FRANCE Law and Practice Contributed by: Anthony Roustan and Cédric Dubucq, Bruzzo Dubucq
3. Taxation of Cross-Border Income 3.1 Income From Immovable Property General Principles French immovable property income is taxable in France regardless of the recipient’s residence. France distinguishes between revenue from non-furnished property and from furnished property. Non-furnished property For non-furnished property, rental income is taxed at the income tax bracket and subject to the social con - tribution of 17.2%. It can lead to a maximum effective tax rate of 45% (tax bracket) + 4% (exceptional contri - bution on high revenues) + 17.2 % = 66.2% maximum. The main categories of expenses that are deduct - ible from the revenue are property expenses, inter - ests, property tax, renovation and amelioration work. Acquisition costs (notary fees, transfer tax) and amor - tisation are not deductible. For rental income below EUR15,000 per year, taxpay - ers may elect for a simplified regime with a 30% allow - ance on the gross rental income. Furnished property For furnished property, rental income is considered a business and commercial income. This allows the taxpayer to deduct depreciation and amortisation of the property and acquisition costs, in contrast to non- furnished property. The net profit is then taxed at the income tax bracket and social contributions at the rate of 18.6% (since 2026). For rental income below EUR77,700 per year, tax - payers may elect for a simplified regime with a 50% allowance on the gross rental income. The threshold is reduced to EUR15,000 and 30% for short-term rental profits (stays below 30 days), unless the property is classified by the French Ministry of Tourism. Non-Residents For non-residents, the tax base is the same as for residents. They are subject to an income tax bracket with a minimum rate of 20% or 30% depending on the amount of revenue (see 2.4 Taxation of Non-Resident Individuals ). They are also subject to social contri -
worldwide revenues to calculate the effective tax rate at which they must be taxed in France. 2.5 Tax Residence of Legal Entities Corporate tax residence is determined by three alter - native criteria: • the registered office ( siège social ) in France; • the place of effective management, where key stra - tegic decisions are made; or • the existence of a permanent establishment. In practice, the place of effective management is often decisive. It is determined by reference to where the board of directors actually meets and makes strategic decisions, rather than mere registration formalities. In treaty situations, tie-breaker rules apply, and the MLI has introduced the possibility of mutual agreement procedures for dual-resident companies. 2.6 Definition of Permanent Establishment Domestic Framework French domestic law does not contain an explicit statutory definition of permanent establishment. The concept has been developed through case law and administrative doctrine, and is broadly aligned with the OECD Model Convention. Treaty Practice In treaty contexts, France follows the OECD Model, with a broader agent-dependent definition of perma - nent establishment, capturing persons who habitually play the principal role that leads to contract conclu - sion. Digital Economy Challenges The digital economy creates specific challenges regarding the concept of taxable presence. In several recent decisions, the Conseil d’État has addressed whether foreign digital platforms create permanent establishments through local activities – an area of ongoing judicial development.
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