US Expat Taxes in France

France is a famous country for U.S. ex-pats. Whether they are attracted by the vibrant art and culture of Paris, the glamour and the beautiful beaches of the Mediterranean, or the idyllic calm of the countryside, many Americans choose to live in la République française. However, living abroad comes with certain tax obligations that U.S. citizens, and permanent residents, must continue to follow. 

Here, our expat tax lawyers at Evolution Tax and Legal are breaking down some taxes for ex-pats in France below.

French Taxes for American Expats

U.S. citizens and permanent residents living in France are still obligated to file a U.S. tax return in addition to being subject to the French taxation system. Along with the required regular federal tax return, those who held $10,000.00 or more at any time in the year in their accounts also need to file an informational return on their assets held in foreign bank accounts with FinCEN Form 114 – also known as the Foreign Bank Account Report (FBAR).

Taxable foreign income for American ex-pats includes wages, interest, dividends, rental income, and qualified retirement account distributions. 

Tax Forms for US Expats in France

An expat living in France generally needs to file the following U.S. tax forms, depending on their circumstances:

  1. Form 1040: The standard U.S. individual income tax return.

  2. Schedule B: Interest and ordinary dividends, often required if you have accounts or investments abroad.

  3. Form 8938: Statement of Specified Foreign Financial Assets, if you have certain foreign financial assets exceeding the reporting threshold.

  4. Form 2555: Foreign Earned Income Exclusion, if you want to claim the foreign earned income exclusion or housing exclusion/deduction.

  5. FBAR (FinCEN Form 114): Report of Foreign Bank and Financial Accounts, if you have foreign bank accounts exceeding certain thresholds.

Additional forms might be necessary depending on specific income types, deductions, or credits you’re claiming. It’s advisable to consult with a tax professional specializing in expat tax issues to ensure compliance and optimize your tax situation.

French Income Tax Rates for U.S. Expats

French income tax rates are different for residents and non-residents. While French residents’ worldwide income is their net taxable income, U.S. expats who are not considered French residents for tax purposes are only taxed on income from French sources. For Americans who qualify as residents, 2024 (2023 Tax Year) French tax rates are as follow:

  • Income up to EUR 10,777: 0%

  • Income between EUR 10,778 and EUR 27,478: 11%

  • Income between EUR 27,479 and EUR 78,570: 30%

  • Income between EUR 78,571 and EUR 168,994: 41%

  • Income above EUR 168,994: 45%

Non-residents are typically taxed only on their French-source income, and are typically collected by withholding at the source. The withholdings are applied at progressive income tax rates of 0%, 12%, 20%, and 30%, depending on the total amount of taxable income.

Non-residents also are not eligible to claim the standard exclusion. However, some U.S. expats may fall within a special tax regime for foreign nationals on a temporary assignment. For eligibility, in this case, the individual must not have been a resident of France in the five years preceding their arrival and must not be assigned to live in France for more than eight years (five years if the position started before July 6, 2016).

How French Expats Can Avoid Double Taxation

Nonetheless, some provisions can be put in place to help you avoid double taxation. The most important are:

 

  • The Foreign Earned Income Exclusion (FEIE) allows American expatriates to exclude up to $120,000 of their foreign earnings in the 2023 tax year, providing they meet residency requirements.

  • The Foreign Housing Exclusion is an extension of the foreign earned income exclusion. The exact amount of the exclusion varies as it’s based on actual housing costs, limited by specific guidelines and the individual’s foreign earned income. The IRS provides a detailed calculation for expats to follow.

  • The Foreign Tax Credit allowing a dollar for dollar offset of taxes paid in the host country from U.S. tax liability.

  • And Tax Treaties to prevent double taxation. Continue reading below to learn more about the various tax treaties.

U.S. Taxes When Retiring in France

For American citizens that decide to retire in France, a few considerations should be added. First and foremost, even when retiring abroad, you still may have to file a U.S. tax return. Moreover, if you meet the requirements, you must report money in any French financial accounts on your FBAR. Finally, if you have a French pension or retirement account (like the compulsory supplementary pension scheme ARRCO-AGIRC), it may be treated differently than in the U.S.

Who Is a Resident of France?

To be considered a French resident for tax purposes, a U.S. ex-pat must meet any of the following requirements:

  • The family’s primary home (or, if there is no family home, the primary residence location) is within French territory. This is defined by spending over 183 days within France or spending more of their time within France than another foreign country.
  • The primary professional activity or employment is derived in France. If there are professional activities taking place in several countries, a person is a French resident when most of their activities occur in France.
  • France is the center of the person’s economic activity.

When Are French Taxes Due?

Like in the U.S., the French tax year matches the calendar year, but deadlines to file French taxes are dependent on residence status, location, and the means used to file. They are generally due by the end of May or June.

U.S.- France Tax Treaty

The U.S. and France have a treaty that defines in which situations people will pay tax to which country, including people who are residents of both, and defines in which situations international structures such as investment vehicles, corporations, and trusts will be taxed by which country. The treaty also covers relief from double taxation for Americans living in France and French citizens living in the U.S.

Social Security in France

While the US – France tax treaty doesn’t cover social security taxation, a separate agreement called a Totalization Agreement generally helps U.S. expats in France not pay social security taxes to both the U.S. and French governments. The agreement ensures that workers and employers don’t need to contribute to both countries’ systems simultaneously. Additionally, the agreement helps workers qualify for benefits by allowing them to combine work periods in both countries.

However, the U.S.- France Totalization Agreement has several nuanced aspects:

  1. Determination of Coverage: It specifies which country’s social security system applies to the worker based on various factors like employment location, employer’s base, and the duration of assignment.

  2. Combining Social Security Credits: Workers who don’t have enough contributions to qualify for benefits in one country may combine their work credits from both countries to qualify for benefits.

  3. Benefits Calculation: The agreement outlines how each country calculates benefits for those who have paid into both systems, ensuring that benefits from both countries reflect the proportional amount of coverage accrued.

  4. Avoidance of Dual Taxation: It prevents dual social security taxation for the same work, ensuring that employers and employees only pay social security taxes to one country as specified by the agreement.

  5. Family and Survivor Benefits: The agreement also covers eligibility for family and survivor benefits, clarifying how these benefits are paid across borders.

These nuances ensure that workers moving between the U.S. and France are treated fairly and can access their social security benefits, while also preventing situations where workers or employers might be required to contribute to both systems simultaneously.

Does France Tax Foreign Income?

Anyone that is considered a French resident for tax purposes will have their worldwide income subject to taxation. While the U.S.-France tax treaty excludes certain types of income, any excluded income is still considered when determining what tax rate will be applied to your personal income in France.

Other Taxes in France

Evidently, income tax is not the only tax imposed in France. For instance, there is a standard TVA (France’s value-added tax) rate of 20%, except for a 10% rate for books and restaurant meals and 5.5% for most groceries. Moreover, worldwide capital gains are taxed as part of French residents’ income. And besides that, there are particular rules surrounding inheritance and gift taxes, and they vary greatly based on who is receiving them.

File U.S. Taxes With Evolution Tax and Legal’s U.S. Expat Tax Services

The many aspects of expat taxes for Americans in France may overwhelm you, but the Evolution Tax and Legal team provides U.S. Expat Tax Services to help you streamline your tax return process. For help with your ex-pat taxes, contact our team of experts today.

September 26, 2021

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