Companies regularly develop their arsenal of bonuses for so-called long-term expatriation assignments, i.e. for more than one year abroad, whether they are mobility bonuses aimed at compensating for the distance from one’s social network (family, friends, work colleagues) and the necessary adaptation to the new cultural environment, cost-of-living allowances to maintain the employee’s purchasing power in the host country or hardship allowances when the country of assignment has a harsher climate, political or economic instability, a lack of hospital, school or leisure facilities.
Less well known are the remuneration emoluments more specifically intended for one-off assignments outside France. There are indeed possibilities for expatriation bonuses for employees who do not have expatriate status per se but who carry out one-off assignments of several days, weeks or even months abroad.
These salary supplements deserve attention because they benefit from a specific tax and social security treatment that is as advantageous for the employer as for the employee.
It is important to master the conditions of tax and social security exemptions in order to turn them into a real advantage in terms of employer branding without risking a tax adjustment in the event of an inspection by the authorities.
2 types of bonuses can be paid by the employer. The social and tax treatment will depend on the purpose of these supplementary payments.
The titles of these bonuses vary greatly depending on the company: “lump-sum long-distance allowances“, “per diem“, “lump-sum allowances for professional expenses abroad” or even “expatriation bonuses“, even though the employee will not be expatriated and will only travel outside France for a few days.
When the Human Resources department gives instructions to the payroll manager to pass on these bonuses, it is essential to specify the purpose of each of them so that they benefit from the correct tax and/or social security exemptions.
Some allowances (most often referred to as lump-sum travel allowances or per diems) are intended to cover travel costs: transport, hotel, catering, taxis. In principle, they correspond to actual expenses in the country of assignment or are assumed to be allocated to expenses abroad if a lump sum is paid.
Also, they are exempt from social security contributions in France and from French tax if they remain of a reasonable amount. It should be noted that they may be charged and taxed in the country of assignment, but this remains very rare.
During the business trip outside France, the employer may pay the employee, in addition to the usual salary, a daily lump sum representing accommodation and food expenses as an alternative to the reimbursement of actual expense accounts. The two schemes may not be superimposed.
Through the Acoss scale, the administration specifies the daily ceilings that can be granted without social or tax charges. Although these amounts are relatively comfortable, they differ for each country according to the cost of living in the country of assignment (e.g. Germany: maximum 164 € per day of presence on site and not per day worked, Italy: 220 €, USA: 320 USD).
For a mission of less than 3 months on site, the employer will proceed to the automatic tax and social exemption of the daily lump sum without justification within the limit of the ACOSS scale or the Chancellery scale on the basis of the so-called “daily allowances allocated to civil and military personnel of the State on temporary mission in foreign countries“.
If the employer pays the accommodation costs and only an allowance for food, the exempt ceiling is reduced by 65%.
The employer may pay amounts above the scale. If so, the part exceeding the ceiling will be subject to French social security charges and income tax unless the employee produces invoices to prove the actual cost incurred (the latter must however be reasonable).
If the assignment is extended beyond 3 months in the same country, the amount of exempt allowances is reduced by 15% from the first day of the fourth month, up to a maximum of 2 years from the beginning of the assignment.
After 2 years of assignment in the same destination, the exemption of the allowances is reduced by 30% from the 1st day of the 25th month and this again for 2 years. It should be noted that this situation is rare, as the allowances are comfortable, so after a certain length of assignment in the host country, the company will tend to switch to another, less expensive method of remuneration (see our article “How to manage the remuneration of short-term assignments that are prolonged”).
Our recommendation: as mentioned above, since the ceilings are generous, we suggest paying the maximum amount exempt from social security and tax charges minus 15% from the first month of the assignment. Indeed, it is not very motivating for the employee to receive an allowance reduced by 15% after 3 months of assignment for fiscal and social reasons.
In addition to covering the costs incurred by travelling abroad, the employer may pay a bonus, sometimes called an “expatriation bonus“, which is intended to compensate for the hardship of working abroad (early start, late return, efforts to communicate in another language, distance from spouse or children, shifting hours, more difficult climate, etc.).
This bonus, which constitutes additional pay, can be saved or spent as the employee wishes. Therefore, it will only benefit from a tax exemption in France under certain conditions set out in Article 81 A II of the French General Tax Code.
Fairly easy to implement, some employers use it as a recruitment tool to attract multilingual talent with an international profile.
This supplement should
- be proportional to the hardship, the amount should differ from one country to another according to objective criteria (although the administration does not give a scale)
- correspond to a 24-hour trip on site (excluding travel time)
- not exceed 40% of gross pay (nor be calculated as part of, or in addition to, gross pay)
- appear separately in the employment contract or in a rider to the employment contract if set up after the date of hiring
- appear separately from the fixed salary on the pay slip
- be mentioned in a specific section of the DSN (Déclaration Sociale Nominative)
Finally, the employee must keep all proof of travel abroad (copies of boarding passes, hotel/taxi/restaurant invoices, etc.) for three years plus the current year (tax limitation period in France).
Let’s be pragmatic and summarise
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Type of compensation
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Object |
Social & fiscal processing in payroll France
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Legal reference |
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Fixed allowance for long-distance travel or per diem
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Covering travel costs: transport, hotel, meals, taxis, etc.
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Exemption from French social security and tax charges under certain conditions |
ACOSS scale |
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Expatriation allowance
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Compensating for work-related hardship abroad
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Exemption from French tax charges only under certain conditions
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Article 81a II of the French General Tax Code |
Similar arrangements should exist in other jurisdictions outside France, to optimise the social and tax impact of bonuses for staff who travel abroad in the course of their work.
