France-Hong Kong tax treaty: executives, shareholdings, real estate and IFI

The rules that come up in our files

• Taxes covered (Article 2). In France, income tax, corporate tax and its contributions, payroll tax, CSG and CRDS, and the solidarity tax on wealth, as well as identical or similar taxes imposed after signature; in Hong Kong, profits tax, salaries tax and property tax.
• Income from immovable property (Article 6). Taxable in the State where the property is situated. Income from shares or interests granting the enjoyment of a property held by a company is too (paragraph 5).
• Dividends (Article 10). The State of the paying company may levy at most 10% of the gross amount, whatever the percentage held; the term covers income subject to the distribution regime. French domestic law provides 12.8% for an individual and 25% for a company: the 10% rate is obtained on proof of the residence of the beneficial owner.
• Interest (Article 11). Withholding capped at 10%, exemption for certain public creditors. Under domestic law France does not levy withholding tax on most interest paid to non-residents, except payments made in a non-cooperative State or territory.
• Royalties (Article 12). Withholding capped at 10%. Fees for technical, engineering or consulting services are not royalties, nor is the mere right to distribute software without copying it: they fall under business profits (protocol, point 8).
• Real estate gains (Article 13, paragraph 1). Gains on a property are taxable in the State where it is situated; so are those on shares of a company, trust or institution deriving more than 50% of its value from immovable property situated in that State, except for shares listed on an agreed exchange (regulated markets of the European Union, Hong Kong exchange), reorganisations, and companies whose property is used for their own business.
• Substantial shareholding (Article 13, paragraph 3). Gains from the sale of shares or interests forming part of a participation of at least 25% of the profits of a company, held alone or with related persons, directly or indirectly, are taxable in the State of residence of the company. Other gains are taxable only in the State of residence of the seller.
• Pensions (Articles 17 and 18). Pensions paid in respect of past employment are taxable in the State they come from, that is the State of the payer or of the recognised pension fund. Public pensions are taxable only in the State that pays them.
• Other income (Article 20). Taxable in the State of residence, but also in the State of source where it arises (paragraph 3).
• Wealth (Article 21). Immovable property and shares of companies deriving more than 50% of their value from immovable property, other than property used for their own business, are taxable in the State where it is situated; other items in the State of residence, unless they are not taxed there, in which case the other State may tax them (paragraph 5).
• Limitation and characterisation (protocol, points 11 and 12). Where the other State taxes an item of income only in proportion to the amounts remitted to or received in its territory, the treaty benefit is limited to that part; and each State keeps the right to tax its residents in case of double exemption arising from a different characterisation.
• Anti-abuse clauses. The agreement preserves domestic anti-abuse rules (Article 27) and excludes free zones and offshore regimes (protocol, point 1). The multilateral instrument adds a general clause: a benefit is denied if it is reasonable to conclude that obtaining it was one of the principal purposes of an arrangement, unless it accords with the object of the agreement. It takes effect in France from 1 January 2024 for withholding taxes.
• Mutual agreement procedure (Article 24). The request must be submitted within three years of the first notification of the contested taxation, now to the competent authority of either State (multilateral instrument).
• Exchange of information (Article 25). Exchange on request, without transmission to a third jurisdiction; the protocol specifies that the article does not create spontaneous or automatic exchange. Automatic exchange on financial accounts rests on the Common Reporting Standard, which we follow on our page on CRS 2.0 and crypto-assets.

The agreement confirms French law

• Rents. Taxable in France (Article 6), at the progressive scale with the minimum rate of 20% then 30% for non-residents, unless the taxpayer shows a lower worldwide average rate (Article 197 A of the tax code), and subject to 17.2% social charges absent affiliation to a social security scheme of a European State.
• Capital gain on sale. Taxable in France: 19% for an individual (Article 244 bis A of the tax code), 17.2% social charges, and a 2% to 6% surcharge on taxable gains above EUR 50,000 (Article 1609 nonies G), after the holding-period allowances available to residents. An accredited tax representative must in principle be appointed. The exemption for a former main residence requires a move to the European Union or to a State bound to France by administrative assistance and recovery assistance agreements, which this agreement does not provide, a sale no later than 31 December of the year following departure, and a home not made available to third parties in the meantime: it must be checked before selling.
• Real-estate-rich companies. The gain on the sale of shares of a property company (SCI) or an unlisted company deriving more than 50% of its value from French real estate remains taxable in France, subject to the exceptions of Article 13, paragraph 1, b.
• IFI. The agreement covers the solidarity tax on wealth and similar taxes imposed after its signature; the administration points out that an agreement applicable to the ISF is not necessarily applicable to the IFI and must be examined case by case (BOI-PAT-IFI-10, § 30). The result here is the same as under domestic law: Article 21 leaves to France French real estate and shares of French real-estate-rich companies, which the IFI of a non-resident reaches when their net value exceeds EUR 1.3 million (Articles 964 and 965 of the tax code). See our page on IFI for non-residents and foreign companies.
• The other way round. A French resident who owns an apartment in Hong Kong declares it for IFI: Hong Kong having no wealth tax, the credit provided by Article 22 is nil.

Exit tax on departure, favourable regimes on return

• On departure, the exit tax. A taxpayer domiciled in France for at least six of the previous ten years who moves to Hong Kong is taxed on the latent gains on his shares where they represent at least 50% of a company's profits or exceed EUR 800,000 (Article 167 bis of the tax code). Deferral of payment is automatic towards a European Union State or a State bound to France by administrative assistance and recovery assistance agreements; the agreement providing no recovery assistance, it must be requested, with guarantees. Our exit tax guide explains the mechanism.
• After departure, the sale. If the shareholding reaches 25%, France also taxes the gain realised after departure (Article 13, paragraph 3, of the agreement; Article 244 bis B of the tax code); the corresponding exit tax is then cancelled. Below that, only Hong Kong, which does not tax such gains, has the right to tax.
• On return, the date of domicile. French tax domicile resumes as soon as one of the criteria of Article 4 B is met again; in the year of return, income received before that date is taxable in France only if of French source.
• On return, favourable regimes. After at least five calendar years outside France, the inbound expatriate regime of Article 155 B of the tax code may, subject to conditions, apply to a posting in France, and the IFI covers only real estate situated in France for five years (Article 964 of the tax code).

Three decisions on residence, tax credit and territory

The 21 October 2010 agreement is recent, and its case law mostly concerns the residence of French nationals who moved to Hong Kong.

• Hong Kong is not enough when the family stays in France. A taxpayer had stayed in Hong Kong in 2014 and 2015; he remained the owner of a house in Bordeaux occupied by his mother and adult son, his two minor children lived with their mother in Bordeaux, and he received his mail there and held insurance and bank accounts. The court holds that he had his home in France under Article 4 B of the tax code and his permanent home in France under Article 4, paragraph 2, a, of the agreement: he remains taxable there (Bordeaux Administrative Court of Appeal, 21 April 2026, no. 24BX01371).
• The Article 22 tax credit has to be proved. A French resident claiming the credit for income of Hong Kong source must establish the correspondence between the income subjected to withholding in Hong Kong and the income taxed by the French administration; failing that, double taxation is not established and the credit is refused (Conseil d'État, 16 July 2025, no. 495668).
• The 1984 France-China agreement does not cover Hong Kong. A French resident who had received fees from a Hong Kong company could not rely on the agreement of 30 May 1984: Hong Kong having its own tax legislation, the territory was not subject to Chinese tax legislation, and taxation in France is upheld. The decision predates the application of the 2010 agreement, which has since governed relations with Hong Kong (Paris Administrative Court of Appeal, 13 October 2011, no. 10PA00919). On permanent establishment, see the Conversant decision (Conseil d'État, 11 December 2020, no. 420174), rendered under another treaty, which sets the court's method.

Four worked examples

Example 1, dividends from a French company. A Hong Kong resident receives EUR 100,000 of dividends. The 12.8% domestic withholding tax is reduced to 10%: EUR 10,000 instead of EUR 12,800. If the shares are held by a Hong Kong company, the 25% domestic rate is reduced to 10%, i.e. EUR 10,000 instead of EUR 25,000, provided it is the beneficial owner, does not fall under an offshore regime excluded by the protocol and the benefit is not one of the principal purposes of the arrangement.

Example 2, sale of a 30% shareholding. A founder living in Hong Kong for three years sells 30% of a French SAS and realises a capital gain of EUR 2,000,000. The shareholding exceeds 25%: the agreement lets France tax (Article 13, paragraph 3) and domestic law applies the 12.8% final levy of Article 244 bis B, i.e. EUR 256,000, with a possible refund, on claim, of the part exceeding the tax computed at the scale under Article 197 A. With 20% of the capital, held within the family throughout, only Hong Kong would have the right to tax.

Example 3, IFI on a Paris apartment. A Hong Kong resident owns a Paris apartment with a net value of EUR 2,000,000, and no other French real estate. IFI is due: 0.50% on EUR 800,000 to EUR 1,300,000, i.e. EUR 2,500, then 0.70% up to EUR 2,000,000, i.e. EUR 4,900. Total: EUR 7,400 per year. His financial investments are not taxable.

Example 4, estate of a father living in Hong Kong. A father domiciled in Hong Kong leaves a Paris apartment of EUR 1,500,000 and a portfolio in Hong Kong to his two children, also living in Hong Kong for more than ten years. France taxes only the apartment (Article 750 ter, 2°): EUR 650,000 taxable per child after allowance, i.e. EUR 137,962 of duties each and EUR 275,924 in total. The Hong Kong portfolio is not taxable in France; it would be if one of the children had been domiciled in France for at least six of the last ten years.