Income tax in France for non-residents
Here is a reminder of the taxation rules for the non-residents receiving French source incomes, mainly incomes concerning real estate properties.
Non resident in France 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.
Calculation of the tax
Incomes derived from real estate holdings are determined according to different rules, whether it is a rental of a bare property / without furniture (land incomes bracket) or furnished (commercial income bracket). These two regimes allow tax allowances or the deductibility of the expenses for their real amount. It is suitable to contact a specialist for further details.
The profit of the rental activity will be taxed on the basis of the progressive scale of the tax income, in accordance with the table below:
This scale has to be applied after determining the family quotient (gross income / number of shares. The number of shares is determined in accordance with the number of people in the household).
Nevertheless, whether the tax calculated in this manner is lower than 20% of his/her French source incomes, then the non-resident will have to apply the minimum rate of 20% to his incomes.
We notice that most of the time, this rate of 20% is applicable.
Since 1st January 2012, these French source incomes from real estate are also subject to social charges (Generalized Social Contribution (CSG) and Social Debt Reimbursement Contribution (CRDS)) at the rate of 15,5%. However, we draw the attention that the cancellation of these contributions for the non-residents is imminent; as France is embarked on a procedure of condemnation by the European Court of Justice (on that subject readers are referred to our article A 15,5% savings for the non-residents.)