St. Barths residents: what does France still tax after five years?

Yes, a St. Barths resident can still owe tax in France. Even after five years on the island, France taxes whatever remains connected to it: French-source income, real estate located in France, and inheritances or gifts received by an heir who lives in France. Here are the points of contact worth knowing.

Before five years of residency, France taxes everything

Until the five-year residency condition is met, a person living on the island is treated as having their tax home in France.

French tax	Before five years	After five years
Income tax	Worldwide income	French-source income
Real estate wealth tax (IFI)	Real estate worldwide	Real estate located in France
Inheritance and gift tax	All assets	Depends on the asset and the heir
Social levies	Due	French-source income; debated for local income

Before five years, a shareholder in an island company is taxed in France at 30% on the dividends it pays them. If they hold at least 10% of an island company whose assets are mainly financial, article 123 bis of the French General Tax Code also allows France to tax them each year on their share of the profits, even undistributed. That tax is set aside when the company has a real business and a genuine presence.

What follows concerns residents of more than five years.

Which French-source income does France tax?

A St. Barths resident is taxed in France, as a non-resident, on French-source income.

Income	French treatment
Rent from property located in France	Taxable in France
Dividends from French companies	12.8% withholding tax
Salary for work performed in France	Taxable in France
Gains on French real estate	19%, plus social levies
Gains on substantial shareholdings	Taxable in France
Services paid for by a French business	25% withholding tax, deducted by the client
Royalties paid by a French company	Same withholding tax

The 25% withholding applies to amounts paid by a payer established in France to a person or company with no permanent professional base in France, for services provided or used in France. No treaty is available to set it aside. It is a final tax: the St. Barths company has no other French return to file. See invoicing French clients.

Do St. Barths residents pay the French wealth tax (IFI)?

France’s wealth tax, the IFI, applies only to real estate. A five-year resident is treated as a non-resident: the tax covers only real estate located in France, and shares in companies holding mainly French real estate, above €1.3 million.

Inheritances and gifts: the six-out-of-ten-years rule

Assets that fall under local rules are exempt from inheritance tax in St. Barths. That exemption does not bind France, which taxes an inheritance or a gift in three situations:

• the deceased or the donor has their tax home in France: all of their assets are covered, wherever located;
• the asset is located in France;
• the heir or recipient lives in France on the day of the transfer and has lived there for at least six of the ten preceding years: everything they receive is covered, including assets located in St. Barths.

“France” here means mainland France and its overseas departments, not St. Barths. Any one of these links is enough. Between parents and children, French tax applies after a €100,000 allowance, on a progressive scale from 5% to 45%. We cover the subject in a dedicated insight.

Are French social levies owed in St. Barths?

The territorial scope of France’s social levies, known as CSG and CRDS, is set by French law. The Conseil d’État, France’s highest administrative court, in an opinion of November 20, 2013, and the tax authorities consider that they were not transferred to the island for the investment and property income of residents enrolled in a French social security scheme.

In practice, social levies are claimed on French-source investment and property income. Whether they apply to the local-source income of five-year residents is debated and handled case by case. The position should be checked every year.

Is there a tax treaty between France and St. Barths?

No treaty eliminates double taxation between the French State and St. Barths. There is only an administrative assistance agreement, signed on September 14, 2010: the two authorities exchange information and can collect tax on each other’s behalf. Double taxation is avoided through each side’s territorial rules and through a tax credit set out in the organic law, the French statute that defines the island’s status. That credit has no practical effect, since the island has no income tax. See the taxes you pay in St. Barths.

Accounts outside France: reporting obligations

For as long as a person has their tax home in France, they must report accounts held outside France (form 3916), for example in Sint Maarten or the United States. For an account opened at the St. Barths branch of a French bank, official guidance is not explicit: the prudent course is to report it, which carries no cost and no tax.

Example: an eight-year resident who keeps ties to France

Take Antoine, who has lived in St. Barths for eight years and is therefore a tax resident of the island. He has kept ties to France. This is a simplified example, for illustration only.

1. Dividends. His shares in French companies pay him €20,000 a year. Withholding tax: €20,000 × 12.8% = €2,560.
2. French clients. His consulting company, based on the island, invoices €40,000 to a business established in France, for work used in France. The client withholds €40,000 × 25% = €10,000 and pays €30,000.
3. Real estate. He owns an apartment in Bordeaux valued at €900,000 and a villa on the island. Only the apartment counts for the IFI: €900,000 is below the €1.3 million threshold, so no IFI is due. Rent from the apartment is taxable in France.

On the first two items, France collects €2,560 + €10,000 = €12,560, before any tax on the rent and any social levies.

Three years after his arrival, the picture would have been very different: Antoine would have been taxed in France on his worldwide income, and the IFI would have taken both the apartment and the villa into account.

French taxes for St. Barths residents: common mistakes

• Assuming a St. Barths company shields its shareholders from French tax: as long as a shareholder has their tax home in France, their dividends are taxed there at 30%.
• Passing assets to a child who lives in France on the assumption that the estate is exempt.
• Taking for granted that no social levies are due on dividends, interest, rent or capital gains.
• Invoicing a French business client without allowing for the 25% withholding: the client deducts it, and the net price drops by a quarter.

French taxes for St. Barths residents: the bottom line

Even after five years of residency, France still taxes St. Barths residents wherever a link to it survives: assets, clients, heirs. Their French-source income is taxed as a non-resident’s would be: a 12.8% withholding tax on dividends from French companies, and 25% on services paid for by a French business. The real estate wealth tax (IFI) only covers real estate located in France, above €1.3 million. France taxes an inheritance or a gift if the asset is in France, or if the heir has lived in France for at least six of the past ten years. The task is therefore to identify what in an estate and a family still connects to France. That inventory is best prepared with an adviser.

A note for U.S. readers: this article covers French and St. Barths rules only. U.S. citizens and green card holders remain subject to U.S. tax on their worldwide income wherever they live.