Distinction between the automatic deferral under paragraph IV (EU and treaty States) and the optional deferral under paragraph V (Dubai, third States). Cumulative conditions, lapse events, and a comparative table.
Payment deferral is the mechanism that makes the exit tax workable in practice. Without it, the taxpayer would be forced to dispose of all or part of his portfolio to immediately pay the tax — a result at odds with the very purpose of the deemed-disposal fiction. The deferral allows payment to be postponed until a lapse event occurs or until the tax is ultimately relieved.
Paragraph IV of article 167 bis CGI provides for a deferral granted as of right, by operation of law, where the transfer is made:
For transfers occurring up to 31 December 2018, the automatic deferral was limited to departures to an EU Member State, Norway or Iceland; Law no. 2018-1317 of 28 December 2018 (art. 112) broadened the scope of paragraph IV as from 1 January 2019.
Under the automatic deferral, no guarantee is required and no fiscal representative is needed. The annual reporting obligations (Form 2074-ETS) were streamlined by the 2019 reform.
The United Arab Emirates does not satisfy the dual condition required by the statute: it is not a member of the EU, and the France-UAE tax treaty of 19 July 1989 (as supplemented by the protocol of 6 December 1993) contains no mutual-assistance clause for the recovery of tax claims within the meaning of paragraph IV. The automatic deferral is therefore unavailable for a departure to Dubai. The optional deferral under paragraph V must be sought instead.
Paragraph V of article 167 bis CGI provides that, where the transfer falls outside the scope of paragraph IV, the taxpayer may elect for a deferral. The election is exercised with the French tax authority and is subject to the following cumulative conditions:
The taxpayer also remains subject to the follow-up reporting obligations (Forms 2074-ETS), subject, for transfers occurring since 2019, to the exemption from annual filing where the deferral covers only unrealised gains.
| Criterion | Automatic deferral (IV) | Optional deferral (V) |
|---|---|---|
| States covered | EU / treaty States (assistance against fraud + recovery), excluding ETNC | All other States (including the UAE) |
| Grant | As of right, by operation of law | Upon express election by the taxpayer |
| Guarantees | Not required | Required: 12.8% of the gross amount of gains and claims (Article 167 bis, V-1 of the CGI) |
| Fiscal representative | Not required | Mandatory |
| Lead time | None | 90 days before the transfer (Form 2074-ETD + guarantee proposal) |
| Annual filings | Form 2074-ETS — annual filing waived since 2019 where the deferral covers only unrealised gains | |
| Cost to the taxpayer | Effectively nil | Cost of guarantees + fiscal representative |
The deferral ends and the tax becomes immediately due upon the occurrence of any of the following events:
The death of the taxpayer is, by contrast, not an enforceability event for unrealised gains and earn-out claims: it triggers relief of the deferred tax or its refund (Article 167 bis, VII of the CGI), only certain gains placed in deferral under former regimes becoming due.
The payment deferral has the statutory effect of suspending the limitation period for the recovery action until the date of the event terminating it. For as long as the deferral runs, the four-year period of Article L. 274 of the LPF does not elapse: the Treasury's claim remains recoverable, sometimes many years after departure.
Above all, a mere reporting failure does not, by itself, start the limitation period running. Under the current regime, the immediate enforceability triggered by a breach is restored only after a formal notice to regularise has remained unanswered for thirty days (Article 91 quaterdecies of Annex II to the CGI, for the application of paragraph IX of Article 167 bis). A taxpayer therefore cannot rely on his own reporting default to escape payment of the exit tax.
Taxpayers who had moved to Switzerland in 1998 stopped reporting their deferred social levies on their returns from 2003. In the absence of any formal notice from the administration, the Conseil d'État held that enforceability had never been restored and that the limitation period had remained suspended: the levies, paid in 2016, were not time-barred. The solution is transposable to the current regime.
For a departure to Dubai, there is no choice: only paragraph V applies. The strategy then consists in structuring the deferral so that it ultimately benefits from tax relief at expiration (2 or 5 years depending on the portfolio value) rather than being triggered by an actual disposal. That is the entire purpose of the wealth-planning work that must accompany the transfer.
A one-hour video conference to review your situation, calibrate your exit tax exposure, and secure your transfer to Dubai. Fee: AED 2,000 (approx. USD 545).
Book an AuditReferences current as at the date of last revision, cited for information only. Any application to a particular situation requires an individualised analysis.
Legislation
Administrative doctrine (BOFiP)
Case law