TLDR: Interests on foreign accounts are not subject to withholding tax in France for French tax residents. Non-residents may be subject to withholding tax depending on the nature of the income and applicable tax treaties.
Tax residency and taxation
In France, interests on foreign accounts are not subject to withholding tax for tax-resident individuals. These interests must be declared in the annual income tax return and are taxed according to the income tax (IR) rules. Tax residents can opt for the prélèvement forfaitaire unique (PFU) at a rate of 30% (12.8% tax + 17.2% social contributions).
Withholding tax for non-residents
Non-tax residents may be subject to withholding tax on interests from foreign accounts in specific cases. For example, interests from bonds issued before January 1, 1987, and interests from bons de caisse (cash bonds) are subject to a 15% withholding tax. Prizes and redemption bonuses related to securities issued before January 1, 1986, are subject to a 17% withholding tax.
Exemptions and tax treaties
Certain categories of income are exempt from withholding tax. For example, bonds issued before January 1, 1965, by public bodies or agricultural cooperative societies are exempt. Additionally, international tax treaties may modify or cancel the application of withholding tax. For instance, dividends and interests of French origin paid to residents of Lebanon are exempt from withholding tax in France.
Declaration of foreign income
French tax residents must declare interests from foreign accounts in their annual income tax return. These interests are taxed according to IR rules, with the option to choose the PFU. Non-residents must also declare this income but may be subject to withholding tax depending on applicable tax treaties.
Withholding tax rates
Withholding tax rates vary depending on the nature of the income and the beneficiary's status. For example:
- Interests from bonds issued before January 1, 1987, are subject to a 15% withholding tax.
- Prizes and redemption bonuses related to securities issued before January 1, 1986, are subject to a 17% withholding tax.
- Dividends distributed to non-residents may be subject to a 75% withholding tax for non-cooperative countries.
Final nature of withholding tax
For non-residents, withholding tax is final and non-refundable. This means it is considered a definitive tax and does not entitle the taxpayer to a tax credit or refund.
Examples of withholding tax rates
- 15% for interests from bonds issued before January 1, 1987, and interests from bons de caisse.
- 17% for prizes and redemption bonuses related to securities issued before January 1, 1986.
- 75% for dividends distributed to non-residents in non-cooperative countries.