Retirement of an expatriate employee: Be aware of the classification of lump-sum retirement benefits

An expatriate employee had participated in a company pension plan and a profit-sharing plan during his career.

The retirement plan provided for the payment of an annual pension to employees who had worked for the company for at least 15 years, in exchange for contributions deducted from their pay.

The profit-sharing plan allowed employees with more than one year of service to open an account with a fixed-income fund. This account was credited annually based on various criteria. The funds associated with this plan were paid out as soon as the employee left the company.

Following his resignation, the expatriate employee was informed of the option to transfer a portion of the funds from the profit-sharing plan into his retirement savings plan in order to increase the amount of his pension, which he did in part. The remaining portion was paid directly to him.

He considered this second portion to be a lump-sum retirement pension and reported the amount in order to qualify for the special 7.5% tax rate.

However, following a tax audit,administration determined that these were not pensions but wages and issued a tax assessment to the taxpayer.

The Administrative Court of Appeals will then rule that the payment does not constitute a lump-sum retirement pension because:

• The fact that contributions can be made to the retirement plan to increase the pension does not mean that these are considered pensions;

• a resignation submitted after the age at which the company allowed employees to participate in the retirement plan has no bearing;

• It was solely the loss of employee status that led to the payment of the amount that the taxpayer mistakenly believed to be a retirement pension.

The taxpayer will nevertheless benefit from a partial reversal of the assessment, as the income received should have been treated not as wages but as income from securities.

CAA Bordeaux, Dec. 3, 2025, No. 23BX02970

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