You are a French expatriate who owns at least one property in France that you rent out, and you are wondering how your income from property is taxed as a non-resident. First of all, it is important to check whether there is a tax treaty between your host country and France. If the French tax system applies, you will have to pay tax on your property income under the French tax scale with different applicable schemes (real amount or “micro”system).
When you invest in rental property, choosing between renting it empty or furnished implies consequences on the applicable tax. Rental income from an empty property is considered to be income from property and may be subject to the micro-foncier system or the actual system. On the other hand, rental income from a furnished property comes under the category of industrial and commercial profits (BIC) and may be subject to the micro-BIC scheme or the actual scheme.
When it comes to international taxation, it is essential to check whether there is a tax treaty between France and the country where you live. The aim of international tax treaties is to combat tax evasion and avoid double taxation of expatriates. They allow the country where the income is generated (in this case, France) to tax this income and may provide for a deduction of the tax paid in the country of origin. In the absence of a tax treaty, there is a risk of double taxation.
In France, expatriates can choose between two tax regimes for their property income: the micro regime (micro-foncier for empty rental property and micro-BIC for furnished rental property) and the real profit regime. The micro scheme applies automatically if rental income does not exceed certain thresholds, otherwise you can opt for the actual scheme, which is irrevocable for 3 years.
Under the micro scheme, you must declare the gross amount of your rental income and apply a 30% allowance to take account of your expenses. Under the actual scheme, you can deduct certain actual expenses, which can create a property deficit and reduce your tax liability.
For income from furnished lettings, the micro-BIC scheme works in a similar way to the micro-foncier scheme, but with a more advantageous allowance of 50%, or even 71% for classified furnished tourist accommodation. Under the actual scheme, you can deduct various expenses and depreciation, and if you make a loss, you can carry the loss forward.
As a non-resident, you are subject to tax on your French-source rental income. The tax rate may be calculated according to the progressive income tax scale or by applying a minimum rate, depending on the applicable tax treaty. You may also request that the average tax rate be applied if this is more favourable to you.
Non-residents are required to pay social security contributions in France, unless they are resident in an EEA country and are affiliated to a compulsory social security scheme. Social security contributions are set at 17.2%, except in French overseas departments where they are 14.4%.
As a non-resident of France, you must declare your income from property in the year following your departure abroad. The declaration varies according to the tax regime and the type of rental. It is also necessary to declare income from SCI (Société Civile Immobilière) shares.
In conclusion, as a non-resident French expatriate, you need to take account of international tax treaties, choose the appropriate tax regime for your property income and comply with French tax reporting requirements.
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MFL registered lawyers remain at your disposal should you have any queries regarding your property incomes tax treatment. MFL will provide you with the best lawyers to handle your situation and secure your interest.