How do I report and optimize the taxation of my foreign interest or dividends?

Summary

• Mandatory reporting on form 2047 + transfer to form 2042
• Default taxation: flat tax (PFU) of 31.4% or option for the progressive scale (box 2OP)
• Tax credit to be claimed on lines 8VL / 8TK depending on the type of income
• Tax lawyer: recovery of the credit, tax audits, application of bilateral treaties

What are the reporting obligations for foreign interest or dividends when you are a French tax resident?

• Form 2047 is mandatory: Every tax resident of France must report their foreign-source interest and dividends, even if this income has already been subject to withholding tax in the country of origin.
• Transfer to form 2042 according to the type of income: Dividends must be reported in box 2DC, and interest in box 2TR. This transfer allows the applicable French tax to be calculated.
• Claiming the tax credit on lines 8VL / 8TK: To avoid double taxation, you must report the amount of foreign tax already paid and request that it be credited against French tax.
• Meeting deadlines and keeping supporting documents: The return must be submitted before the end of May/June, and documents proving the foreign withholding must be kept for 6 years.

How do you complete form 2047 step by step to report my foreign dividends?

1. Tick the section “revenus de capitaux mobiliers étrangers” (foreign investment income) on form 2047.
2. Enter the gross amount received, without deducting foreign levies: this is the amount to be converted.
3. Convert into euros at the ECB rate on the date of receipt, in accordance with French tax standards.
4. Transfer the gross amount to the main return (2042), box 2DC for dividends.
5. Enter the amount of the tax credit on line 8VL if the tax treaty provides for it.
6. Add the supporting documents for the withholding tax, keeping these documents for six years.
7. Check the treaty caps: any withholding in excess of them cannot be credited.

Flat tax (PFU) at 31.4% or option for the progressive scale: which taxation should I choose for my foreign interest and dividends?

How can double taxation be avoided through tax treaties and the tax credit on lines 8VL/8TK?

• Check the applicable bilateral treaty: These treaties specify the maximum rates of foreign withholding tax (often 15% for dividends, 10% for interest).
• Crediting via a tax credit: Depending on the treaty, France grants you a credit equal either to the foreign tax paid (method A) or to the French tax (method B).
• Report accurately on forms 2047 and 2042: Enter the gross amount, then the credit on line 8VL (investment income) or 8TK (other mixed income), attaching the supporting documents.

Why entrust the reporting of my international financial income to a tax lawyer?

• Checking treaties and applicable rates: The tax lawyer identifies foreign withholding errors, recovers overpayments and ensures that the rates provided for are respected.
• Optimizing taxation: They advise you on the choice between the flat tax and the progressive scale, and help you correctly incorporate expenses and tax credits.
• Securing the file in the event of an audit: In the event of an omission or error, the lawyer prepares a solid file with the necessary supporting documents to limit penalties.
• Assistance with foreign tax authorities: They can represent you abroad to obtain a certificate of non-residence, challenge a withholding or obtain a refund.

FAQ

Simple case study on foreign dividends: €1,200 received from Coca-Cola

1. Dividend statement: you receive €1,200 gross through your broker on a foreign account.
2. Form 2047: enter the gross amount in euros (converted at the ECB rate on the payment date) in the section “Revenus de capitaux mobiliers étrangers” (foreign investment income).
3. Form 2042: transfer the gross amount (€1,200) to box 2DC (dividends).
4. Tax credit: if tax was withheld at source (e.g. 15% in the United States), enter it on line 8VL.
5. Supporting documents: keep the transaction statement and the foreign withholding notice for 6 years.

Glossary

• PFU (Prélèvement Forfaitaire Unique – single flat-rate levy): automatic taxation at 31.4% (12.8% income tax + 18.6% social levies).
• Box 8VL / 8TK: allows you to benefit from the tax credit and avoid double taxation.
• Tax treaty: an agreement between France and another country to limit double taxation (e.g. the France-USA treaty).
• Box 2OP: to be ticked if you wish to be taxed at the progressive scale (useful if you are in a low tax bracket).

Key takeaways

• Even if you have already paid tax abroad, reporting in France is mandatory.
• The tax credit ensures that you do not pay tax twice on the same income.
• Never deduct the foreign tax on form 2047: report the gross amount and apply the credit on line 8VL or 8TK.

Further reading

CGI, article 158, 3-2: 40% allowance on dividends

Article 158, 3-2 of the French General Tax Code (Code général des impôts) allows a 40% allowance on foreign dividends when the progressive scale option is chosen. This regime applies only if the distributing company is located in the EU or in a State with which France has a tax treaty, and if the dividends are distributed under regular conditions. The allowance is incompatible with the flat tax (PFU).

Tax credit: method A vs method B depending on the treaty

Method A consists of granting a tax credit equal to the tax actually paid abroad. Method B limits the credit to the French tax due on the income concerned. The choice depends on the applicable treaty.

A close reading of each treaty is essential to avoid double taxation or a reporting error.