Legal news

Impatriation bonus : the objective interpretation of the "similar functions" notion - Paris Court of Appeal, 16 March 2021, 19PA00956

A recent decision of Paris Administrative Court of Appeal clarifies the temporary personal income tax exemption of the impatriation bonus available to some professional sportsmen who are transferred to France to carry out their professional activity.

As a reminder, the impatriate regime, codified in article 155 B of the French Tax Code (« FTC »), allows to exempt from income tax a part of the remuneration of taxpayers who come to work in France, provided that some conditions are met. In particular, the remuneration of the beneficiary of the impatriation bonus, excluding the said bonus, shall be higher than that of other employees performing "similar functions" in the same company.

This is how the legislator attempts to attract foreign talents in France, especially professional football players.

In this particular case, a foreign taxpayer signed a contract with the Parisian club, after having spent almost his entire career in the most prestigious European clubs.
Under article 155 B of the FTC, this taxpayer claimed the exemption of a part of his remuneration as an impatriation bonus, which was paid by his Club.

However, the tax authorities, in the context of an inspection, considered that the player’s remuneration was not higher than other players performing similar functions within the Club.

According to the French Tax Authorities, the notion of « similar functions » should not be assessed solely based on the status of professional football player, as claimed by the taxpayer, but should also take into account more subjective criteria such as notoriety and comparable experience.

The Administrative Court of Appeal, following the argumentation of the Administrative Court, ruled against the French Tax Authorities, considering that the French Tax Authorities were introducing a new requirement to take into account the specific characteristics of the individuals, which was therefore not relevant.

This case underlines the practical difficulty of identifying relevant comparative elements in terms of remuneration in this sector, which involves a very large degree of individualization.

However, the objective interpretation of the Administrative Court of Appeal on the notion of « similar function » should tend to comfort the professionals of the sector on France’s attractiveness for foreign talents.