Taxation of foreign-source income

Conditions for taxation of this income in France

When you are a resident of France and receive foreign-source income, you must refer to the tax treaty executed by France with the country in which the income originates, to determine:

  • if the income is taxable or exempt in France

  • whether the income has to be declared in France or not

  • in the event that the income is taxable in France, whether there are arrangements to avoid possible double taxation of this foreign-source income (income taxed in both the source country and France)

The tax treaties between France and the rest of the world may be consulted online at www.impots.gouv.fr International section > A savoir.

If there is no tax treaty between France and the country in which you receive the income, then this income is taxed in France as a matter of principle.

Consulting the treaty:

  • If the treaty stipulates that the income is tax-exempt in France, it will specify whether the income has be declared in France or not.
    Declaring income that is tax-exempt under the treaty in France will not cause this income to be taxed. This income is nevertheless factored in to calculate the amount of income tax owed on French-source income (    taux effectif method).
     

  • If the treaty stipulates that the income is taxable in France, it will specify, based on the type of income, how the double taxation should be eliminated if this income is also taxable in the source country. There are two elimination methods: by applying a tax credit equal to the tax paid abroad or by applying a tax credit equal to the French tax relating to the foreign-source income.
    When the foreign-source income has to be declared in France, first fill out return no. 2047 following its instructions (use the search engine on this website). The instructions will help you calculate the amount to declare, the section for reporting income and, where applicable, the amount of the tax credit.

Taxation of foreign-source income in France

Firstly, refer to the treaty between France and the country in which the income originates to find out if you have to declare it in France. If there is no treaty, the income is taxable in France.

Wages and salaries

If the treaty stipulates that the income is tax-exempt in France: declare the income for taxation of French-source income using the taux effectif method.

If the treaty stipulates that the income is taxable in France: in most cases, to avoid double taxation, a tax credit equal to the French tax is issued.

You should fill out returns nos. 2042, 2042 C and 2047.

Pensions and retirement benefits

If the treaty stipulates that the income is tax-exempt in France: declare the income for taxation of French-source income using the taux effectif method.

If the treaty stipulates that the income is taxable in France: in most cases, to avoid double taxation, a tax credit equal to the French tax is issued.

You should fill out returns nos. 2042, 2042 C and 2047.

Investment income

Broadly speaking, if the treaty stipulates that this type of income is taxable both in the country of origin and in France, a tax credit, usually equal to the amount of foreign tax, will be issued to avoid double taxation.

You should fill out returns nos. 2042, 2042 C and 2047.

Capital gains

The treaties cover three types of capital gains:

Capital gains on the sale of property: tax arrangements are the same as for the income derived from this property.

Capital gains on assets that are part of a permanent establishment: taxation in the country where this establishment is located. The treaty may provide for taxation in France and elimination of the double taxation by issuing a tax credit, or for exemption from capital gains tax in France with the declaration of these gains for taxation of French-source income using the taux effectif method.

Capital gains on other securities: taxation in the country of residence of the taxpayer making the gains, with a tax credit possibly being issued if these capital gains have been taxed abroad.

You should fill out returns nos. 2042, 2047 and/or 2042-C and/or 2042-C PRO and/or 2074 and/or 2048-IMM and/or 2048-M.

Self-employed income (Agricultural profits [BA], business profits [BIC], non-commercial profits [BNC])

For information on how to declare your foreign-source self-employed income in France (Agricultural profits [BA], business profits [BIC], non-commercial profits [BNC]), you should firstly refer to the treaty between France and the country of origin of the income. If there is no treaty, the income is taxable in France.

If the treaty stipulates that the income is tax-exempt in France: declare the income for taxation of French-source income using the taux effectif method.

If the treaty stipulates that the income is taxable in France: to avoid double taxation, a tax credit equal to the foreign tax or equal to the French tax will be issued, depending on the provisions of the treaty.

You should fill out returns nos. 2042, 2042 C PRO and 2047.

Property income

For information on how to declare your foreign-source property income in France, you should firstly refer to the treaty between France and the country of origin of the income. If there is no treaty, the income is taxable in France.

Treaties usually provide that income from property located abroad is taxed in the country where said property is situated. The income is tax-exempt in France but it must be declared for taxation of French-source income using the taux effectif method.

However, some treaties provide for taxation of this income in France followed by elimination of the double taxation by issuing a tax credit which is usually equal to the French tax.

You should fill out returns nos. 2042 and 2044.

 

Updated DINR PART - June 6th, 2021