How do I report and optimize the taxation of my foreign rental income?

Summary

• Every French resident is taxed on their foreign rental income (French General Tax Code (CGI), article 4 A)
• Micro-foncier regime for rental income up to €15,000: 30% allowance, no form 2044
• Above that: actual-expenses regime (régime réel) with form 2044 + tax credit on line 8TK
• Tax lawyer: choice between micro and actual-expenses regimes, recovery of foreign taxes, defense in a DGFIP audit

What are the tax obligations for foreign rental income received by a French resident?

• Reporting on form 2047: All foreign-source rental income must be reported on schedule 2047, section I “Revenus fonciers de source étrangère” (foreign-source rental income).
• Transfer to the main return: The net taxable amount is then transferred to return 2042 (box 4BE) under the micro-foncier regime, or via form 2044 under the actual-expenses regime.
• Subject to French social levies: This income is subject to the 17.2% social levies, even if it has already been taxed locally.
• Tax credit on line 8TK: A credit is granted to avoid double taxation; it is offset up to the amount of the theoretical French tax.

How do you complete form 2047 step by step for an apartment rented out in Portugal?

1. Section I – foreign rental income: Enter the gross rents received during the year in euros, at the ECB rate on the date of receipt.
2. “Impôt payé à l’étranger” (tax paid abroad) column: Enter the amount withheld at source by the Portuguese tax authorities.
3. Transfer to return 2044 or 2042: The net result must be transferred to return 2044 (under the actual-expenses regime) or to form 2042 (under the micro-foncier regime).
4. Enter the tax credit on line 8TK: the amount to be entered is that of the rental income concerned (not that of the tax); the credit generally corresponds to the theoretical French tax on this income.
5. Foreign supporting documents to keep: Attach the Portuguese tax receipts translated into French, to be kept for at least 6 years in case of an audit.

Micro-foncier or actual-expenses regime: which regime should I choose for my foreign rental income?

How can double taxation be avoided thanks to the tax credit on line 8TK and tax treaties?

• Bilateral tax treaties to consult: These treaties set the maximum withholding rate in the source country.
• Tax credit equal to French tax: If the foreign withholding is lower than the treaty rate, France grants a credit equivalent to the French tax on the income reported.
• Mandatory supporting documents: The foreign withholding notice must be attached or kept, in particular for line 8TK of the return.

Why engage a tax lawyer for your foreign rental income?

• Strategic choice between the micro-foncier and actual-expenses regimes: The lawyer simulates both options, takes into account actual expenses (works, costs, interest), and measures the long-term benefits (e.g. deficit that can be carried forward for 10 years).
• Tax treaties and recovery of withholding tax: They identify rights to a refund in the event of overpayment abroad and help you obtain reimbursement.
• Preparing for tax audits: They anticipate the risks associated with failing to report a foreign property, for which the reassessment period can be as long as 10 years.
• Wealth optimization: Structuring through an SCI, split ownership (démembrement), partial exemption from IFI (real estate wealth tax) for a property abroad: the lawyer secures and adapts your real estate taxation.

FAQ

Glossary

• Micro-foncier: a simplified regime for reporting gross rental income of up to €15,000 per year. It provides an automatic 30% allowance without having to provide details of expenses.
• Form 2047: a mandatory schedule for all foreign-source income, to be completed before the main return (2042 or 2044).
• Tax credit on line 8TK: avoids double taxation by neutralizing French tax on income already taxed abroad.
• 30% allowance: automatic deduction applicable under the micro-foncier regime, without supporting documents, regardless of the country where the property is located.

Checklist: 5 reflexes for correctly reporting rental income from abroad

1. Obtain the local supporting documents (tax assessments, receipts, proof of payment).
2. Convert gross amounts into euros at the ECB rate in force on the date of receipt.
3. Choose between the micro-foncier and actual-expenses regimes according to the annual amount of rent and expenses.
4. Complete form 2047 first, then form 2042 (micro) or form 2044 (actual expenses).
5. Don’t overlook line 8TK, which is essential to avoid double taxation.

Further reading

1. International tax treaties (OECD Model)
   Most tax treaties concluded by France provide for rental income to be taxed exclusively in the State where the property is located.
   In practice:

• either France exempts this income (often applying the effective rate to the rest of the income),
• or it grants a tax credit equal to the French tax (method B).
  A lawyer can help you interpret the specific clauses depending on the country in which you invest.