Extension of the tax prescription to 10 years: a vague and worrying reform

A new measure that raises questions

Article 61 of the 2025 finance law provides for the extension of the tax prescription period to 10 years for taxpayers suspected of false tax residency abroad. Initiated by a senatorial amendment, this reform aims to strengthen the fight against tax evasion.

However, its interpretation remains uncertain. Even the Senate, despite adopting the text, has requested clarifications from the government regarding its exact scope (question no. 03693, JO Senate of March 13, 2025).

The legal ambiguity lies in the very definition of "false tax residency," the contours of which are not clearly defined by current legislation. This imprecision raises concerns about the fairness of its application.

A legal uncertainty with serious consequences

The text leaves a question hanging: does this new prescription apply only to characterized fraud, or can it also apply to unintentional misinterpretations of tax residency rules?

Two scenarios are possible:

• A strict interpretation, reserving the extended prescription for cases of proven fraud, where a taxpayer would have intentionally declared their income abroad to evade tax.

• A broad interpretation, allowing the tax administration to reclassify a taxpayer's tax residency over a decade, even in the absence of manifest fraud.

This second scenario creates significant legal insecurity. The rules for determining tax residency rely on several complex criteria, defined by the General Tax Code and international tax treaties. This uncertainty could affect many profiles, including:

• Expatriates and detached workers,

• Business leaders managing transnational activities,

• Individuals with high international mobility (High Net Worth Individuals – HNWI).

A taxpayer could thus face tax adjustments over 10 years, simply due to a divergence in interpretation between their tax lawyer and the tax administration.

What risks for taxpayers?

The adoption of an extensive reading by the tax administration could lead to massive tax adjustments, accompanied by significant penalties and late interest.

This reform significantly increases the risk of legal insecurity, particularly on several critical points:

• Could a good faith taxpayer be unduly prosecuted?

• Does the tax administration have excessive discretionary power?

• What possible recourse do taxpayers have in case of disputes regarding their tax residency?

Even Jean-Luc Ruelle, a senator who initiated the amendment, has requested an official clarification from the government to prevent potential abuses and ensure a fair and transparent application.

A reform to watch closely

Without a precise legal framework, this extension of the tax prescription risks multiplying disputes between taxpayers and the tax administration. While awaiting an official clarification, it is strongly recommended that affected individuals consult a tax lawyer to anticipate potential challenges to their tax residency.

If the stated goal is to better combat tax fraud, it is imperative that the government quickly clarifies the criteria for "false residency" to avoid any legal insecurity and ensure a fair application of this reform.