Assets abroad, foreign accounts, foreign income: the scenarios are many and often intertwined.
Not to mention the origin of foreign assets and funds, an often thorny issue to which the French tax authorities (administration fiscale) are increasingly attentive: An inheritance? A gift? Foreign income? Were they declared?
And there is no shortage of tax questions:
- Is the inheritance taxable in France, and what about a gift?
- Do I have to pay tax when I sell a property abroad?
- And what about my foreign income: is it taxable in France? Even if I have already been taxed abroad?
- And the IFI (the new ISF, which targets real estate only): are my foreign properties affected?
- Do I have to declare my foreign bank accounts? And my life insurance policies? And my savings? And what about my trading account?
This tax guide provides initial answers to these questions, as concretely as possible.
In brief
- Holding accounts or assets abroad is not prohibited, but accounts, including life insurance contracts, must in principle be reported every year on form no. 3916-3916-bis.
- Foreign-source income of a French tax resident is in principle taxable in France; depending on the tax treaty, it may, in some cases, be exempt (subject to the effective rate rule) or give entitlement to a tax credit: only an analysis of the situation by a lawyer can determine whether or not the treaty allows this.
- The capital gain on the sale of a property located abroad is in principle reported on form no. 2048-IMM, within one month of the sale, where the treaty allocates taxation to France.
- Properties located abroad are included in the IFI calculation where net real estate assets exceed €1.3 million.
- An heir resident in France for at least six of the last ten years is in principle taxable in France on a foreign inheritance, with a credit for the tax paid abroad, except where a treaty may, in some cases, provide for an exemption: only an analysis of the situation by a lawyer can determine whether it applies.
Contents
Foreign accounts: what are the obligations?
First of all, it is important to remember that holding bank accounts abroad is, in principle, not illegal. Except in cases of proven tax fraud, holding bank accounts abroad is perfectly legal. The main obligation on the individual is, in principle, to declare their foreign accounts every year.
From a tax point of view, they are therefore, in principle, to be declared every year, using form 3916-3916-bis.
If the account is closed, the closure is in principle declared the following year, on the same form 3916-3916-bis; in subsequent years, the account in principle no longer needs to be declared.
The reporting obligation is very broad. It in principle covers all types of accounts held abroad: current account, savings account, securities account, capitalisation account, life insurance, trading account…
Foreign Accounts: Questions and Answers
I declared my foreign account last year; do I need to do it again this year?
In principle, yes: the declaration is to be made again every year, as long as the account exists.
I have closed my account; do I still have to make a declaration?
In principle, yes: the declaration is to be made again, indicating the date on which the account was closed.
An account closed in 2025 is in principle to be declared in 2026; from 2027 onwards, however, no further declaration is in principle required for that account.
I forgot to declare my account. I opened it a long time ago. What will happen if I regularise my situation?
In the event of regularisation, fines may in principle be applied. They become time-barred at the end of the fourth year following the year of the omission (article L188 of the LPF): depending on the date of the regularisation, the tax authorities may therefore, in principle, apply fines for a maximum of 4 or 5 years.
The amount of the fine depends on the country concerned. Generally, it is €1,500 per year and per account, but it can rise to €10,000 in certain cases.
I have an account abroad and I do not wish to declare it. What are the risks?
First of all, the declaration of accounts is, in principle, a legal obligation.
If the individual chooses not to comply with this obligation, the likelihood of being "detected" by the tax authorities depends on the country concerned. There are automatic exchanges of banking data with many countries around the world. Foreign banks send banking information to the French tax authorities, every year. The likelihood of being "detected" is therefore increasingly high.
If the concealment of the foreign account is part of tax fraud, the consequences can be severe, both from a tax and a criminal standpoint: 80% surcharges, fines, criminal prosecution.
If the concealment is not part of tax fraud, there will in principle only be tax consequences: 80% surcharges, which may sometimes, depending on the case, be reduced to 40%, and fines.
If I want to regularise, how do I go about it? What are the benefits?
Regularisation takes the form of filing a file with the tax authorities.
This file will include, in particular:
- A written statement on the origin of the funds, and documents substantiating this origin
- The bank documents for the entire regularised period
- A statement of assets for the regularised period
- The amended returns for income tax and any amended ISF / IFI returns
This is generally a long and tedious file to put together.
In addition, the tax authorities remain entitled to apply fines and surcharges (which they do, although the surcharges may, depending on the case, be reduced)
I have received a letter from the tax authorities asking me to regularise my foreign accounts. What should I do?
In principle, a reply to this request is expected; it is advisable to prepare it after analysing the situation, ideally with a lawyer.
If you have received this type of letter, it is very likely that your foreign assets are substantial.
The stakes are therefore high, and the potential tax reassessments could also be very significant.
It therefore seems advisable to be assisted by a tax lawyer for whom regularising foreign accounts is part of their usual practice, who can help avoid many pitfalls, secure the procedure and, depending on the case, reduce the reassessments.
If you decide to respond to the request on your own, which is entirely possible, here are some key points to watch:
- The origin of the funds: sincerity is essential, and the way it is worded deserves particular attention, ideally with a lawyer. The devil is in the detail and, in these cases, a detail can have serious consequences
- Producing the amended returns for income tax and ISF / IFI: depending on the case, tax credits and various tax reduction mechanisms may apply (to be checked by a lawyer); it may therefore be useful to claim them, so as not to miss out on these possibilities
Foreign income: what are the obligations?
Every tax resident of France is in principle required to declare all of their income every year, whether that income comes from France or from abroad.
Foreign income can be of several types:
- Rents from properties located abroad
- Financial income (interest, dividends or capital gains) from investments abroad
- Professional income: this may be salaries, or income from a business activity abroad
In principle, all this income is taxable in France, as long as the person receiving it is a tax resident of France.
However, there are many tax treaties, with many countries, which may derogate from this rule of taxation in France.
Depending on the case, tax treaties may provide for the following derogating rules:
- Foreign rents: in principle still to be declared in France, but, depending on the treaty, they may be exempt (subject to the effective rate rule) or give entitlement to a tax credit in France (to be analysed by a lawyer)
- Financial income: in principle taxable in France, with, depending on the case, a tax credit in France for the tax withheld abroad, within the limit set by the treaty (a lawyer’s analysis is needed)
- Professional income: very different scenarios, and therefore very different solutions depending on the case. It will sometimes be taxable in France, sometimes not, which needs to be checked by a lawyer.
Where a tax treaty exists, a careful reading of it by a lawyer is in principle necessary.
As for the forms to be used, this will be form 2047, and sometimes other types of forms, such as the 2042 C.
Form 2047 will make it possible to declare foreign income and, where applicable, to claim the tax credit in France.
The amounts on form 2047 are to be carried over to other returns: mainly form 2042, and sometimes other forms. When filing online, automatic carry-over can be activated, but it may “overwrite” boxes already pre-filled on form 2042; a manual carry-over may therefore, depending on the case, be safer.
Form 2047 contains the various sections needed to declare foreign income.
It also contains sections allowing you to claim, where the treaty provides for them, tax credits in France for the taxes you have already paid abroad, in order to avoid, or at least limit, double taxation.
These forms deserve to be completed with the utmost rigour, ideally with the help of a lawyer, as errors could cause you to miss out on tax reductions to which you may be entitled.
These forms nevertheless remain far from intuitive for those who are not used to them.
Where the stakes are high, the assistance of a tax lawyer can be useful to prepare the returns accurately.
Sale of a Property Abroad: Do I Have to Pay Tax in France?
For a French tax resident, the sale of a property abroad, if it has generated a capital gain, is in principle to be declared in France.
However, France has signed international tax treaties with many States.
It is therefore the tax treaty, where there is one, that determines how the gain is taxed in France.
Where, under the tax treaty, the capital gain is taxable in France, form 2048-IMM is in principle the one to be filed.
Note: the deadline is very short, in principle one month from the date of the deed of sale.
The difficulty with sales of properties abroad lies in two aspects:
- The complex legal aspects: is the sale taxable in France? And if so, am I entitled to a tax credit? Each tax treaty contains different details. Yet the devil is in the details, and from one treaty to another, the consequences can be enormous: some treaties will result in taxation, others will not, which only an analysis of the situation by a lawyer can determine
- The file to be put together is relatively substantial: form 2048-IMM, a cover letter explaining the context, copies of the purchase and sale deeds, documents evidencing the taxes paid abroad, etc.…
Property Abroad: Do I Have to Pay IFI?
First of all, owning real estate abroad is, in principle, not illegal.
Moreover, there is no specific reporting obligation for properties abroad, except where the taxpayer is liable to IFI (property wealth tax, impôt sur la fortune immobilière).
Consequently, in the absence of liability to IFI, the property does not, in principle, have to be declared.
Liability to IFI is triggered as soon as the tax household owns, on 1st January of the year, net real estate assets exceeding 1.3 million euros.
Each property is in principle valued at its market value (the value at which it could be sold) on 1 January of the year.
All properties are in principle taken into account: flats, houses, land, offices, SCIs (property holding companies), SCPIs (real estate investment trusts), the portion of life insurance policies relating to real estate, etc.…
Furthermore, both French and foreign properties are, as a general rule, taken into account.
There are, of course, exceptions, in particular where the property is used for professional purposes by the tax household (subject to certain strict conditions).
There are also possible allowances, in particular a 30% allowance on the value of the main residence and, depending on the case, a discount for rented properties (no rate is set by law; a discount of around 10% is often applied).
Inheriting Foreign Assets from a Deceased Foreign Resident: Are You Taxed in France?
Note: only the most common case is dealt with here, that of an heir who is a French tax resident, a deceased person who was a tax resident abroad and assets located abroad (other situations are not dealt with here: deceased resident in France with assets abroad, assets in France of a non-resident deceased, etc.).
A relative of yours has died abroad, was a tax resident abroad, and owned assets there, all or part of which have passed to you?
The first thing to understand is that, as a tax resident of France, any inheritance, even a foreign one, is in principle taxable in France.
There are, however, two major exceptions to this principle:
- At the time of the succession, you were indeed a tax resident of France, but you had not been one for at least 6 years during the ten years preceding the death
- A tax treaty on inheritances exists and may, in some cases, result in foreign assets not being taxable in France: only an analysis of the situation by a lawyer can determine whether this is the case
Case 1: Resident in France for at Least 6 of the Last 10 Years, No Treaty
The estate is therefore in principle taxable in France. The tax paid abroad on the assets located abroad is, however, in principle and subject to conditions, deductible from the tax due in France (article 784 A of the CGI).
Example: you inherit a house located abroad worth €2,000,000. Abroad, €150,000 of inheritance tax is paid. In France, €500,000 is due (by assumption). In principle, only €350,000 (€500,000 – €150,000) would then be payable to the French tax authorities.
Note: certain forms are then in principle to be filed, in particular form 2740-SD.
Form 2740 SD
It is through this form that you can, if the conditions are met, claim the credit for foreign tax and thus reduce the tax payable in France.
The other forms are in principle forms 2705-SD and 2705-S-SD, and possibly form 2705-A-SD in the case of life insurance.
Form 2705-S-SD (extract)
These forms deserve to be completed rigorously: they have a very direct impact on the inheritance tax due in France.
Case 2: Resident in France for Less Than 6 of the Last 10 Years
Since the deceased was a foreign tax resident and the assets are located abroad, no inheritance tax is in principle due in France.
Case 3: Resident in France for at Least 6 of the Last 10 Years, with a Treaty
In this case, the treaty needs to be analysed to determine how it allocates taxation between the two States.
Some treaties may make it possible to eliminate French taxation completely, others only partially, and others still will not allow French taxation to be eliminated at all; only an analysis of the situation by a lawyer can determine whether or not the applicable treaty may eliminate all or part of the French tax.
A careful reading of the treaty in light of your specific situation is therefore necessary.
If the stakes are high for you, the assistance of a tax lawyer seems highly advisable.
FAQ
Is a property located abroad subject to a specific return?
There is in principle no specific return for a property located abroad, except where the household is liable to IFI. The rents and capital gains it generates, however, must in principle be declared in France.
Is income already taxed abroad taxed a second time in France?
It must in principle be declared in France; depending on the case, the applicable tax treaty may provide either for its exemption in France, taken into account for the tax rate on other income, or for a tax credit set against the French tax, which may avoid or limit double taxation. It is necessary to have one’s situation analysed by a lawyer to find out whether or not the treaty allows this.
On which forms is foreign income declared?
In principle on form no. 2047, the amounts of which are carried over to return no. 2042 and, depending on the case, to the 2042 C; the accounts themselves are reported on form no. 3916-3916-bis.
Is an inheritance received from abroad taxable in France?
It depends in particular on the tax domicile of the deceased and of the heir, and on whether there is a tax treaty: such a treaty may, in some cases, lead to an exemption in France, which only an analysis of the situation by a lawyer can confirm or rule out. Where France taxes, the tax paid abroad on assets located abroad can in principle be credited against the French tax.
When is the sale of a property located abroad declared?
Where the capital gain is taxable in France, return no. 2048-IMM is in principle filed within one month of the sale. Analysis of the applicable tax treaty by a lawyer is an important first step.
