Where should non-resident leaders be taxed? Towards a new interpretation of tax treaties.
The taxation applicable to non-resident executives is undergoing significant jurisprudential evolution. The classic criteria, focused on physical presence, are now giving way to a more functional approach. Recent cases, such as those of François-Henri Pinault or the AXA group, are reshaping the contours of international executive taxation. Analysis.
End of the dominance of the physical presence criterion
For a long time, the taxation of non-resident executives' remuneration was primarily based on their physical presence. Thus, working more than 183 days in another state often justified taxation abroad, in accordance with Article 15 of the OECD model tax treaty.
However, this logic is now being challenged. From now on, it is the effective organization of decision-making power that becomes the key to the distribution of tax rights. In other words, the headquarters of the company (and not the geographical location of the executive) becomes the anchor point for taxation.
The Pinault case: residency abroad is no longer sufficient
In a ruling dated April 14, 2025, the Paris Administrative Court of Appeal ruled against François-Henri Pinault, CEO of the Kering group. He argued that he resided in London, had an office there, and spent more than 183 days a year there. He sought a tax credit under the Franco-British tax treaty.
The court rejected his request based on several elements:
- The headquarters of Kering is in France;
- Strategic functions are exercised from France;
- The professional organization in London was not sufficiently structured;
- The London stay was more related to personal reasons.
This judgment marks a turning point: tax residency is no longer sufficient if the executive's activity is not supported by an autonomous professional structure abroad.
The AXA case: a presumption of exercise in France that is difficult to overturn
A few months earlier, on May 15, 2024, the Versailles Administrative Court of Appeal had already laid the groundwork for this new doctrine in a case involving an executive from the AXA group.
The court established a strong presumption: if an executive is paid by a French company, their activity is presumed to be exercised in France. In this case, the management, decision-making tools, and headquarters were in France, and the individual could not demonstrate a sufficiently structured foreign activity.
New criteria for tax attachment
This jurisprudential evolution leads to a clear upheaval in the interpretation of tax treaties:
| Element | Before | Now |
|--------|-------|------------|
| Physical presence >183 days | Essential | Secondary indicator |
| Place of work abroad | Determining | Relevant if structured |
| Article 15 (OECD model) | Mechanically applied | Interpreted in light of actual functions |
| Social mandate | Treated as an employment | Activity presumed at headquarters |
Thus, in terms of taxation of non-resident executives, the legal and economic headquarters of the company is now the decisive criterion.
Gain from stock options: the importance of the exercise date
The Council of State clarified, in its ruling of June 4, 2019 (n° 415959), that the date of exercise of stock options constitutes the taxable event.
This means that a taxpayer will remain taxable in France on the gain from the exercise if they were fiscally resident there on that date, even if they sell the shares abroad afterwards. A crucial factor for mobile or expatriate executives to consider.
The relationship between tax treaties and the burden of proof on the taxpayer
Tax treaties aim to avoid double taxation, through exemption or tax credit (Article 24).
However, recent case law confirms that:
- The presumption of exercise in France applies in the case of remuneration paid by a French company;
- It is up to the taxpayer to demonstrate the effective exercise of their functions abroad;
- The evidence must be concrete, tangible, and demonstrate a proper professional organization.
In the absence of such evidence, tax authorities may refuse any tax credit, as seen in the Pinault and AXA cases.
Divergence between the tax judge and the criminal judge
The Conflict Tribunal, in its decision of December 2, 2024 (n° 4328), reminded that tax and criminal jurisdictions can adopt different assessments.
Thus, an executive acquitted in criminal court for lack of tax residency in France may still be considered a tax resident by the tax judge. Criminal and tax procedures follow distinct logics, and neither constrains the other.
Increased vigilance for international executives
All these decisions reveal a profound change: the taxation of non-resident executives is now closer to the principle of effective localization of activity than to mere physical presence.
In summary:
- The headquarters of the company becomes the default center of taxation;
- Autonomous structuring abroad is now essential to benefit from a tax credit;
- Article 15 of tax treaties is interpreted in light of the actual functioning of the company;
- The burden of proof rests solely on the taxpayer.
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Are you a non-resident receiving remuneration from a French company? Are you preparing for expatriation? Do you have gains from stock options to declare?
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