Sale of real estate abroad by a tax resident of France: is any tax due in France?

Do individuals domiciled in France for tax purposes have tax obligations in France when they sell property located abroad, and is capital gain tax due in France?

This question is often ignored, considering that French taxation is inapplicable to the sale of foreign real estate, but this is incorrect and the answers are different depending on each situation, which should be examined on a case-by-case basis.

A distinction should be made depending on whether or not France has concluded a tax treaty aimed at avpiding double taxation with the foreign country where the property is located.

In the absence of a tax treaty with the other State

In the absence of a tax treaty between France and the State or territory where the sold property is located, the capital gain realized by a French tax resident upon the sale of a property buildings located outside France, is in principle taxable in France.

Indeed, tax residents of France are in principle taxable on all their worldwide incomes, profts and gains, regardless of the country where they are generated, unless a specific exemption is applied under French tax law or by a bilateral tax treaty aimed at avoiding double taxation.



In the presence of a tax treaty with the other State


In most cases, a tax treaty will have been concluded by France with the State where the property sold is located, France having signed a very large number of international tax treaties.

It is then necessary to check the rules provided for by the applicable tax treaty, in the event of a real estate capital gain realized on the occasion of the sale in a foreign country.

Usually, bilateral tax treaties provide that capital gains realized on the sale of real estate are taxable in the State where the real estate is located. It is therefore the criterion of the location of the building that will determine the State having the right to tax the capital gain.

In the event that a French tax resident sells real estate located outside France, the right to tax the capital gain realized therefore falls primarily, most often, to the foreign State where the property is located.

However, this does not mean that France does not also have the right to tax such a gain.

Indeed, as the State of residence of the taxpayer who sold the property, France, since it taxes its residents on all their worldwide incomes and gains, benefits from a right to tax, on a subsidiary basis, the capital gain real estate made abroad.

In order to avoid double taxation between the foreign State where the property is located and France, State of residence of the taxpayer, different techniques are likely to be retained by tax treaties. This is why an analysis carried out by an experienced tax advisor is necessary.

In certain situations, the capital gain realized abroad is exempted from any capital gain tax in France.

In other situations, the real estate capital gain realized abroad will have to be determined according to French tax rules for real estate capital gains, but will benefit from a tax credit which will cancel French tax.

Finally, in many cases, the real estate capital gain realized abroad will have to be declared in France, according to the French tax rules for real estate capital gains, but will benefit from a tax credit limited to the tax actually paid abroad. This means in practice that if French capital gain tax is higher than tax paid abroad, the difference must be settled in France.

The capital gain made upon the sale of real estate abroad has therefore to be declared in France when it is not exempted from tax, and has to be determined according to French tax rules.

Capital losses on real estate do not have to be declared, insofar as they cannot offset against other gains nor be carried forward upon the sale of other real estate, in France or abroad.

Attention should be drawn to the fact that capital gains to be declared in France are calculated according to French tax rules and that their amount may therefore be very different from the amount taxed abroad according to local rules. Exchange gains or losses have also be taken into account, if applicable.

Indeed, as the State of residence of the taxpayer who sold the property, France, since it taxes its residents on all their worldwide income, benefits from a right to tax, on a subsidiary basis, the capital gain real estate carried out abroad.

Thus, subject to an analysis specific to the transaction in question, and a study of the applicable tax treaty, the following declarations should be filed:

- Declaration No. 2048-IMM within 30 days of the sale, when the capital gain is not tax exempt in France;

- The general annual income tax return (form #2042), where the capital gain has to be reported;

- Form #2047, which summarizes all income collected outside France.


The tax law firm CM-Tax and its team of English speaking French tax advisors, with offices in Lyon, Marseille and Toulon but operating throughout France, is available to French tax residents with assets abroad, to provide tax analysis on the proposed transaction and, where applicable, make the above-mentioned calculations and declarations.