Taxation of non-residents

A tax non-resident is an individual or company that meets none of the criteria of article 4 B of the Tax Code (home or main place of stay in France, main professional activity in France, centre of economic interests in France) or the treaty residence tests. Non-resident status affects taxation: only French-source income (article 164 B of the Tax Code) is taxable in France, under specific rules and rates.

Taxable in France notably are property income (rental of buildings located in France), real-estate capital gains (Tax Code art. 244 bis A), certain salaries (article 182 A), dividends and interest (withholding tax), royalties (art. 182 B) and gains on the sale of substantial shareholdings (art. 244 bis B). A 20% minimum rate (or 30% above a threshold) applies to non-residents' income tax, unless a lower average rate is demonstrated.

Bilateral treaties aim to eliminate double taxation, but their effectiveness depends on the characterisation of income, tax residence and the mechanisms used (exemption in one State, tax credit, withholding cap). Conflicts may remain: they are resolved by applying treaty tie-breaker rules, by the mutual agreement procedure (MAP) or, failing that, through litigation.

The exit tax (article 167 bis of the Tax Code) taxes unrealised gains on substantial shareholdings held by a taxpayer who transfers their tax domicile out of France. Payment may benefit from an automatic deferral (EU States and certain partners) or against a guarantee. A return to France or certain disposals before the time limit expires may cancel the tax liability. See our full guide to the exit tax.

The form 3916 reporting obligation mainly concerns French tax residents. A non-resident is in principle not required to report accounts held outside France. However, a non-resident who becomes a resident (change of status) must report from the first year concerned. Omission can carry heavy penalties — see our article on reporting obligations and penalties.

French-source dividends paid to a non-resident are subject to a withholding tax of 25% under domestic law (article 119 bis of the Tax Code), often reduced to 15% — or even 0% or 5% — by the applicable treaty. The reduction requires producing a tax-residence certificate (forms 5000 / 5001) at the time of payment, or filing a formal tax claim afterwards to recover the excess.

A non-resident selling a French building above a certain price threshold and residing outside the European Union and the EEA must appoint an accredited fiscal representative, jointly liable for the capital-gains tax. Non-residents established in the EU or the EEA are exempt from this requirement. The representative acts before the signing of the deed — anticipation is essential.

A non-resident owner must notably file: (i) an annual income tax return 2042 and 2042-NR for French-source income; (ii) the specific schedules depending on the type of income (2044 for property income, 2048-IMM for real-estate gains); (iii) form 2777 for certain withholding taxes. The interaction with the applicable tax treaty is decisive to avoid over-withholding.