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Income tax in France : rules for non-residents

Income tax in France, rules for non-residents

(updated in october 2017)

Here is a reminder of the taxation rules for non-residents receiving French source incomes, mainly incomes from real estate properties. This will guide you for your income tax return in France.

Non residents are taxed in France on their income from French sources only, regardless of their nationality. The following categories are considered as income from French sources:

  • Income from immovable property situated in France, from business concerns situated in France.
  • Income from professional activities carried on in France
  • Capital gains on the transfer of property or rights of any kind.
  • Capital gains on the transfer of corporate rights pertaining to companies having their head offices in France;
  • Amounts, including salaries, in consideration of artistic or athletic performances supplied or used in France.
  • Pensions and annuities;
  • Fees received by inventors or as copyrights as well as any income derived from patent and similar rights.

These rules are applied only to French source incomes: taxable incomes in France are considered as such by the Tax Agreement signed between France and the taxpayer’s country of residence. So it is systematically appropriate to refer to the tax agreements (contact us to obtain any tax agreement). The major part of the non-residents will be subject to taxation in France of the incomes generated by the rental of properties: indeed the vast majority of the tax agreements consider that the country of taxation is the country where the property is situated.


Video (subtitles in English)

Territoriality of the tax:

As regards taxation but also data exchange, France has concluded several bilateral agreements with many countries. The purpose of these Conventions is to regulate situations which may conflict with the internal rights of two countries and consequently prevent the risks of double taxation. For example, tax treaties specify:

  • the place of taxation of the income given its nature and the country of residence of the debtor;
  • the rules for eliminating double taxation.

In the case of persons domiciled outside France, and subject to the application of tax treaties, they are liable to taxes in France on their income from French sources.

Taxation of real estate income in France:

Revenues from the leasing of an immovable property located in France are particularly targeted by the application of French Internal Law. Indeed, most tax treaties drafted under the OECD model reserve the right to impose in the country on which the property is located.

In France, it is necessary to distinguish:

  • the income from an unfurnished leased property, which belongs to the category of “revenus fonciers” (land revenue);
  • income from a furnished leased building, which belongs to the category of income from “Industrial and Commercial Profits (BIC)”.

Depending on the categories, the rules for calculating tax bases differ, so it is better to contact a specialist to determine the exact tax base.

Calculation of the income tax in France: family quotient, scale …

To determine the amount of tax payable by the tax household, the taxable net income must be divided by the number of units determining the Family Quota: the number of shares depends on the family status.

For example, a single person is worth 1 share, a married couple has 2 shares, and a family with two dependent children counts 3 shares (1 share per adult, half a share for each child).


The following progressive scale should then be applied:

Up to 9.710 €0 %
From 9.710 € to  26.818 €14 %
From 26.818 € to 71.898 €30 %
From 71.898 € to 152.260 €41 %
More than 152.260 €45 %

The final tax is determined by multiplying the amount found by the number of shares in the tax household.

Example:

Mr and Mrs Fleur have three dependent children. Their net taxable income in 2016 is  45,000€

1 / The number of shares in the tax household is determined= 4 shares (1 share per adult, 0.5 part per child for the first two children, 1 full share starting with the third dependent child).

2 / The Family Quotient is calculated = 45,000 / 4 = 11,250 €

3 / The scale of assessment is applied, in increments:

Up to 9.710 € = 0

From 11.250 to 9.710 € = 1540 x 14% = 216 €

4 / Multiply the amount found by the number of shares in the tax household = 216 x 4 = 864 €

It should be noted that, as an exception, non-residents are subject to a minimum tax rate of 20%. However, it is still possible for them to apply the full scale and to benefit from a lower tax rate. For this, the non-resident taxpayer must justify that a tax on his world income would lead to a lower rate. 

 

Social contributions (CSG CRDS) what rule should be respected?

The application of social security levies on the income of non-residents was deemed to be contrary to European social security regulations and France was condemned by the Court of Justice of the European Union in February 2015. The Court considered that European taxpayers did not have to pay social charges in France as long as they were already contributing to their country of residence for tax purposes.

This condemnation led France to review her position. Since 1 January 2016, the CSG and the CRDS have been re-allocated to the financing of the “fonds de solidarité vieillesse” (Old Age Solidarity Fund), making it possible to trespass the European social security regulations. Since that date, non-residents once again have to pay social contributions on the property income received in France.


We are specialists in Non-residents and expats french tax return. Do not hesitate to give us a call

Contact us for further assistance on your income tax returns in France.