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Who has to file a tax return in France?

If you spend the majority of the year living in France and consider it your primary residence, or if you earn income from a French source, you are legally required to submit a French tax return, even if it’s your sole source of income.

This requirement applies to both tax residents and non-residents. This means that individuals residing in France without any income originating in France must still report any income they earn elsewhere. Similarly, foreigners with rental income from French properties must also go through the process of filing a French tax return.

It’s vital to emphasize that not adhering to these obligations can result in significant tax consequences, especially regarding capital gains tax when selling a property in France. Thankfully, individuals can avoid this tax when selling their primary residence, but they need to substantiate their French tax residency status by submitting their tax returns.

Dealing with non-tax residents

For those who are not tax residents in France, it’s crucial to be aware that you may still be obligated to file a tax return in France if you receive income from French sources, such as rental income, retirement pensions, or dividends. Some individuals might mistakenly believe that reporting their French income on their home country’s tax return is enough, but this is not the case and can lead to expensive tax reassessments.

It’s important to note that the risk of tax adjustments, particularly in the case of rental income, has grown due to the automatic exchange of information among platforms connecting landlords and tenants. This means that tax authorities have an easier time identifying non-compliance, making it even more imperative for individuals to accurately report their French income and fulfill their tax responsibilities.

Handling income from foreign sources

If you are a French tax resident and earn income from foreign sources, you must declare it to the French authorities annually. This includes all income from global sources, regardless of its nature, as well as any foreign bank accounts you might possess.

However, it’s essential to understand that declaring foreign income doesn’t necessarily imply you’ll have to pay taxes on it in France. France has signed 121 tax treaties to ensure that income declared in two countries isn’t subject to double taxation. Instead, a system of tax credits is in place to prevent this issue.

For example, if you earn property income in the UK, you need to report it in France, but you won’t be taxed on it again in France since it has already been taxed in the UK. This system is designed to prevent overpayment of taxes and to avoid potential double taxation complications.

SCI: Remember to declare cerfa 2072!

Many property owners in France hold their properties through an SCI company, often without their full awareness. These properties are frequently primary residences or second homes not rented out. It’s essential to note that all of them are obliged to submit declaration n°2072 to the tax authorities electronically, or they risk facing tax penalties for non-compliance.

French Tax Online is a tax consultancy firm specialized in foreigners investing and living in France.

A member of the Budiz Company Group, which is a French chartered accountant registered with the Order of French Chartered Accountants (OEC).

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