American residents: how will your real estate income be taxed in France?

23 May 2022

American expat in france ? Do you own a property in France ? Maybe you wish to settle in France in this property or you would like to rent it ?As a US tax resident, you are wondering how this income will be taxed. Do you have to report this income in France or the United States? Is there a risk of double taxation? All the answers to your questions are in this article! 

American expat in france: A question of tax territoriality

France and the United States have signed a tax treaty to organize and define the taxation of income received by their residents. With regard to income from immovable property, Article 6 of the Convention specifies: “Income from immovable property (including income from agricultural or forestry operations) situated in a Contracting State may be taxed in that State“. Thus, income from buildings located in France is taxable in France. 

Under French domestic law, Article 4A of the General Tax Code also specifies in this respect:”[Persons] whose domicile is outside France are liable to this tax solely on the basis of their income from French sources. »

American expat in france : Determination of taxable income in France 

A distinction should be made between income from the rental of bare premises and the rental of furnished premises. 

Bare rentals (without furniture)

Bare rentals fall into the category of land income. For the determination of taxable income, there are two schemes:

The micro scheme: if the annual amount of revenue does not exceed €15,000 per tax household, the taxable result will be determined after deduction of a flat-rate allowance of 30%. 

How can we help you ?

The missions we can offer you:

Drafting of a tax study: with simulation of your tax obligations in France
Follow-up of your tax returns in France: income tax, real estate wealth tax

Example: Let us take again the case of Mrs Williams, an American resident, who receives income from the furnished tourist rental of an apartment located in Cannes. Under the micro scheme, his net taxable income amounts to €5,800.  His tax will be calculated as follows: 5,800 € x (20% + 17.2%) = 2,158 €. 

American expat in france : What about the U.S. tax return? 

Persons domiciled in the United States for tax purposes and American citizens are subject to unlimited tax liability and must report all their worldwide income on their American tax return. Real estate income from French sources does not derogate from this rule. The taxable income is determined in accordance with the American tax rules specific to the nature of this income. 

In accordance with Article 24 of the tax treaty signed between France and the United States, double taxation will be avoided by charging a tax credit equal to the amount of tax paid in France. 

The Team Roche & Cie

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