It is already April and the sun is shining, the birds are singing: spring is here. It also means « tax time » for some (well, everyone!). So we thought it was time to give the back of the class a little tax refresher.
But WHO has to submit a tax return in France?
If you live in France for most of the year and have your main residence there, or if you receive income from a French source, you are required to file a French tax return, even if you have no other income.
Tax residents and non-residents both fall under this requirement. This means that individuals living in France without any French source of income must still report any income they receive elsewhere, while foreigners with rental income from French properties must also file a French tax return.
It’s important to note that failure to comply with these requirements can have significant tax implications, especially when it comes to capital gains tax on the sale of property in France. Fortunately, individuals can avoid this tax on the sale of their main residence, but to do so, they must be able to provide proof of their French tax residency status with their tax returns.
The case of non-tax residents
If you’re a non-tax resident of France, it’s important to know that you may still be required to file a tax return in France if you receive income from French sources such as rental income, retirement pensions, or dividends. Some individuals may mistakenly believe that declaring their French income on their home country’s tax return is sufficient, but this is not the case and can result in costly tax reassessments.
It’s worth noting that the risk of tax adjustments, particularly with rental income, has increased due to the automatic transmission of information from various platforms connecting landlords and tenants. This means that it’s becoming easier for tax authorities to identify non-compliance, making it even more important for individuals to accurately report their French income and fulfill their tax obligations.
Tax treatment of foreign source income
If you’re a French tax resident and have income from foreign sources, it’s important to know that you are required to declare it to the French authorities every year. This includes all income from worldwide sources, regardless of its nature, as well as any foreign bank accounts you may hold.
It’s worth noting that declaring foreign income doesn’t necessarily mean that you’ll have to pay taxes on it in France. In fact, France has signed 121 tax treaties that ensure that income declared in two countries isn’t subject to dual taxation. Instead, a system of tax credits is provided to prevent double taxation.
For instance, if you have property income from the UK, you’ll need to declare it in France, but it won’t be taxed again in France since it’s already been taxed in the UK. This system helps ensure that you don’t pay more tax than necessary and can avoid any potential double taxation issues.
SCI: don’t forget to declare the cerfa 2072!
Many owners own property in France through an SCI company (sometimes without even knowing it) which is often their main residence or a second home that is not rented out. It turns out that they are all obliged to submit a declaration n°2072 to the tax authorities (electronically) on pain of a tax fine for not filing.
The author: Géraud is the co-founder of The French Tax Representative and a chartered accountant by training, specialising in real estate and international clients since 2017. He and his team help several hundred individuals and companies each year with their French tax management.