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Are Relocation and Moving Expenses Taxable in France?

One of our clients is a US-based firm that works with startup companies and does business in France.  Because they assign employees long term they had a question about paying relocation and moving expenses.  They wanted to know if those expense reimbursements or allowances for relocation are tax-free to the employee in France, similar to the US.

Every company that assigns employees abroad will incur relocation costs, but some of those will be either reimbursed directly to the employee or paid from an allowance.  In our experience, taxability varies from country to country, and here is how we addressed their questions about France.

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Questions From the Client about Taxable Expenses in France

How do we handle payments for relocation, for example transportation costs, moving personal items and temporary lodging upon arrival?

In France, allowable relocation expenses must be documented by receipts and with an expense report, and submitted to the local partner handling payroll.  That is the only way to avoid having those payments taxed.

Can those amounts be reimbursed directly to the employee, or do they have to be included as a taxable part of compensation in the payroll?

The non-taxable items can be reimbursed directly, but any expenses that are taxable (or lump sum allowances that are not documented with receipts) will have to be processed through payroll as a bonus.  The bonus would incur both income tax and social security withholding as any other compensation. If the employer chooses, they can offset those amounts on behalf of the employee, and the total cost will depend upon whether the bonus is paid as a gross or net amount.

In France, is there a maximum moving expense reimbursement amount?

There is no maximum amount as long as the expense is documented and appears to be reasonable under the circumstances. But it should be noted that lump sum relocation allowances without receipts or expense reports will be treated as a taxable bonus to the employee.

Are there specific expenses that can and cannot be covered or reimbursed by the company?

The following are examples of expenses are allowed in France to be reimbursed tax free:

  • Actual moving expenses
  • Air/ground travel and hotel for the employee and their family
  • Travel for pre-assignment search for a residence (up to 3 trips) for the employee and one other person
  • Furniture storage

You can see a more complete listing of allowable relocation expenses here, and you can see that almost any imaginable expense is non-taxable if well-documented.  

How Does Shield GEO Help Clients with Relocation Expense Payments in France?

Because all of our clients have to deal with relocation costs for assignments abroad, we are well versed in how to structure those payments and reimbursements in each country.  Any taxable amounts are run through the local payroll using the Employer of Record, in this case located in France.  All withholding and computations are handled for you, so there is no risk of mistakes or underpayment.

This is only one aspect of the Shield GEO employment solution, which covers all elements of immigration, payroll and local employment for your staff on assignment. 

Looking to hire an employee in France? Get in touch!

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