J'ai fait appel à Maître Uzan dans le cadre d'une procédure fiscale longue et techniquement complexe. Analyse rigoureuse du dossier, réponses précises dans des délais parfois très courts, et surtout une vraie capacité à maintenir un dialogue constructif avec l'administration plutôt qu'à durcir inutilement les positions.
Il a pris le temps de m'expliquer chaque étape et les options possibles, sans jargon et sans promesses excessives. Le dossier s'est conclu par une issue négociée.
Un accompagnement sérieux, du premier échange jusqu'au suivi complet de l'exécution. Je recommande sans réserve.
Foreign Real Estate
By Marc Uzan, French tax lawyer in Paris
Property Abroad: Letting, Sale, IFI and Inheritance
Tax lawyer at the Paris Bar since 2008 – exclusive tax law practice, including property abroad
Summary
- French tax resident ⇒ taxation of worldwide income in principle (article 4 A of the CGI), subject to tax treaties
- IFI due where net taxable real estate assets exceed €1.3 million at 1 January (article 964 of the CGI)
- Foreign rents: forms 2047, 2042 and 2044; depending on the treaty, tax credit (box 8TK) or exemption with the effective rate
- Tax lawyer: helps avoid double taxation, analyses the capital gain, defends you in the event of an audit
What tax obligations apply to a French resident who owns a property located abroad?
- Foreign rents are in principle taxable in France: a French tax resident in principle reports rental income received abroad; depending on the tax treaty, it is subject to the progressive scale of income tax with a tax credit, or exempt but taken into account to calculate the effective rate. Social levies (17.2% for rental income) may also be due, depending on the situation.
- An additional return is in principle required: depending on the applicable regime, this is form 2044 (actual-expenses regime) or box 4BE of return 2042 (micro-foncier, if gross rents do not exceed €15,000). This choice has a direct effect on taxation.
- Worldwide real estate is in principle included in the IFI: if the net taxable value of all real estate (including property held abroad) exceeds €1.3 million at 1 January, the IFI applies, after deduction of allowable debts. For five years, new residents may, subject to conditions, not be taxed on their property located outside France (article 964 of the CGI).
- The capital gain on resale is in principle taxable in France: at 19% (income tax) and 17.2% (social levies), with holding-period allowances (exemption from income tax after 22 years and from social levies after 30 years) and, where applicable, a surtax on high gains; depending on the treaty, a tax credit may avoid double taxation.
How do you report rental income or a capital gain from a foreign property?
- Form 2047: this is in principle the first step. This form makes it possible to detail the income received abroad, country by country.
- Form 2044 or box 4BE of return 2042: rental income is then reported on form 2044 (actual-expenses regime) or, under the micro-foncier regime, in box 4BE. The choice of regime depends in particular on the level of expenses.
- Box 8TK: where the treaty provides for a credit equal to the French tax, the amount of the foreign rents is also entered there, in order to avoid double taxation. Evidence of the tax paid abroad may be requested.
- Capital gain on sale: form 2048-IMM is in principle filed, with payment of the tax, within the month following the sale of the property. It is used to calculate the tax due on the gain according to the holding period and the allowances.
- Supporting documents: it is prudent to keep leases, rent receipts, deeds, translations and proof of payment, which may be decisive in the event of an audit.
| Tax | Form | Applicable rate | Specific feature |
|---|---|---|---|
| Rental income | 2047 + 2044 or 2042 | Income tax scale + 17.2% | Depending on the treaty: tax credit (8TK) or exemption with the effective rate |
| Capital gain | 2048-IMM | 19% + 17.2% | Progressive allowance after 5 years |
| IFI | IFI return | 0.5% to 1.5% | Threshold: €1.3 million in net worldwide real estate |
How can double taxation of a property located abroad be avoided?
- The tax treaty between France and the country concerned: it allocates the right to tax between the States. In general, the article on income from immovable property and the article on the elimination of double taxation specify the method applicable in France (exemption or tax credit).
- Tax credit equal to the French tax: many treaties provide that France grants a credit equal to the corresponding French tax, even if the foreign tax is lower; this mechanism then neutralises the French tax on that income.
- Evidence of the tax paid abroad: it may be very useful to keep the foreign tax notices, receipts, statements or certificates, together with a translation if necessary. These documents make it possible to prove actual payment.
What are the IFI rules for a property abroad and how can the taxable base be optimized?
- Property located outside France is in principle subject to IFI: Second homes, holiday homes or vacant dwellings abroad are, save for exceptions (tax treaties, special regimes), included in the taxable assets of a French tax resident.
- Business property may be exempt: If the property is used in a professional activity carried on as a main occupation (e.g. professional furnished rental – LMP), it may be excluded from the IFI base. This requires a genuine, lasting and declared activity.
- Property held through a company is in principle taken into account: the fraction of the value of the shares representing real estate, even held through an interposed structure (non-trading company, foreign company), is in principle included in the IFI base, according to specific rules.
- Only certain debts are deductible: for example loans used to acquire or carry out work on the taxable property, subject to conditions and within certain limits. Debts must in principle be substantiated and relate to the taxable property.
- Organisation of assets: depending on the case, certain options (split ownership, financing arrangements, holding through a company) may have an impact on the IFI; they require a personalised study, in particular in the light of anti-abuse rules.
What I see in my cases
For the IFI, the situation I come across most often is an undervaluation of properties located abroad. Two errors come up: using a cadastral value instead of the market value (the “valeur vénale”, which is in principle the value used for the IFI), and forgetting to credit against the IFI any wealth tax paid abroad on these properties, which Article 980 of the CGI in principle allows, within certain limits.
In the event of a sale, it is the deadline that most often causes difficulty: when the capital gain is taxable in France, form 2048-IMM is in principle filed within the month following the sale, a very short deadline. Finally, rents often come on top of other income and assets held abroad, with significant stakes (see the page on foreign rental income).
Why engage a tax lawyer to manage the taxation of a property abroad?
- Personalised tax audit: a lawyer analyses the applicable tax treaties, simulates the tax credit and identifies potential risks or omissions, in order to secure your situation in advance.
- Transfer and capital gain: depending on the case (gift before sale, holding through a company, special regimes), the lawyer analyses the French tax consequences for the capital gain and the IFI.
- Case file in the event of a tax audit: in the event of an omission, the tax authorities may in principle go back 3 years for income tax and up to 6 years for the IFI. The lawyer gathers the supporting evidence, drafts the replies and assists you at each stage.
- Coordination: the lawyer can liaise, on the French tax aspects of the file, with the other parties involved (notary, local adviser).
FAQ
Why does France tax my foreign rental income when I already pay local tax?
As a French tax resident, you are in principle taxable on all your worldwide income (article 4 A of the CGI), including rents received abroad, subject to tax treaties.
To avoid double taxation, many treaties provide for a tax credit equal to the French tax: French taxation then applies, but it is neutralised by that credit. Others provide for an exemption in France with the income taken into account for the effective rate. In both cases, this income is in principle to be reported, and it may be useful to be able to prove payment of the tax abroad.
How do you complete form 2044 step by step to report an apartment rented out in Spain?
In principle, the rents received in Spain are first reported on form 2047, with the country, the gross amounts and the local tax paid. Under the actual-expenses regime, net rental income is then determined on form 2044 (deduction of expenses: loan interest, works, insurance, etc.).
Where the treaty provides for a credit equal to the French tax, the amount of the rents concerned is in principle entered in box 8TK of return 2042 C. It is useful to keep all the supporting documents for these transactions.
What should I do if I forgot to include my foreign property in my IFI return for the last three years?
In the event of an omission, the tax authorities may carry out a tax reassessment that may go back up to 6 years for IFI (article L186 of the LPF), with interest and surcharges. Before taking any step, it is advisable to consult a lawyer to analyse your situation: depending on the case, regularising by filing an amended return, accompanied by an explanatory letter, may be an appropriate solution.
The involvement of a tax lawyer makes it possible to secure the process, calculate the amounts due precisely and, where possible, negotiate a reduction in penalties. Depending on the case, acting proactively may be preferable to waiting for an audit or a request for information from the tax authorities: this is one of the points to examine with your lawyer.
Glossary and checklist
- IFI: impôt sur la fortune immobilière (property wealth tax)
- Micro-foncier: simplified regime for gross rents ≤ €15,000 a year
- Tax credit: amount deducted from French tax to avoid double taxation, according to the treaty
- Market value (valeur vénale): valuation of the property on January 1 of the year
Checklist: 5 points to check
- Analysis of your situation by a lawyer
- Gross rents and supporting documents gathered
- Forms 2047, 2044 or 2042 completed, as the case may be
- Amount of foreign rents carried over to box 8TK, if the treaty provides for this credit
- Possible inclusion of the property in the IFI (net real estate assets above €1.3 million)
Further reading
- CGI, article 4 A (taxation of residents on worldwide income)
- CGI, article 964 et seq. (definition, thresholds and calculation of IFI)
- BOFiP BOI-PAT-IFI-20-40 (deductibility of debts)
- Articles 150 U et seq. of the CGI: real estate capital gains of individuals; form 2048-IMM.
