French taxation for non-residents

CREDIT SUISSE (FRANCE)

2015

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1. Taxation of financial assets

Taxation of financial incom e

Taxation of financial property

Taxation of the sale of financial

assets

Interests received by a non-resident

individual are, in principle, not subject to any
taxation in France

Financial assets held in France by non-

residents are generally exempted from
wealth tax in France

The sale of French financial assets by

non-residents is generally not subject to
taxation in France

Moreover, interests included within the

surrender of a French life insurance
wrapper are subject to a decreasing
withholding tax depending on the oldness of
the wrapper (35% before 4 years, 15%
between 4 and 8 years and 7,5% after 8
years). Such rate is generally capped at 15%
by most of the double tax treaties signed by
France

Substantial participation (> 10%) held by

a non-resident in a French company is not
considered as financial investment for wealth
tax purposes and is subject to such a tax
(subject to double tax treaty provision)

The sale of substantial participation

(>10%) in a French company is subject to
taxation in France on the capital gains
realized at income tax rates (45% max.). A
rebate can be applied (50% on capital
gain if shares are hold between 2 and 8
years, 65% for more than 8 years).

Dividends paid to non-residents are

subject to a withholding tax of 21% for
residents of the European Economic Area
(EEA), or 30% for others. However, such rate
is generally capped at 15% by most of the
double tax treaties
Interests and dividends paid to noncooperative States are subject to a
withholding tax of 75%

Non-residents are not subject to social

contributions on financial income

Special tax on high income (3% to 4%)

could apply. (see below)

Wealth tax (ISF): due by individuals on an

annual basis according to a progressive tax

schedule if the assets held in France are
worth more than 1,3 M :

Net taxable assets

Below 800,000

Rate
0%

Between 800,000 and 1,300,000

0,5%

Between 1,300,000 and 2,570,000

0,7%

Between 2,570,000 and 5,000,000

1%

Between 5,000,000 and 10,000,000

1,25%

Above 10,000,000

1,5%

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Many tax treaties do not entitle France to

levy such taxation on capital gains realized
by non-residents
Special tax on high income (3% to
4%) could apply if total annual income is
more than 250.000 for a single, widow
or divorced, or more than 500.000 for a
couple.

Janvier 2015

2. Taxation of real estate in France

At the time of the purchase
Registration duties to be paid at the time of purchase: From 5,19
to 5,91% (due by the purchaser)
Proportionnal notary fees (+VAT 20%), established according to
an official progressive schedule and set by type of deed :
From 0 to 6,500
4%
From 6,500 to 17,000
1.65%
From 17,000 to 60,000
1.10 %
Above 60,000
0.825 %
To sum up: the total cost of the purchase would be around 6,5%7,5%
In case of acquisition of shares of a company which worldwide
assets are mainly real estate located in France, registration duties
would be limited to 5% on the value of the shares

During ownership
Annual land tax and residence tax: depends directly on the
propertys size and rental value. These taxes vary widely depending on
the propertys location
Wealth tax (ISF): due by individuals on an annual basis according to a
progressive tax schedule if the assets held in France are worth more
than 1,3 M (see above)
If the property is held indirectly through a French or foreign
company, shareholders are subject to wealth tax of they hold, directly
or indirectly, at least 50% of the shares issued by that entity.
Moreover, if the french assets of the company are mainly real estates,
shareholders are subject to welath tax in France, even if they hold less
than 50% of the shares
Under French tax law, the value of substantial participation (at
least 10%) held in any French company by a non-resident should be
also subject to net wealth tax

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2. Taxation of real estate in France

During ownership
In accordance with Article 768 of the French tax code, debts on a
property must meet the following criteria to be deductible from the
wealth tax basis:
Debts must exist on 1st January of the relevant tax year
Debts must be borne personally by the taxpayer
Debts must be justified (existence of a loan contract)
If a building is bought with a loan, the following are deductible
for wealth tax purposes:
Principal remaining due on 1st January of the relevant tax year
Interests due but not paid at 1st January
Accrued interests during the previous tax period
If the loan was not used to purchase the property (or does not
relate to another encumbrance on the property), the tax authorities
may challenge the deduction
If the property is acquired through a company, banking loans
are deductible for the assessment of the taxable value of the shares
but shareholders loans are no more deductible for non-residents

Rental income earned by non-resident are subject to French

personal income tax to the following progressive tax schedule
after deduction of rental costs (including interets of loans
contracted to buy the property):
Taxable incom e

Rate

Below 9,690

0%

Between 9,690 and 26,764

14%

Between 26,764 and 71,754

30%

Between 71,754 and 151,956

41%

Above 151,956

45%

However, in principle, the minimum tax rate for non-residents

is 20%
In addition rental income earned by non-residents are also
subject to social contributions of 15,5% (i.e., max. rate of
60,5%)
Rental income earned by companies subject to corporate
income tax are subject to a taxation of 33,1/3% on the net
income, after deduction of costs, interests and amortization of
buildings

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2. Taxation of real estate in France

When selling
Capital gains tax depends on how the property is held (directly or
via a company) and on the owners place of residence for tax
purposes

Capital gains realized as from January 1st 2013 are also subject
to an additional taxation which rate depends on the amount of the
taxable capital gain (assessed after application of the above
allowances):

The first sale of a French property by non-residents may be

exempted from capital gain tax under certain conditions
For other properties, the capital gain is subject to taxation at a
rate of 19%, plus 15,5% of social contributions and a specific
additional tax of 6% max (i.e. max rate of 40,5%)
Taxable capital gains are determined after deduction of
allowances based on the holding period reducing the taxable basis of
the capital gains:
Allowances on income tax (19% or 33,1/3%) basis:
6% per year between 6 and 21 years
4% for the 22nd year
Total income tax exemption after 22 years of holding period
Allowances on social contributions (15,5%) basis:
1,65% per year between 6 and 21 years
1,6% for the 22nd year
9% per year between 23 and 30 years
Total social contributions exemption after 30 years of holding
period

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2. Taxation of real estate in France

Succesion Planning
French properties held directly by a non-resident is subject to French civil law ( from tax law) in case of death and in particular to the
reserved portion rules for children
To avoid the application of French civil law it is necessary to held the property through a company: in that case it should be only applied the law of
the State where the deceased had his last domicile
On a tax point of view, French inheritance duties (in case of death) or gift duties (in case of gift) should apply on the value of the property.
There is no inheritance duties between spouses. From parents to children, duties (inheritance or gift) are the followings (after an allowance of
100,000 per beneficiary):

Taxable value

Rate

Below 8,072

5%

Between 8,072 and 12,109

10%

Between 12,109 and 15,932

15%

Between 15,932 and 552,324

20%

Between 552,324 and 902,838

30%

Between 902,838 and 1,805,677

40%

Above 1,805,677

45%

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2. Taxation of real estate in France

Examples of double tax treaties

Russia / France

UAE / France

French rental income derived by a Russian tax resident is taxable

in France (art.6)*

French rental income derived by an UAE tax resident is taxable in

France (art.5)**

Capital gains realised by a Russian resident on the sale of a

French property or on the sale of shares of a company invested
mainly in real estate located in France are taxable in France
(art.13)*

Capital gains realised by an UAE resident on the sale of a French

property or on the sale of shares of a company composed of more
than 80% of real estate located in France or on the sale of a
substantial participation (more than 25% of the financial rights) in any
French company are taxable in France (art.11)**

French Wealth Tax is only due on the value of properties held

directly in France by a Russian resident or on the value of shares
of a company which assets are mainly composed of real estate
located in the country (art.22)*

No provisions regarding inheritance or gift duties

French Wealth Tax is only due on the value of properties held directly
in France by an UAE resident or on the value of shares of a company
which assets are mainly real estate located in the country if the value
of those assets exceeds the value of other financial assets held in
France (art.16)**
French wealth tax is also due on the value of substantial participation
(more than 25% of the financial rights) of any French company
Inheritance duties are only due in France if French properties are
held directly by the deceased person(art.17)**

* articles from the Russian/French tax treaty

** articles from the UAE/French tax treatiy

No provisions regarding gift duties

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Janvier 2015

2. Taxation of real estate in France

Examples of double tax treaties
Switzerland / France

Qatar / France

French rental income derived by a Swiss tax resident is taxable in

France (art.6)*

French rental income derived by a Qatari tax resident is taxable in France

(art.5)**

Capital gains realized by a Swiss resident on the disposal of a

French property or on the disposal of shares of a company which assets
are mainly real estate located in France are taxable in France (art.15*).
Further to recent case law based on the non-discrimination clause of the
treaty, Swiss tax resident should be eligible to claim for the application of
the reduced rate of income tax of 19% that applies normally to EEA tax
residents instead of the 33,1/3% rate for non-EEA residents

Capital gains realised by a Qatari resident on the disposal of a French

property or on the disposal of shares of a company which assets are, for
more than 80%, real estate located in France or on the disposal of a
substantial participation (more than 25% of financial rights) in any French
company are taxable in France (art.11)**

French wealth tax is due on the value of properties held directly in

France by a Swiss resident or on the value of shares of a company
which assets are mainly real estate located in that State (art.24)*
French wealth tax is also due on the value of stock issued by a
company considered as a pass-through entity for tax purposes provided
that the above entity has a permanent establishment in France (art.24)*
As from 1st January 2015, no provisions regarding inheritance nor gift
duties

French wealth tax is only due on the value of properties held directly
in France by a Qatari resident or on the value of shares of a company
which assets are mainly real estate located in that State if the value of those
assets exceeds the value of other French financial assets (shares of French
listed companies, shares of French investments companies, bonds issued by
French public authorities or listed public companies) during at least 4 months
per year (art.16)**
French wealth tax is also due on the value of substantial participation
(more than 25% of the financial rights) of any French company
Inheritance duties are only due in France on French properties held directly
by the deceased (art.18)**
No provisions regarding gift duties

*articles from the Switzerland/French tax treaty

** articles from the Qatar/French tax treaty
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