French and foreign dividends

If you opt via box 2042 2OP for taxation of all investment income under the tax bands (rather than ‘flat tax’), dividend income may be taxed after an allowance of 40%.

This also applies to dividends from the EU or countries with which France has a double tax treaty, assuming they meet certain rules to qualify, which is usually the case for ones quoted on major stock exchanges (dividends should have been paid out according to formalities comparable to French business law rules). This rule on ‘qualifying’ dividends is stated on page 4 of the Notice (notes) to the 2047 form.

If you do not opt for the bands, there is no allowance and the flat tax applies.

Foreign dividends, depending on rules in double tax treaties with France, often give rise to a tax credit to account for tax taken at source in the foreign country. You should generally declare these incomes net of any foreign tax paid. However, UK dividends should be paid out to non-UK residents without deduction of tax. 

Where relevant, you should also give the tax credit figure listed as allowable against net dividends from the country on pages 5–6 of the Notes, including the notional amount stated for the UK.

With regard to US dividends, however, see the 2047 Notes, page 3 note 20 and Etats-Unis on page 5, which state that US citizens in France declare gross and obtain a credit against French tax instead.

UK dividends should be declared net of UK tax as follows:

2047 section 2

On 2047 line 200+ Dividendes et jetons de présence:

Enter Royaume-Uni (UK) in line 202.

In 203, enter net income from relevant UK dividends.

In 204, enter the tax credit rate from the countries list (a notional 17.6% for the UK).

Multiply income by the rate to work out the credit. Enter this in total in line 205.

Enter UK tax paid in line 206 (probably zero).

Do the same in the extra columns if you have income from other foreign countries subject to the same rules.

The smaller of the two figures – tax credit or foreign tax – should be entered in line 207.

The total of incomes from 203 and tax credits from 207 should be entered at 208.

Total dividend income is also entered at line 221.

The part from ‘qualifying’ dividends is entered in 222 and any part from non-qualifying dividends in 223.

This income, and French dividends, is also entered as follows:

2042 section 2

Dividends from French shares and qualifying UK shares and unit trusts are declared on 2042 box 2DC (use the figure from line 222 on the 2047 for foreign dividends).

Non-qualifying ones go in 2TS (from line 223 on the 2047).

If you claim allowable expenses with regard to investments, these are entered on 2047 line 274, then carried to the 2042, box 2CA.

You should retain proof of these expenses.

With regard to any foreign income which has had tax taken at source and which gives rise to a tax credit equal to the foreign tax, the foreign tax (or the tax credit) from 2047, line 207 needs to also be entered in 2047 section 7 and then in 2042C box 8VL.

US dividends received by Americans in France

In the case of foreign income which gives rise to a tax credit equal to the French tax (eg. US dividends received by Americans in France), this should be declared as for French income but also in:

2047 section 2, line 210 and carried to line 221, then also to line 222 (qualifying dividends) or 223 (other dividends). 

It should also be declared in 2047 section 6 and carried to box 8TK on the 2042.

Note: Non-French schemes holding money or shares should also be declared with foreign bank accounts on form 3916.