Employees who are tax residents in France and are shipped abroad by a European employer may be exempt from income tax on all or part of the wages earned as compensation for their activities abroad.

When the person is not entitled to full exemption, only the supplement on the salary is exempt, provided that it isn’t exceed on 40% of it remuneration, excluding those supplements (CGI art. 81 A, II). The question that arises is whether the limit of 40% should be calculated taking into account the annual salary supplements, or prorated depending on the number of days of stay abroad, so far there are no legal precedents. The court of cassation clarifies in a judgment delivered in plenary session, that there should be kept the total amount of remuneration during the tax period, not just the compensation received during the period of stay abroad.

These additional (or raw expatriation) payments are added to the “normal” remuneration received abroad; they are designed to compensate the limitations related to the separation of the family and the difficulty of working in some countries.

The chosen solution is the most advantageous to the taxpayer. It invalidates the administrative doctrine according to which it should prorate the remuneration without including the supplements to calculate the exempt limit.

The administrative doctrine determines a limit of payment (200,000€) beyond which the supplement earnings do no benefit from the exemptions (BOI-RSA-GEO-10-30-10#190: PITVII- 24640). In the case of an employee whose annual salary excluding supplements is 500,000 € and justifies the 20 days of activities abroad for a period of annual effective activity of 200 days, the maximum exemption amount is 40% x 500,000 = € 200,000 (rather than 40% x 500,000 x 20/200 = € 20,000). The yield premium received from € 40,000, which is below the limit of € 200,000€, is exempt entirely.

The scale also provides an increase in premiums in certain geographical areas; an increase in periods, setting a fixed annual ceiling adjusted every year.

Finally, taxpayers who have, in their annual tax return, limited the amount of the exemption premiums to a prorated ceiling, can form a prior complaint until 31st of December of the following two years. (LPF, Art. R 196-1, par. 2-a). In practice, it is the taxpayer who received bonuses and whose taxation period started in 2013.