The taxation of non-residents in France

To know how a person will be imposed in France, you must determine whether she/ he is French domiciled from a tax viewpoint.

Definition of domicile

A person is considered, subject to an international convention, as having his fiscal domicile in France when one of the following criteria in met:

– The person has his home in France

The home means the place where the person or his family (spouse and children) live normally, that is to say the place of habitual residence. It is not considered temporary stays elsewhere for professional reasons or exceptional circumstances.

– The person has its main place of abode in France

It holds the place of residence of the person itself, without sticking instead to stay in the family. It is sufficient that the person has lived in France more than 183 days in any one year.

– The person has a professional activity in France (self-accessory)

– The person in France’s center of economic activities

This is the place where the person has made his principal investments, where it has registered its business or the center of his business, where it manages its assets.

2  Persons not having their tax domicile in France

People who do not tax domicile in France may nonetheless be subject to French tax.

Under French tax law, we must distinguish whether or not taxpayers have a home in France.

  • taxpayers who do not have a home in France

Since their tax domicile overseas, these taxpayers are subject to French tax unless they have income from French sources (income from real estate located in France, French securities income, income from farms, industrial, commercial and artisanal located in France …) and in respect of such income alone.

The income tax payable by non-resident taxpayers is calculated by applying the tax base, consisting of such income, the progressive scale and the family quotient system.

  • taxpayers who have a home in France

People who have their fiscal domicile abroad but who have, in France, one or more residential units are in principle liable to French tax either because their income from French sources or on a lump sum equal to three times the rental value of these homes, if their income or non-existent in France are lower than the flat rate.

 But international conventions on double taxation treaties and reciprocity can lead to or create exceptions to withdraw to France the right to tax the income from French sources.

 3  Taxation to wealth tax (ISF)

Individuals domiciled outside France shall be taxable only because of their property located in France (tangible personal property having a base material in France, property or interests in land owned directly or indirectly in France, claims against a debtor based in France …).

However, international conventions on the elimination of double taxation risks may provide a right to tax sharing between states.

Moreover, the financial investment of non-residents are specifically exempt. These are all investments made in France and incomes that fall under the category of income from securities: bonds, shares or rights – with the exception of equity securities and units or shares of companies predominantly real estate – deposits or future partners’ current accounts, life insurance and capitalization companies underwritten by French insurance …

4  Taxation of real estate gains

Subject to international agreements, individuals who are not tax resident in France and corporations with headquarters outside France are subject to a levy of 33 third on capital gains resulting from an occasional the sale of real estate in France.

Notwithstanding, it is set at 19% if the transferor is an individual residing in a state of the European Union, Iceland or Norway.

The methods of determining the capital gain are aligned on the provisions applicable to taxpayers residing in France.

Case of individuals subject to tax on income they receive most of the exemptions for residents.

There is a specific exemption, under certain conditions, when the first transfer of property that constitute their home in France. Including non-residents must be nationals of a Member State of the European Union, Iceland or Norway.

Filing of capital gain is required whenever the transferor is a person resident in France, there are taxable capital gain or not. Individuals are not required to file a declaration if they are exempted for holding period or selling price of less than 15,000 €.

 The amount of tax on capital gains is paid under the responsibility of an accredited representative. The designation of this representative is mandatory regardless of the nature, the price rise to the assignment or the quality of the transferor.

This may include the purchaser tax domicile in France, a bank carrying on business in France or a person approved by the Director of Tax Services. Some agencies receive a permanent license tax representation.

In derogation of common law, individuals are automatically exempted from appointing a representative accredited when the sale price is less than or equal to 150,000 € or if the gain is exempt under the holding period of the property.

5  Tax on properties held by certain corporations

The French or foreign legal persons, organizations, trusts that own, directly or indirectly, one or several buildings in France are liable to pay an annual tax of 3% on the market value of these buildings.

This tax is applicable regardless of the shape of the corporation (or partnership capital, associations …). The tax is levied on real property or property rights owned on January 1 of the tax year.

But such are not subject to this tax:

–          foreign states and international organizations,

–          companies whose shares or units are subject to regular and meaningful negotiations on a regulated market,

–          under certain conditions, certain corporations that have their seat of management in France, in a Member State of the Union or in a State which has concluded with France a convention on administrative assistance in the fight against fraud and tax evasion or in a State which has entered into an agreement with a clause of equal treatment (also referred to as non-discrimination clause or assimilation to national) pension funds, legal persons who subscribe annually a statement No. 2746 …

–          Corporations whose buildings located in France are less than 50% of French assets. To calculate the limit of 50%, buildings affected by the corporation to its own business other than real estate are not taken into account.