Avoid Double Taxation in France of Foreign Source Revenues

Persons engaged in economic activities or residing in more than one country sometimes face complex taxation rules. These persons must thus verify whether they are not subject to double taxation.

 

 

Persons engaged in economic activities or residing in more than one country sometimes face complex taxation rules. These persons must thus verify whether they are not subject to double taxation.

 

CHECK IF YOU HAVE TO BE IMPOSED IN FRANCE

 

Regarding the tax department, you are considered to have your fiscal domicile in France if you meet any of the following four conditions:
• your home, which is the place where you and / or your family (partner and children) usually reside, is located in France (it does not matter whether you are on a temporary trip abroad for work or other reasons );
• you stay in France more than half of the year (regardless of your family's main place of residence);
• you practice your professional activity in France (except if this activity is the accessory of a profession exercised abroad);
• the center of your economic interests, that is to say the place where you drive most of your income or the place where you made your main investments, is established in France.

 

Thus, you are taxable in France on all of your income including those from foreign sources.

If you are not in any of the above situations, you are considered to have your tax domicile abroad and you must pay your taxes in your country of residence. You are nevertheless liable to be taxed in France on your French-source income or on a flat-rate basis if you have kept a home there.

 

ARE THE VARIOUS INCOME FROM FOREIGN SOURCES TAXABLE IN FRANCE?

 

It is necessary, first and foremost, to consult the tax convention that binds France to the country from which the income comes. In the absence of an agreement, income is taxable in France.

 

Salaries treatments and pensions:
If the agreement provides that income is exempt in France: declare the income in order to tax the French source income according to the effective rate method.
If the agreement provides that income is taxable in France: to avoid double taxation, a tax credit equal to French tax applies most often.
You must fill out the printed forms N° 2042 / 2042C and N° 2047.

 

Securities incomes:
In principle, if the agreement provides that this category of income is taxable both in the country of origin of the income and in France a tax credit, most often equal to the foreign tax, applies to avoid a double taxation.
You have to fill the printed forms N°2042 / 2042C and N° 2047.

 

Capital gains:
Three types of capital gains are provided for in the agreements:

  •  Real estate gains: tax principle identical to the property income from these properties;
  • Capital gains of property forming part of the assets of a permanent establishment: Taxation is normally in the country in which the establishment is located. The agreement may provide for taxation in France and the elimination of double taxation by the application of a tax credit, or provide for the exemption of capital gains in France with, however, declaration of such capital gains for taxation of French source income using the effective rate method;
  • Capital gains on other securities: principle of taxation in the country of residence of the taxpayer who receives the earnings, a tax credit may apply if these capital gains have been taxed abroad.

 

You must complete printed forms N° 2042, 2047, and / or 2042-C and / or 2042-C PRO and / or 2074 and / or 2048-IMM, and / or 2048-M.

 

Incomes from independent professions (BA, BIC, BNC):

To know how to declare in France your income from independent professions (Agricultural Profits, Non-commercial Profits, Industrial and Commercial Benefits) from a foreign source, refer first of all to the agreement that binds France to the country of origin of the income. In the absence of a convention, income from independent professions is taxable in France.

If the agreement provides that income is exempt in France: report income for the taxation of French-source income using the effective rate method.
If the agreement provides 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 applies, according to the provisions of the agreement.

You must complete the printed forms N°2042/2042-C PRO and 2047.

 

Property incomes:

In this category it is also the convention which provides the principle of taxation. In the absence of an agreement, property incomes are taxable in France.

The agreements provide in principle for the taxation of real estate incomes from immovable property located abroad in the country in which the immovable is located. Incomes are exempt in France but must be declared for the taxation of French-source income according to the effective rate method. However, certain agreements provide for the taxation of such income in France and the elimination of double taxation through the application of a tax credit that is generally equal to French tax.

 

You must fill out the forms N° 2042 and 204.

 

You can read further about the forms on our article about the principal forms for income tax declaration.

 

In conclusion, it should be noted that 148 agreements on the taxation of income were signed by France and therefore you must in principle depend on one of them. You can contact one of our English speaking accountants to get the text. We can of course also study your situation to avoid double taxation.