If you split your time between France and the UK or United States (or any other country), own a second home in France, or own French businesses, assets, or investments, it can sometimes be tricky to understand which country you are resident in for tax purposes. Here’s how to determine whether or not you are tax resident in France and your responsibilities.
What Makes You a Tax Resident in France?
Tax residency is typically determined by the location of your principal home or residence. If you live in France or spend the majority of your time in France, you will generally be considered tax resident in France.
However, with more and more EU citizens living and working throughout multiple countries, and many second-home owners in France choosing to split their time between properties, it can sometimes be complicated.
You will be considered tax resident in France if:
- Your main household (i.e. your spouse/partner and dependent children, or principal residence if you are single without dependents) is in France.
- You are employed in France or run your primary business in France (this doesn’t count if this employment/business is a secondary activity and your principal job is in another country).
- The centre of your economic interests is in France (i.e. your main business, professional activity, or source of income).
It’s also important to note that your tax residency is determined on an individual basis, and it is possible to be considered tax resident in France even if your spouse is not.
See the official rules for French tax residency here.
The 183 days rule for French tax residency
If none of the above can be determined, tax residency may be established by a simple calculation of days spent living or working in France. Legally speaking, the limit for which a non-resident can live in France is 183 days in each one-year period – if you go over this, you will also be classed as resident for tax purposes in France.
If you are spending more than 183 days a year in France, it is your responsibility to seek residency and file an income tax return – failure to do so could lead to a tax investigation (and the applicable consequences if you are found to owe taxes) further down the line.
France’s Double Tax Treaties
France has a double tax treaty in place with many countries, including the UK, the United States, Australia, and the EU and EEA. This means that you cannot be tax resident in both countries at the same time – your tax residency must be established in one single country, and you will never be required to pay the same taxes twice in both countries.
However, this doesn’t mean that you are free from ALL French taxes – see our section below ‘Do I have to Pay French Taxes if I am Not Tax Resident?’ for more. It also does not necessarily mean that just because there is a double tax treaty in place, you will never be liable for additional taxes in the other country – typically, you receive a tax credit against any taxes already paid, but this may still leave you liable to pay the remainder, and certain ‘taxes’ (namely social charges) are not always covered by the agreement.
International treaties will always take precedence over national legislation – however, if there is no treaty between the two countries, then you may be considered tax resident in more than one country, depending on the national legislation of each.
In the case that tax residency cannot be established, it will be down to the tax authorities of each country to prove their case.
What Does Being Tax Resident in France Mean?
Being tax domicile in France means that you must declare and may be liable for French income taxes (and potentially social security contributions/social charges, too) on all of your global income. This includes your salary and business revenue, investments and savings interest, rental income, capital gains, inheritance, your overseas pension, and any other income.
You must submit a French tax return each year, regardless of whether you have any income to declare or taxes to pay. How much tax you are liable to pay and where this tax is payable may depend upon the rules of the double tax treaty in place—for example, tax on rental income on a UK property or UK government pensions are taxed in the UK, but must still be declared on your annual tax return in France (see our guide to Tax Liability on Rental Income in France: Non-Residents).
Read our guides:
Do I have to Pay French Taxes if I am Not Tax Resident?
Even if you have determined that you are not tax resident in France, you may still be liable to French taxes if you own a business, property, or assets in France. Here are a few of the key taxes to be aware of.
French property owners are liable for France’s two property taxes, the Taxe d’Habitation and Taxe Foncière, regardless of whether you are resident in France or not. In fact, by 2023, the Taxe d’Habitation will only be payable on second homes, and if your property is in a Zone Tendu (an area of France with a known housing shortage), taxes on second homes and holidays could be even higher.
Read our guides:
Non-residents who work or receive business revenue in France may still be liable for French income tax. The official guideline is that you will only be taxed on income “from French sources”. In practice, if you took a temporary position in France or carried out work for a French company, it would likely be taxed at source (in France) and, if covered by a double tax treaty, you would gain a tax credit to allow for this when you file your tax return in your country of residence. Similarly, income from French rental property is taxable in France – read our guide to Tax Liability on Rental Income in France: Non-Residents for more on this.
While high-net-worth residents will be subject to French Wealth Tax on their global assets,
non-residents may still be liable to pay wealth tax on the value of French assets such as real estate.
Read our guide Understanding French Wealth Tax- Are You Liable?
Properties and real estate in France may be subject to French inheritance tax even if the deceased is a non-resident. Both the domicile of the deceased and the heir will be taken into account when calculating other inheritance tax liabilities, and it can be complicated.
Our guide, French Inheritance Tax – What You Need to Know is a good place to start.
Capital Gains Tax
Selling your second home in France can result in capital gains tax, and most taxation treaties dictate that this is paid in France regardless of whether you are a French resident.
Do I Need to File Two Tax Returns?
If you receive income or own assets in more than one country, such as the UK and France, or the United States and France, determining where you are tax resident is the first step to determining where to file your tax return and pay your income tax. However, as we’ve outlined above, being non-resident for tax purposes doesn’t necessarily mean you aren’t liable to pay tax in that country.
So, does this mean you need to file two tax returns? Probably – but the kind of tax declaration will depend upon the rules of each country. For example, a UK resident in receipt of pension income or rental income from the UK may still need to submit an annual tax return, even if there is no tax due. US citizens must file an annual tax return with the IRS when resident overseas, even if they have no US assets or income.
Filing a tax return in France as a non-resident
In France, annual income tax returns are only filed by residents of France; however, there is a specific tax return for non-residents with income from French sources (Cerfa form no. 2042).
Remember, it is your responsibility to declare these taxes in France, and it’s highly recommended to seek professional advice if you are not sure what taxes you are liable for – our directory of international tax advisors is a good place to start.
The French government also publishes fact sheets detailing declarable income in France depending on your country of residence, which you can find here.
Paying Your Taxes in France
Whether you are moving to France, own French property, or have business interests, assets, or investments in France—FrenchEntrée is here to help with all your tax questions. Our Essential Reading articles are designed to give you an overview of the basics, from income tax and social charges to wealth tax and property taxes. However, tax laws and rates are always subject to change, and international tax liabilities can be especially complicated, so if in doubt, we always advise discussing your personal situation with one of our recommended financial or tax advisors.
Disclaimer: This guide is provided for general information purposes only and is not intended to be a substitute for professional advice regarding any aspect of your tax planning or tax liabilities in France. FrenchEntrée cannot be held responsible for the consequences of decisions or actions you may choose to take in connection with French tax declarations or tax liabilities.
Leave a reply
Your email address will not be published. Required fields are marked *