TLDR: Income from foreign sources denominated in foreign currency must be converted into euros for income tax (IR) assessment, either at the exchange rate on the day of receipt or when credited to a foreign account, or, as a practical rule, at the annual average rate determined by the Banque de France. Such income may be excluded from the taxable base under international double taxation conventions or if the beneficiary is not tax resident in France.
Conversion of income in foreign currency
Income from foreign sources expressed in a currency other than the euro must be converted into euros to determine the taxable amount for income tax (IR). The conversion is carried out at the exchange rate of the currency in question in Paris, on the day of receipt or when credited to a foreign account.
Annual conversion practical rule
For simplification, it is accepted to convert income received during a year based on the annual average exchange rate of the currency in question in euros, determined from the exchange rates on January 1 and December 31 of the previous year, as set by the Banque de France.
Exclusions from the taxable base
Income from foreign sources may be excluded from the IR taxable base in two cases:
- Application of international conventions against double taxation;
- The beneficiary is not tax resident in France.
Specific declarative obligations
Income from foreign sources that is taxable in France or exempt but taken into account for the application of the effective tax rate must be declared in annex form n° 2047. This obligation applies even if the income is exempt under international conventions.
Special cases related to tax residence
Taxpayers who are not tax resident in France may be subject to specific tax rules for their income from French sources. However, income from foreign sources is not taxable in France if the beneficiary is not tax resident there, unless international conventions apply.
Treatment of foreign charges and taxes
Income from foreign sources is considered in its net amount, after deducting expenses incurred for its acquisition or preservation. Social security contributions paid abroad may also be deducted, within the limits allowed by French legislation.
Exempt income and effective tax rate
Exempt income (e.g., under international conventions) must be declared for the calculation of the effective tax rate. It is reported in the supplementary income declaration n° 2042 C, with the following information: nature, gross amount, country of origin, related expenses, and amount of tax paid abroad.