OECD - France: The habitual residence criterion for determining the country of residence for tax purposes

Conseil d’État, 8ème – 3ème chambres réunies, 16 juillet 2020, N° 436570 Publié au Recueil Lebon (annulment with referral)

Resolution of situations in which the taxpayer is considered a resident of each of the Contracting States under their respective laws:

Application of paragraph 2 of Article 4 [1] of the Franco-Brazilian Convention concluded on 10 September 1971 between France and Brazil for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income[2].

In line with the OECD's 2017 Commentary on the Model Tax Convention on Income and on Capital, the Conseil d'Etat ruled that "habitual residence in a State is assessed with regard to the frequency, duration and regularity of stays in that State which form part of the person's normal rhythm of life and are more than transitory in nature, without there being any need to determine whether the total duration of the stays there exceeds half the year".

[3], which "refers to the number of days spent in the State in question. While it is not required, in order to characterise a "main stay", that the person concerned has resided in the State concerned for more than six months (...) the main stay in France is characterised when the taxpayer has resided there for significantly longer than in any other State during the same year (...)"[4].

The (treaty) criterion of habitual residence is distinct from the (French) criterion of principal residencel[3] [3], which "refers to the number of days spent in the State in question. While it is not required, in order to characterise a "main stay", that the person concerned has resided in the State concerned for more than six months (...) the main stay in France is characterised when the taxpayer has resided there for significantly longer than in any other State during the same year (...)".[4]

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NOTES:

[1] For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that Contracting State, is liable to tax therein by reason of the person's domicile, residence, place of management or any other criterion of a similar nature. 2. Where by reason of the provision of paragraph 1 an individual is deemed to be a resident of both Contracting States, then the case shall be resolved according to the following rules: / (a) Such individual shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. Where he has a permanent home available to him in each of the Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests); / b) If the Contracting State in which such person's centre of vital interests is situated cannot be determined, or if such person has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode; c) If such person has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national; ... ).

[2] The Franco-Brazilian treaty is based on the OECD Model Tax Convention.

[3] Article 4 B CGI: "1. The following are considered to be domiciled in France for tax purposes within the meaning of article 4 A: a. Persons who have their home or main place of residence in France; b. Persons who carry on a professional activity in France, whether employed or not, unless they can prove that they are not employed in France. Those who carry out a professional activity in France, whether salaried or not, unless they can prove that this activity is carried out on an ancillary basis; c. Those who have the centre of their economic interests in France. 2. State employees who perform their duties or are entrusted with a mission in a foreign country and who are not subject in that country to personal tax on all of their income are also deemed to have their tax domicile in France."

[4] Conclusions of Ms Karin CIAVALDINI, Public Rapporteur.

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