How Can I Declare My Foreign Rental Income and Optimise Its Taxation?

Summary

• A French tax resident is in principle taxable on their foreign rents (article 4 A of the CGI), subject to tax treaties
• Micro-foncier regime for rental income up to €15,000: in principle, 30% allowance, no form 2044
• Above that: actual-expenses regime (form 2044); depending on the case, the treaty may allow a tax credit (box 8TK) or an exemption with the effective rate (to be analysed by a lawyer)
• Tax lawyer: choice between micro and actual-expenses regimes, application of tax treaties, defense in a DGFIP audit

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

• Reporting on form 2047: Foreign-source rental income must in principle be reported on schedule 2047, section I "Revenus fonciers de source étrangère" (foreign-source rental income).
• Carrying over to the main return: under the micro-foncier regime, gross rents are in principle carried over to box 4BE of return 2042; under the actual-expenses regime, net income is determined on return 2044.
• Social levies: rental income is in principle subject to social levies at 17.2% (a rate not affected by the 2026 increase), subject to the tax treaty; persons affiliated to a social security scheme of another European Union State, the EEA or Switzerland are in principle liable only to the 7.5% solidarity levy.
• Tax credit on line 8TK: where the treaty provides for a credit equal to the French tax, the rents are also carried over to box 8TK; the credit then corresponds to the French tax relating to that income, which needs to be checked by a lawyer, case by case.

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

1. Section I – foreign rental income: the gross rents received during the year are in principle entered in euros, at the ECB rate on the date of receipt.
2. “Tax paid abroad” column: this in principle shows the amount of tax paid in Spain.
3. Carrying over to return 2044 or 2042: the rents are then carried over to return 2044 (actual-expenses regime) or, under the micro-foncier regime, to box 4BE of return 2042.
4. Box 8TK: the amount to be carried over is that of the rental income concerned (and not that of the Spanish tax); the credit may correspond to the French tax on that income, if a lawyer’s analysis of the situation confirms that the treaty allows it.
5. Supporting documents: it is prudent to keep the evidence of the tax paid in Spain, with a translation if necessary.

Each treaty has its own method: for an apartment in Portugal, for example, the France–Portugal treaty may, depending on the case, exempt the rent from French income tax, which only an analysis of the situation by a lawyer can confirm or rule out; it is then only taken into account for the effective rate, in box 4EA (actual-expenses regime) or 4EB (micro-foncier) of the tax return, with no form 2047 and no line 8TK.

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

Can the tax credit on line 8TK and tax treaties avoid double taxation?

• Bilateral tax treaties: they determine the method that may apply in France, namely exemption (often applying the effective rate) or a tax credit equal to the French tax; it is necessary to have the situation analysed by a lawyer to find out whether or not the treaty makes it possible to reduce or eliminate the French tax on these rents.
• Tax credit equal to French tax: Where the treaty so provides, France grants a credit equivalent to the French tax on the income reported (to be checked by a lawyer).
• Supporting documents: the foreign withholding notice should in principle be attached or kept, in particular for line 8TK of the return.

What I see in my cases

In my cases, foreign rents often come on top of other income and assets held abroad, with significant stakes. Tax treaties may, in some cases, avoid double taxation and offer optimisations; only an analysis of each situation by a lawyer can determine whether this is the case. But the tax authorities know these rules poorly and tend to refuse anything poorly presented: a clear, documented file from the outset makes it possible to answer any questions simply.

Rents are, along with dividends, interest and capital gains, the foreign income I come across most often. They are a good illustration of the most frequent error in this area: confusing the tax credit and the exemption with the effective rate rule, and applying a method other than the one provided for by the treaty. For the real estate wealth tax (IFI), I also see properties located abroad being undervalued, particularly when the cadastral value is used instead of the market value.

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: They identify the applicable treaty and check whether or not it allows an exemption or a tax credit equal to the French tax.
• Preparing for tax audits: they analyse the risks linked to failing to report the income from a foreign property.
• Estate planning: holding through a company, split ownership, real estate wealth tax (IFI): the lawyer analyses the French tax consequences of each option.

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 schedule in principle required for foreign-source income, to be completed before the main return (2042 or 2044).
• Tax credit on line 8TK: makes it possible, where the treaty provides for it, to claim a credit equal to the French tax on income already taxed abroad and to limit double taxation (a lawyer’s analysis is needed).
• 30% allowance: automatic deduction applicable under the micro-foncier regime, without supporting documents, regardless of the country where the property is located.

Checklist: 6 points for declaring foreign rent

1. Analysis of your situation by a lawyer.
2. Local supporting documents (tax notices, rent receipts, proof of payment).
3. Gross amounts converted into euros, in principle at the rate on the day of receipt.
4. Choice between micro-foncier and the actual-expenses regime, to be made with your lawyer depending on the amount of rents and expenses.
5. Form 2047, then return 2042 (micro) or 2044 (actual expenses).
6. Box 8TK or boxes 4EA / 4EB, depending on the method provided for by the treaty.

Further reading

1. International tax treaties (OECD Model)
   Most tax treaties concluded by France allow the State where the property is located to tax the rental income.
   In practice:

• either France may, depending on the case, exempt this income (often applying the effective rate to the rest of the income),
• or it may grant a tax credit equal to the French tax (box 8TK).
  Only an analysis of the situation by a lawyer can determine whether or not the treaty concluded with the country in which you invest leads to this exemption or this credit.