tax domicile.
What is domiciliation fiscale?
For many people, tax domicile is an abstract yet central step, enabling them to determine the tax system to which they belong. It is difficult to pin down, as it is possible to own homes in different states, or even pay taxes in several countries.
This notion is defined by each State, resulting in sometimes very different definitions. However, in order to avoid a person being domiciled in two states at the same time, international conventions can derogate from these national rules.
However, we still need to provide more details on tax domiciliation.
From a tax point of view, domiciliation is the means by which national administrations identify a company, enabling them to determine the tax regime with which it will have to comply.
This is particularly the case for taxation rules
This explains why some companies choose to domicile their business outside France, in order to benefit from tax advantages that are often far more advantageous. It's vital not to deviate from the law, otherwise you run the risk of falling foul of the law.
According to the French General Tax Code (CGI), domiciliation and the place of taxation correspond to the place of "the person's main establishment", whether a legal entity or an individual.
As article 4.5 of the CGI clearly states, an individual is considered to have his or her tax home in France if three criteria are met.
- Firstly, it depends on whether the individual has a home or main residence in France.
- It may also be linked to the fact that the individual has a professional activity in France, whether salaried or not. The individual can override this criterion by demonstrating that his or her professional activity is incidental.
- The final criterion for defining a tax domicile is whether or not the individual has the center of economic interests in France.
Only one of these three criteria is sufficient to define a tax domicile, not all three.
These criteria appear to be necessary and sufficient
Determining tax domicile is a strategic decision. Indeed, as we have already seen, it is necessary to define the tax regime to which an individual will be subject withIncome Tax, or a legal entity withCorporation Tax. It is also essential for determining the transfer duties to which the individual is subject, whether for an inheritance or a gift.
Finally, a clear distinction needs to be made between domiciliation for tax purposes and domiciliation for postal purposes. While domiciliation for tax purposes is an address used to establish a company's nationality, but also to determine its legal and tax address, in the eyes of the authorities, the postal address is the company's official contact address. These two locations don't necessarily have to be the same, and their choice should be as strategic as possible, depending on the company's needs.
In this case, however, both addresses must be reported to the tax authorities.
Written by our expert Quentin MOYON
January 26, 2018
