Bankers in Paris are ready to return to London as tax deals run out
London as a destination for banking and trading jobs may be having a moment. Not only has the UAE's star dimmed, but the tax advantages that made Paris popular are wearing thin.
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As we have written here before, France's "inpatriates" tax regime has been good for the thousands of formerly London-based bankers who moved to Paris after Brexit. However, the tax advantages afforded by the scheme only last for eight years, and for many senior bankers and traders in Paris, that time is nearly up.
"I've started to get people calling me from Paris to ask about a return to London," says one macro headhunter. It's more trickle than flood. But it's noticeable. Senior traders in London tell us they're getting calls from Paris-based traders too.
France introduced its inpatriates regime in 2008. It offers tax incentives to people moving to France who haven't lived and worked there for five years previously, French nationals included. The regime is complex, but effectively allows for individuals to receive 30% or more of their salary or bonus tax-free and to reduce capital gains tax. Beneficiaries can nominate a proportion of their work as being carried out abroad and pay no tax on that portion. And their foreign-based assets are exempt from French wealth tax.
Without the inpatriates regime, bankers and traders in France will need to pay to pay a wealth tax of between 0.5% and 1.5% a year on their assets above €1.3m. They will also need to pay marginal tax rates that can be as high as 55% once the French surcharge on incomes above €250k is factored in.
This is why, as the eight year deadline draws near, people are exploring their options. Although Brexit officially took place in 2020, many traders moved to Paris before that. Bank of America, for example, expanded its Paris office dramatically in 2019. JPMorgan and Goldman Sachs moved people to Paris from 2020 onwards.
The staggered relocation of staff initially means tax-inspired exits from Paris will be a dribble rather than a deluge. London may not be the only beneficiary. A post-war Dubai and Abu Dhabi could regain their lustre. Alternatively, there's always Singapore and Hong Kong.
All are possible for traders in banks. Portfolio managers in Paris remain few and far between. "Barely any hedge funds moved there," observes one MD. "- And why would you want to live in Paris anyway?"
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