How is French property income taxed in Israel for an Israeli resident?

invest abroad Cabinet Expert Comptable Dray & Dray

Do we have to pay tax in Israel?

We want to invest abroad, more specifically in France, and are Israeli tax residents.

As part of a furnished rental investment, we would like to contribute 25% towards the purchase of an apartment abroad in France, with the remainder financed by a 15-year loan in France.

Take, for example, an apartment costing 100,000 euros (to simplify the simulation).

Here are our questions:ALSO READ: How do I declare my property income in Israel?

During the credit period :

  • What is the tax impact in France and Israel if we wish to repatriate the rents every month and/or every year (in the case of surplus rent)?
  • How much do we have to pay to declare our income each year? Knowing that in France we receive no income and that we made our aliyah in 2015.

At the end of the credit :

  • What is the tax impact if the rent is repatriated each month?
  • What happens if we sell the apartment and want to bring the money back to Israel?
  • What is the tax impact on any capital gains?

The Franco-Israeli tax treaty defines the taxation of property income

Since you are within 10 years of the date of your aliyah, you have nothing to declare or pay in Israel during this period. For a foreign tax resident, however, this income must be declared in France as rental income. After 10 years of aliyah, this income must be declared in Israel as part of your annual tax return. However, this income will be tax-exempt, in accordance with the French-Israeli tax treaty. Under the tax treaty between France and Israel, rental income from property located in either country is taxable only in the country where the property is located:

  • If you are a French tax resident and own a property in Israel, the income from your property is taxable only in Israel.
  • If you are an Israeli tax resident and own a property in France, the income from your property will be taxable only in France.

So we follow the location of the property.ALSO READ: Explanation of the Franco-Israeli tax treaty



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