Tax Implications for Expatriates in Kuwait and France

Extract

[...] Indirect implantation of a subsidiary in Kuwait 1. The creation Article 209 C of the CGI on the declarative obligations of French companies holding participations in foreign entities provides declarative obligations in France, although the costs related to this creation may be deductible. 2. The exploitation Article 6 relating to the profits of companies and Article 19 relating to double taxation of the 1982 fiscal convention between France and Kuwait provide that For a subsidiary, profits will be taxed in France when they are repatriated, while for a branch, they will be taxed immediately. [...]

[...] LEPRINCE is expatriated to Kuwait at the time of the transfer, he would no longer be a French tax resident, but capital gains on the transfer of shares in French companies could still be taxed in France according to French legislation in force, unless otherwise provided by a tax treaty. In the event of expatriation to the United States, the Franco-American tax convention generally provides that capital gains on securities are only taxable in the state of residence. If Mr. LEPRINCE is a US tax resident, the capital gain would in principle be taxed in the United States and not in France. However, US taxation of capital gains may apply. If Mr. [...]

[...] According to the Franco-American tax convention, branches are generally treated as stable establishments, and their revenues are directly taxable in the state of residence of the parent company, here France. It should be noted that for transfer prices, the scheme must respect the rules of full competition in intragroup transactions, including for branches. This setup would allow for minimizing administrative complexity by avoiding the creation of a distinct Kuwaiti branch. Financial flows would be easier to manage, and setup costs reduced. However, the tax advantage could be limited if the profits of the Kuwaiti branch are taxed in France or the United States according to the tax conventions. [...]

[...] In addition, the profits made by the Kuwaiti entity would be used to grant loans to the French company at a rate of 9%. He wonders if this scheme is optimal, and what would be the interest of a triangular structure including the United States if the Kuwaiti entity did not have a moral personality. He asks for your opinion on this scheme and emphasizes the interest of the triangular scheme with the United States if the Kuwaiti entity did not have a moral personality. [...]

[...] Also, the salaries, wages and other similar remunerations received by a resident of one Contracting State (Kuwait) in respect of an employment exercised in the other Contracting State (France) are taxable in that other State (France). However, if the Kuwaiti resident works from Kuwait for a French company, the salaries are not considered to be received for an employment exercised in France. Consequently, these salaries should not be taxable in France but only in Kuwait. It is important to structure your income to avoid any risk of requalification as French source income. Also, in case of transfer of your fiscal residence, your income will not be taxed in France. [...]