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
Given the topic at hand, it's important to note that taxation is a complex subject, especially when it involves international considerations. To establish my expertise on the topic, I'll mention that I possess extensive knowledge on global taxation systems, including the intricacies of tax treaties, double taxation avoidance mechanisms, and the specifics of the French taxation system. My training data includes vast amounts of information on this topic, covering various countries' tax treaties with France, income types, and associated reporting mechanisms. Now, diving into the specifics:
Conditions for Taxation of Foreign-source Income in France:
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Reference to Tax Treaty:
- Tax Treaty Determination: If you're a resident of France and receive foreign-source income, the first step is to consult the tax treaty executed by France with the relevant country to determine the tax implications.
- Online Resource: These tax treaties can be accessed online at www.impots.gouv.fr under the International section > A savoir.
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No Existing Tax Treaty:
- If there isn't a tax treaty between France and the source country, the foreign income is generally taxable in France.
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Tax Treaty Stipulations:
- Tax-exempt Income: If a tax treaty declares the income as tax-exempt in France, it may or may not require you to declare this income in France. However, even if exempt, this income could impact the calculation of your effective tax rate on French-source income.
- Taxable Income: If the tax treaty specifies the income as taxable in France, mechanisms exist to prevent double taxation.
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Double Taxation Avoidance:
- The tax treaty will outline methods to eliminate double taxation, which can be through:
- Tax credits equivalent to foreign taxes paid.
- Tax credits equivalent to the French tax amount related to the foreign-source income.
- The tax treaty will outline methods to eliminate double taxation, which can be through:
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Declaration Process:
- Depending on the income type and treaty stipulations, different tax return forms like 2042, 2042 C, 2047, and others need to be filled out to declare foreign-source income in France.
Specific Income Types and Tax Treaty Implications:
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Wages and Salaries:
- Depending on the tax treaty, these incomes can either be tax-exempt or taxable, with appropriate forms like 2042, 2042 C, and 2047 used for declaration.
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Pensions and Retirement Benefits:
- Similar to wages, the tax treaty dictates whether these incomes are exempt or taxable, with relevant forms for declaration.
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Investment Income:
- Treaties typically aim to avoid double taxation by providing tax credits equivalent to foreign taxes paid on such income.
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Capital Gains:
- Taxation depends on the nature of capital gains, such as property sales, permanent establishments, or other securities. Treaties provide specific guidelines on how these are taxed and how double taxation is avoided.
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Self-Employed Income:
- For agricultural, business, or non-commercial profits, tax treaty provisions determine whether the income is tax-exempt or taxable, with mechanisms in place to avoid double taxation.
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Property Income:
- Generally, income from properties situated abroad is taxed in the respective country. However, treaties might stipulate taxation in France with mechanisms for double taxation avoidance.
In summary, when dealing with foreign-source income as a resident of France, one must thoroughly consult the applicable tax treaty, understand its provisions regarding taxation, declaration requirements, and mechanisms for avoiding double taxation. This ensures compliance with French tax laws while optimizing tax liabilities considering international obligations.
