France’s beautiful countryside and romantic atmosphere have made it a popular destination for tourists, expatriates, and retirees alike. Before making a decision to move to France, learning about the expat taxes you will encounter is important. For starters, Americans in France are subject to the French taxation system in addition to having an obligation to file a US tax return. Below, we’ve summarized the expat tax details for American expats living in France
US Expat Taxes in France
If you are a citizen or permanent resident of the United States, you are obligated to file US taxes with the IRS each year regardless of the country in which you reside. Not only are you required to file the regular income tax return, you may need to file an informational return on your assets held in foreign bank accounts with FinCEN Form 114 – also known as the Foreign Bank Account Report (FBAR).
Though the US taxes the international income of its citizens and permanent residents who reside overseas, it does have special provisions to help avoid double taxation including:
- The Foreign Earned Income Exclusion, which allows an exclusion of up to $105,900 of foreign earned income from 2019 US taxes ($107,600 for 2020)
- The Foreign Tax Credit, which allows a dollar for dollar offset of taxes paid in the host country from US tax liability; and
- The Foreign Housing Exclusion, which allows an exclusion of household expenses that occur as a result of living abroad.
With proper planning and quality tax preparation, expats should be able to take advantage of these and other strategies to minimize or even eliminate your tax bill. Please note that even if you do not believe you owe any US income taxes, you will more than likely be required to file a return. Fortunately, there are ways to save big on your expat taxes – check out our complete tax guide for Americans working in France to learn more.
Who is a Resident of France?
France has three qualifications for an expat to be considered a French resident. Meeting any requirement will qualify you as a resident for tax purposes. The criteria are as follows:
- Your family’s primary home (where your family gathers on a habitual basis) is located in a French territory. Or, in the event that you do not have a family home, your primary residence is in a French territory. This is defined by spending more than 183 days in France or spending more time in France than any other foreign country.
- Your primary employment or professional activity is derived from France. If you have professional activities in many countries, you are considered a resident if most of your activities take place in France.
- France is the center of your economic activity.
France taxes “family units,” and a married couple will be required to file a joint tax return.
French Income Tax Rates
In France, all income is subject to French taxation unless specifically identified by the French Tax Authorities. Tax rates are progressive and are capped at 45%, plus a surtax of 3% on the portion of income that exceeds EUR 250,000 for a single person and EUR 500,000 for married couples and of 4% for income that exceeds EUR 500,000 for a single person and EUR 1 million for married couples.
The tax rates for 2020 (2019 income) from the French Tax Authorities are below.
|Earnings in Euro (EUR)||Rate Applicable to Income Level (%)|
|Up to €10,064||0%|
|€10,065 – €27,794||14%|
|€27,795 – €74,517||30%|
|€74,518 – €157,806||41%|
For 2021 (2020 income) the tax rates will be:
|Earnings in Euro (EUR)||Rate Applicable to Income Level (%)|
|Up to €9,964||0%|
|€9,964 – €25,405||11%|
|€25,405 – €72,643||30%|
|€72,643 – €156,244||41%|
Non-residents of France are not eligible for a standard exclusion and their income is subject to progressive income tax withholding rates of 0%, 12%, and 20% depending on the amount of total taxable compensation. When compensation reaches the 20% bracket, an annual individual non-resident income tax return is also required even though tax has been withheld at source.
However, there is a special tax regime for foreign nationals on temporary assignment in France known as the Inbound Assignee Regime (Article 155B of the French Tax Code).
To be eligible, 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). Additional compensation or benefits are exempt from French taxation, including housing allowances or relocation costs. These items must be specifically mentioned in the employment contract before beginning employment.
Under the same regime, individuals who are recruited by a French employer can also elect a 30% tax exemption in place of the itemized exemptions mentioned above.
US – France Tax Treaty
The US and France have a tax treaty in place that helps determine which country should be paid specific taxes and at what point those taxes should be paid. The treaty is relatively straightforward, but for any questions, we recommend seeking professional expat tax advice.
French Tax Due Date
Like the US fiscal year, the French tax year matches the calendar year. When taxes are due depends on your residence status, where you are located, and how you file.
If you are a resident and filing a paper return, your returns are due May 18th of the year following the tax year. If you are a resident and e-filing, your returns will be due on May 31. For non-residents, French taxes are due June 7th.
Social Security in France
The US-France Totalization Agreement determines which country has first rights to charge social security under various employment arrangements.
If a US employer sent you to work for less than five years, you pay into US Social Security. If your assignment is more than five years, you pay into the French social security program. If you were hired in France by either a French or US employer, you pay into France’s social security program. If you are on a US government assignment, you pay into US Social Security regardless of residency.
Is Foreign Income Taxed Within France?
Worldwide income will be taxed in France if you are considered a French resident. While the US-France tax treaty does exclude certain types of income, any excluded income is still taken into consideration when determining what tax rate will be applied to your personal income in France. Individuals who are non-residents will only be required to pay French taxes on income that is sourced from France.
Other Taxes in France
In addition to income tax on salaries paid, there are other forms of taxation in France.
There is a standard TVA (France’s value added tax) rate of 20%. Two reduced rates exist: a 10% rate for books and restaurant meals, and 5.5% for most groceries.
If you are a resident of France, worldwide capital gains are taxed as part of your income. All capital gains are taxed at progressive rates, though there are exemptions for items such as furniture, motor vehicles, or asset transfers due to death or gift.
Capital gains derived from the sale of securities as of 1 January 2018 are subject to PIT at a flat tax rate (PFU) of 30% (12.8% for income tax, plus social levies at a rate of 17.2%), and, if applicable, to the exceptional income tax for high earners at a maximum marginal tax rate of 4%.
Capital gains from the sale of shares are taxed at 34.5%. Capital gains from the sale of real estate are taxed at 34.5%, though principal residences are tax exempt. For non-residents, only capital gains sourced from France are taxable at the same progressive rates. There are several additional rules and holding period regulations on sales of real estate and capital gains and it is best to contact a local tax expert for proper planning and filings.
France enacted a law that entitles all those who have been non-residents in France for the five previous years to exclude their non-French assets from wealth tax for the first five years of their residence in France. After that, the tax is payable if you have total worldwide net assets in excess of €1,300,000 – a threshold that is linked to inflation. Few people in France are paying this tax, but it has certainly caused a stir amongst the residents!
There are very specific rules surrounding inheritance and gift taxes, and they vary greatly based on who is receiving them. More comprehensive information on this subject has been published by French-property.com.
As of January 1, 2019, for French resident taxpayers, income taxes are paid on a pay-as-you-earn (PAYE) basis. The scope of income subject to the new withholding tax system is very wide and covers most categories: employment income, pensions, self-employment income, and rental income, among others.
Further, a recent court case decided that many Americans in France are owed refunds due to an incorrect reading of the tax treaty. To find out if you qualify for a refund, watch our free, on-demand webinar.