Real estate income received abroad: tax obligations for French taxpayers

1. Introduction

Every year, more and more French residents choose to invest in real estate abroad. Whether to diversify their holdings, take advantage of market opportunities, or because they have moved outside France, owning and renting a property in another country raises specific tax-related questions. How should one declare foreign real estate income? Which tax regime applies? Which forms need to be filled out? And most importantly, what are the risks if this income is not declared?

This article aims to answer, in detail, these questions. It is intended to serve as a practical guide for every French taxpayer receiving rental income from property located outside of mainland France and the overseas départements. We will discuss the legal foundations, the concept of tax residency, the different systems designed to avoid double taxation, the mandatory declarations (including the 2047 form), as well as the method for calculating tax.

Beyond the strictly fiscal aspects, many French residents wonder about possible effects on social contributions or how to properly fill out their tax returns to avoid audits. International tax treaties, the effective tax rate rule, the availability of tax credits, and the deductibility of rental deficits are all central to the French taxation of foreign real estate income.

We will also see that certain exemption mechanisms do not exempt taxpayers from the obligation to declare this income in order to calculate the effective rate that applies to other taxable income earned in France.

Lastly, this article—geared both to non-specialist taxpayers and knowledgeable readers—will emphasize the importance of adhering to transparency requirements. Amid increased scrutiny of bank accounts held abroad and increased international cooperation, failing to declare foreign rental income now entails significant risk.

2. The French Legal Framework

In France, the taxation of income is governed by the Code général des impôts (CGI), which provides that the taxpayer’s entire household income must be declared and taxed, regardless of where it comes from. The key principle is that French tax residents are taxable in France on their worldwide income. In other words, if you are deemed a French resident for tax purposes, in principle, you must declare all of your income, including that earned abroad.

However, to avoid double taxation, France has entered into a series of bilateral international tax treaties. These treaties allocate between States the right to tax certain types of income. They specify how to treat income—particularly real estate income—arising in one country but received by a resident of another.

Thus, before anything else, it is essential to:

1. Determine whether you are considered a French tax resident.

2. Check whether there is a tax treaty between France and the country in which your property is located.

Depending on these points, the treatment of your income may differ. The CGI contains provisions about territorial scope, explaining that certain income is taxable in France under domestic law. However, these provisions must be reconciled with the corresponding rules in the relevant tax treaty, which may grant taxing rights to one State over the other.

Among the primary references are Articles 4 A and subsequent of the CGI (defining French tax residency), as well as the articles covering income declarations (Articles 170 and subsequent). All international tax conventions can be found on the French tax administration’s website.

It is important to note that the French system differentiates between real estate income (foncier) and capital gains on real estate, each category having specific rules for calculation, reporting, and taxation.

3. What Is Considered Foreign Real Estate Income?

Foreign real estate income includes:

• Salaries paid in exchange for work performed abroad,

• Pensions or life annuities paid by a debtor established abroad,

• Rental income from property located abroad,

• Agricultural, craft, liberal, commercial, or non-commercial profits (BA, BIC, BNC) arising from a business or enterprise located abroad.

It also includes income that is simply collected abroad, even if it is of French source. For example, salaries paid by a foreign employer for work carried out in France, capital income, or capital gains earned in France but paid into an account abroad.

Note: New Caledonia and the overseas collectivities of French Polynesia, the French Southern and Antarctic Lands, Wallis and Futuna, Saint-Pierre and Miquelon, Saint-Martin, and Saint-Barthélemy have separate fiscal regulations. Income from those collectivities is therefore considered foreign-sourced and must be declared on form 2047. The tax treatment of income from the French Southern and Antarctic Lands is specified in administrative bulletin BOI-RSA-GEO-30.

If the income or profits were paid in a foreign currency, they must be declared in euros, according to the exchange rate at the time of receipt.

4. How to Declare Real Estate Income Received Abroad

Foreign real estate income must be reported on the form 2047, then necessarily carried over onto the main tax returns (forms 2042, 2042 C, or 2042 C PRO), in the sections that correspond to their category or nature, and converted into euros. This step applies whether the income is taxable in France (with or without a tax credit) or whether it is exempt but still accounted for to determine the effective tax rate. The same is true if these amounts come from a non-treaty country with which France has not concluded a convention.

Social Contributions: If your real estate income is subject to social levies (CSG, CRDS, CASA) in France, you must also fill out Section 9 of Form 2047 and systematically report these amounts on Form 2042 C, Lines 8TQ through 8SB.

5. International Tax Treaties: Avoiding Double Taxation

Bilateral tax treaties concluded by France aim to prevent double taxation. They set forth how income is divided between the State of source and the State of residence. These treaties determine whether the foreign-sourced real estate income is taxable or exempt in France and outline ways to avoid double taxation, typically through either:

1. Tax credit (equal to either the French tax or the foreign tax paid),

2. Exemption, wherein the income is excluded from tax in France but is still considered when calculating the household’s overall effective tax rate.

5.1 Real Estate Income Taxable in France

In principle, real estate income from abroad remains subject to French income tax if a tax treaty so provides or if there is no tax treaty at all. Even if that income was already taxed or withheld at source in the other State, one must still declare it in France. The fact that a withholding tax was applied abroad does not release the taxpayer from reporting it in France. Nonetheless, to avoid double taxation, a tax credit may be granted for these incomes when they are also recognized in France.

Depending on the treaty, France may either provide:

• A tax credit equal to the foreign tax paid (capped at the amount of French tax that would apply to the same income), or

• A tax credit equal to the amount of French tax that would be due on that income (meaning France taxes it, but grants a French tax credit of the same amount, effectively neutralizing the French tax on it while still considering it for the application of the progressive rate).

When the treaty stipulates that the taxpayer is to be granted a credit equal to the foreign tax actually paid, that foreign tax must be consistent with treaty provisions. The credit will be limited to the amount of French tax computed on the same income. If the foreign tax surpasses the French tax on that portion, no refund or carryover is allowed.

On the other hand, a credit equal to the amount of French tax means that France charges tax on the foreign-sourced real estate income, then grants a credit of the same amount. This approach factors the foreign income into the total sum on which the taxpayer’s rate is determined, but in the end, no additional French tax is paid on that foreign portion. However, it does raise the overall tax rate for other income.

5.2 Real Estate Income Exempt in France (Taken into Account for the Effective Tax Rate)

Under certain treaties, real estate income from abroad can be exempt from income tax in France but still counted to determine the effective tax rate. This method is known as the “taux effectif” or “exemption with progression.” It means the French administration adds this income to the taxpayer’s total income solely to establish the marginal rate. Then, that rate is only applied to the income actually taxable in France. This ensures that even though the foreign income is not taxed again, it can increase the rate at which French-sourced income is taxed.

6. The Concept of Tax Residency

To determine if you must declare foreign rental income in France, you must first ascertain whether you are fiscally domiciled in France. According to Article 4 B of the CGI, an individual is generally deemed a French tax resident if:

1. Their home or main residence is in France,

2. They engage in a main professional activity in France,

3. They have the center of their economic interests in France.

If you meet any of these criteria, you are considered a French tax resident and must declare your worldwide income to the French tax authorities.

If two countries claim you as a resident, each tax treaty has “tie-breaker” rules to resolve dual residency issues (e.g., priority to the country where you have a permanent home, or the center of vital interests). Once residency is determined, the question remains how to eliminate double taxation. That is precisely the purpose of the aforementioned treaties.

7. General Rules on Taxable vs. Exempt Income

1. Foreign-sourced income that is taxable in France under a treaty: You must complete Form 2047 and then report it on Form 2042, 2042 C, or 2042 C PRO, as appropriate.

2. Foreign-sourced income exempt in France under a treaty but included for the effective tax rate: You must still complete the relevant sections of Form 2047 (or directly in certain lines if it involves wages or pensions) to ensure it is considered for calculating your overall tax rate.

If you live in a country with no treaty with France, France will tax your worldwide income. Double taxation relief might not be available, meaning there is a real risk you’ll pay taxes in both places.

8. An Overview of Tax Treaties and Their Impact on Real Estate Income

France’s international tax treaties typically follow the OECD Model Convention, specifying:

• Real estate income is primarily taxed in the country where the property is located,

• The country of residence (France) either grants a tax credit or exempts the income under the effective tax rate rule.

Each treaty may have additional or different clauses. For example, some require that an actual tax be paid abroad to qualify for the credit in France. Others limit the tax credit to a certain percentage. It is crucial to consult the exact terms of the relevant treaty to know which method (tax credit or exemption) applies to your real estate income.

9. Overview of Form 2047

Form 2047 – “Revenus de source étrangère ou encaissés à l’étranger par un contribuable domicilié en France” – is the primary document used to declare foreign-sourced income.

Whether they are wages, pensions, capital gains, or real estate income, you must fill out the lines that match the category of income. Afterward, depending on the type of income, you carry the result over to Form 2042 (the standard income tax return).

For real estate income, there are two main possibilities:

• Taxable income: Typically declared in Section 4 of Form 2047, “Revenus fonciers imposables en France.”

• Exempt income (but counted toward the effective tax rate): Generally goes to Section 8 if it pertains to “Revenus exonérés pris en compte pour le calcul du taux effectif.”

Remember that you need to convert foreign currency amounts into euros as of the date you received the payment.

10. Link Between Form 2047 and Form 2042

The Form 2042 is your main income tax return. If you have foreign real estate income:

1. Fill out Form 2047,

2. Transfer the amounts to the appropriate lines in Form 2042 (or 2042 C if you have special cases like micro-foncier or self-employed benefits),

3. Indicate any related tax credits in the dedicated lines (8VL, 8VM, 8UM, or 8TK, depending on the situation),

4. If the income is exempt but included for calculation of the effective tax rate, fill in lines 8TI or 1AC/1AH, etc., for wages and pensions; for real estate, lines 4EA or 4EB in the case of “foncier” might be relevant.

Make sure you follow the instructions in the official “notices” that come with the 2047 and 2042 forms, as well as the convention, to avoid any mistakes.

11. Principles of Taxable Real Estate Income in France

When foreign real estate income is taxable in France, the rules and calculations generally follow the same model as domestic rental income. This means:

• Micro-foncier regime if total annual rent (from all properties) does not exceed 15,000 euros (and you do not opt for the “régime réel”).

• Régime réel (the standard or itemized regime) if your total rental income is above 15,000 euros or if you elect the actual expense regime because your deductible expenses exceed the 30% standard deduction under micro-foncier.

Hence, you fill out a Form 2044 (the detailed real estate income form) if you choose the standard regime. You itemize the rent, deductible costs, etc., just as you would for French rental properties. The only special step is that you also have to detail the country of location of the property and reflect any withheld foreign tax. These amounts are then replicated onto the 2047 and eventually onto the 2042.

12. Micro-Foncier vs. Régime Réel

12.1 Micro-Foncier

• Eligible when the total gross rent (French + foreign) does not exceed 15,000 euros.

• You directly declare the gross amount in Form 2042 (line 4BE).

• A 30% deduction is automatically applied to cover all expenses.

• Simple and quick, but not always the most cost-effective if your real expenses exceed 30%.

12.2 Régime Réel

• Mandatory if you exceed 15,000 euros in annual rental revenue or if you wish to opt for it.

• Requires filling out Form 2044.

• You deduct actual costs (loan interest, repairs, maintenance, management fees, etc.).

• Potential advantage if your real expenses are higher than 30%.

• You can generate a deficit foncier (real estate deficit) if costs exceed revenue, possibly offsetting up to 10,700 euros against other income (subject to conditions).

Whether micro-foncier or régime réel, you must reflect these amounts on the 2047 if the property is outside France, then transfer them to 2042. If the treaty allows a tax credit, you should also indicate it in the relevant lines.

13. Deductible Expenses Under the Régime Réel

If you choose the actual or “régime réel” approach, you can deduct from the total gross rental amount all expenses genuinely related to the rented property, provided they are:

• Properly documented (invoices, receipts),

• Paid within the tax year,

• Directly related to maintaining or improving the rental property (not a capital expenditure to create new living space).

Common deductible expenses include:

• Maintenance and minor improvement costs,

• Property taxes (taxe foncière),

• Insurance premiums,

• Loan interest (for a purchase loan or renovation loan),

• Condominium fees (the part not recoverable from the tenant),

• Property management fees if you hire an agent.

It’s important to note that if the laws of the foreign country grant you a tax exemption or relief, that does not necessarily affect your French declaration. You must still follow French rules for deductible expenses when completing Form 2044 or 2047.

14. Computation of French Tax

Once the net taxable real estate income is determined (after micro-foncier or régime réel calculations), that figure is typically added to your other income. France then calculates your total tax liability using the progressive tax scale.

Depending on the treaty, a tax credit may then be applied:

1. Tax credit equal to the French tax: Means that, although you include the foreign income in your global tax base, you get a credit that nullifies the French tax on that share, thus maintaining progressivity.

2. Tax credit equal to the foreign tax: Means that the credit is limited to the lesser of what you actually paid abroad or what France would charge. If you paid more abroad than you would in France, you cannot be reimbursed for the difference.

In cases where the treaty calls for exemption with an effective rate, you do not pay additional French tax on that portion, but you do factor it in to calculate your marginal rate.

15. Credit d’Impôt Equal to the French Tax (Line 8TK)

The 8TK line on Form 2042 is often used for treaties specifying a credit equal to the French tax. This system effectively ensures you do not pay double tax on the foreign-sourced portion but you maintain a possibly higher marginal rate due to the inclusion of foreign income in your total base.

For example, if your net rental income abroad is 10,000 euros, and the French tax on that portion would be 2,000 euros, you get a credit of 2,000 euros. Consequently, your total French tax bill does not go up by 2,000, but your other income might be taxed at a higher bracket since these 10,000 euros are included in your overall base.

16. Credit d’Impôt Equal to the Foreign Tax (Lines 8VL, 8VM, 8UM)

In other treaties, the credit is capped by the foreign tax actually paid. For instance:

• You earned 10,000 euros in net rental income abroad.

• You paid 2,500 euros in tax in that State.

• The French tax on that portion, if it were fully taxed, would be 3,000 euros.

• You get a credit of 2,500 euros, leaving 500 euros of tax to pay in France.

If you had paid 4,000 euros abroad (more than the 3,000 euros that French tax would have been), your credit is capped at 3,000 euros, and you do not get a refund for the 1,000-euro difference.

17. Exemption and Effective Rate (Line 8TI)

In many other treaties, real estate income is exempt in France but included in determining your effective tax rate. This method, known as “exemption with progression,” is implemented as follows:

1. Compute your total income as if you were declaring everything in France,

2. Determine the average tax rate that would apply,

3. Apply that rate only to the portion of your income that is taxable in France (excluding the foreign exempt portion itself).

Thus, you pay no French tax on the foreign real estate income itself but indirectly face a higher tax rate on your other sources of income, preserving the progressivity of the overall system.

18. Social Contributions (CSG, CRDS, Additional Contribution)

Beyond income tax, the question of social contributions arises. In principle, if you are affiliated with the French social security system, your real estate income (including that from abroad and taxable in France) may be subject to CSG (9.2%), CRDS (0.5%), and possibly the solidarity contribution (a rate of 7.5% or so, depending on the year and your status). The total rate for social charges on investment income can exceed 17%.

Recent developments following European case law (the “De Ruyter” ruling) have led to certain adjustments in how these social levies apply, especially when the taxpayer is subject to another EU country’s social security. If you remain covered in the French social security system, these contributions generally apply to real estate income taxable in France. If your treaty stipulates otherwise or if you are subject to another EU or EEA social security system, you may have partial or total relief from some contributions.

19. Practical Examples

Example 1

• You own an apartment in Portugal that yields 8,000 euros in annual rent.

• Portugal imposes an initial tax of 500 euros.

• Under the France-Portugal treaty, the income may be taxed only in Portugal but counted for the effective rate in France (depending on the exact treaty stipulations).

• On Form 2047, you declare these 8,000 euros. Then in Form 2042, you indicate them in the line for exempt income subject to the effective rate (e.g., line 4EA or 4EB for real estate, then 8TI).

• You do not owe additional French tax on these 8,000 euros, but it raises your average rate for your other sources of income.

Example 2

• You own property in the United Kingdom, from which you earn 12,000 euros in gross rental income annually.

• You pay 1,000 euros in tax in the UK.

• The France-UK treaty provides for a credit equal to the French tax.

• In practice, you declare the entire 12,000 euros (minus any deductible expenses, if you’re under the régime réel) on Form 2047, then transfer it to the relevant lines in Form 2042. Suppose your net is 8,000 euros.

• The French tax that would apply is, say, 2,000 euros. You get a credit for those 2,000 euros (line 8TK). Thus, you pay no extra tax for that portion, though the 8,000 euros do count in your overall base to determine your rate bracket.

20. Steps to Fill Out Form 2047 – Practical Guidance

1. Identify the foreign real estate income that is either taxable or exempt but included for rate calculation.

2. Gather all documentation: rent receipts, proof of foreign tax paid, possible certificates from the foreign tax authorities.

3. Determine your regime (micro-foncier if under 15,000 euros, or régime réel).

4. Fill in Section 4 for taxable real estate income or Section 8 for income exempt but included for the effective rate.

5. Carry over the relevant information to Form 2042 (or 2042 C):

   • Taxable real estate: lines 4BA, 4BB, 4BC, 4BE, etc.

   • Tax credit: lines 8TK, 8VL, 8VM, 8UM, etc.

   • Exempt real estate for effective rate: line 8TI or 4EA/4EB, depending on the instructions.

6. Check the final calculation of your French tax and credits.

Keep all supporting documents (invoices, tax certificates, exchange rate proofs) in case of an audit.

21. Steps to Complete Form 2042

Once Form 2047 is done, you integrate the figures into Form 2042:

• Real estate: lines 4BA, 4BB, 4BC, 4BE, etc., if you’re in the regular or micro-foncier regimes.

• Credits: line 8TK, 8VL, 8VM, 8UM, or others, depending on the nature of the credit.

• Exemption at the effective rate: line 8TI or 4EA/4EB if it concerns real estate specifically.

Forms 2042 C or 2042 C PRO may be used if you have self-employed income or if you are in certain business categories (e.g., location meublée, BIC). Follow the official instructions for your specific situation.

22. Special Situations (SCI, Indivision, Usufruct, etc.)

• SCI subject to income tax (IR): Each partner declares their share of profits according to their share of ownership. If the property is located abroad, the same principle applies—declare the corresponding portion in Form 2047 and 2042.

• SCI subject to corporate tax (IS): The company pays corporate tax in France (or on French-sourced income if it’s considered French-resident). Partners are then taxed on the dividends or capital gains. The treaty’s rules might be more complex if the SCI is based abroad.

• Indivision: Each co-owner declares their portion of real estate income.

• Usufruct / Bare ownership: Usually, the usufruct holder declares the rentals. Where foreign property is involved, local laws plus French rules define who owes the tax. Typically, the usufructuary receiving the rent declares it.

23. Declaring and Other Obligations

In addition to Form 2047 and 2042, taxpayers owning property abroad may have to comply with certain additional requirements:

• Declaration of foreign bank accounts (Form 3916), if the rent is paid into an account outside France.

• Declaration of insurance policies with foreign providers (Form 3916 bis).

Failure to comply with these obligations can lead to heavy penalties (e.g., 1,500 euros per undeclared account, or 10,000 euros if the account is in a non-cooperative State).

24. Penalties in Case of Omission or Fraud

Failure to declare foreign real estate income can be considered an omission or even fraud. If the tax authorities detect unreported income, you risk:

• A tax reassessment over three or four years, or up to ten years in cases of fraudulent schemes.

• Penalties ranging from 10% to 40% or even 80% in cases of deliberate fraud.

• Late payment interest at the legal rate (e.g., 0.20% per month in 2023).

In cases of outright fraud (e.g., repeated false statements, hidden assets), criminal prosecution is possible. International administrative assistance and automatic exchange of information (CRS, FATCA for the US) make it much easier to detect property or accounts abroad that are not declared.

25. Enforcement and International Cooperation

France is an active participant in automatic exchange of information under OECD and EU initiatives. Banks and financial institutions in many countries now transmit data to the French tax authorities about accounts held by French residents (balances, earned interest, etc.).

Furthermore, some foreign land registries are accessible to French authorities, or are shared via mutual administrative assistance. In the coming years, the French tax authorities will have increasingly powerful means to track taxpayers who have property abroad and fail to declare it.

Tax treaties often contain information exchange clauses, allowing France to formally request details about rental income. The risk of not declaring has thus grown sharply in recent years.

26. What about Capital Gains on Foreign Properties?

Typically, capital gains on real estate are taxable in the country where the property is located. However, the relevant tax treaty might allow France to tax that gain as well if you are a French resident, while offering a method of avoiding double taxation.

Under French law, if these real estate gains are taxable in France, you must file a specific declaration within one month of the sale (Form 2048-IMM for real property sales or Form 2048-M for shares in real estate–oriented companies). The flat tax rate of 19% plus social contributions applies, subject to the standard allowances for length of holding.

If the treaty calls for an exemption, you might still have to declare the gain in the “exempt income” section so that it is included for the effective rate (if the treaty so stipulates).

27. Practical Case Studies

• Case of a French resident with a property in Spain generating 15,000 euros in annual rent:Spain directly taxes those rents. The France-Spain treaty generally grants a credit equal to the French tax. You declare that income on Form 2047 and 2042 (line 4BA/4BB or 4BL), indicating the credit in line 8TK.

• Case of a French resident with a property in Germany:The Germany–France treaty often follows a system of exemption with progression for salaries but can use a tax credit approach for real estate (depending on the treaty’s latest revisions). Verify the actual text to confirm.

• Case of an expatriate who left France but still owns property in France:If you are no longer a French tax resident, you usually pay tax only on income from French sources. Foreign rental income might not be reported in France, subject to the treaty stipulations.

28. Practical Tips to Avoid Pitfalls

1. Read the bilateral convention: That’s the only way to be certain if your real estate income is subject to a tax credit or exemption in France.

2. Declare even if exempt: Some treaties require you to report the amounts for the purpose of applying the effective tax rate.

3. Retain proof of foreign tax paid: If you claim a credit for foreign taxes, you must have official evidence (e.g., a certificate).

4. Assess your best tax regime: Micro-foncier or régime réel—if your expenses are significant, the real system may save more.

5. Don’t overlook social contributions: In many cases, the French administration will levy them unless a treaty or EU rule precludes it.

6. Comply with deadlines: Typically in spring (May/June). Follow published deadlines for your region.

7. Seek professional guidance if in doubt: A tax attorney or accountant can help you handle complex structures (SCI, usufruct, multiple residencies, etc.).

29. Frequently Asked Questions (FAQ)

Q1: If I don’t pay tax in the country where the property is located, do I still have to declare the rent in France?Yes. As a French tax resident, you are taxable on your worldwide income. Lack of tax abroad does not exempt you from declaring and potentially paying tax in France.

Q2: I received no rent this year because the property was vacant. Do I still declare it?If no rental income was received, then no amount is declared as income. However, if you had previously reported rental activity, you might wish to note that you’ve received 0 euros (particularly if you have a real estate deficit to report).

Q3: What if I pay a property tax abroad amounting to 30% of my rental income?Check the relevant treaty. You could be granted a credit in France equal to all or part of that foreign tax, capped at the French tax on that income.

Q4: Can the French authorities really find out if I own property abroad?Yes. With the increase in data exchange mechanisms among tax authorities, the risk of detection is significantly higher now than before.

30. Conclusion

Owning and renting out real estate abroad can be an attractive investment to diversify your portfolio or take advantage of new market opportunities. However, as a French tax resident, you remain subject to strict reporting obligations. Mastering the relevant tax treaty, selecting the appropriate French tax regime (micro-foncier or régime réel for unfurnished rentals, or BIC for furnished rentals), and filling out Form 2047, then Form 2042, accurately and in full, is crucial.

The French tax administration—like others worldwide—is increasingly equipped to uncover omissions and combat evasion or fraud. Controls are growing more frequent, and international cooperation is expanding. Consequently, the safest course is rigorous compliance with all rules, ensuring a legitimate and trouble-free situation.

Keep in mind that each case may feature specific nuances. In case of doubt, consult us: https://www.rous-avocat.fr/contact