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France’s high quality of life and vibrant culture have made it one of the most popular destinations for Americans living abroad. But in order to build a new life in France, you’ll need to understand how its tax expat policies impact you.
So what are France’s taxes like for US expats? Let’s take a look.
The first question many US expats living in France have is whether they should file their taxes with the French government or the US. In most cases, the answer is both. That’s because:
Of course, that can make tax season complicated. Which tax forms should you file—and when? What other taxes might affect you? To help clarify what your obligations may be as an expat, here’s an overview of France’s tax policies.
Any expat that qualifies as a tax resident of France must file an annual income tax return, no matter their income level. If you earn more than 9,964 euros in a single year, you may also have to pay taxes on your income.
Non-residents often have their taxes withheld at the source, making it unnecessary to file an annual tax return. However, non-residents may still have to file if:
While tax residents are taxed on their worldwide income, non-residents are only taxed on their French-source income. (However, because of the US-France tax treaty, most US expats won’t have to worry about double taxation.)
France determines residency by looking at a few different factors. If you meet any of the following benchmarks, you will be considered a French resident for tax purposes:
If you don’t meet these qualifications, you are considered a non-resident for tax purposes.
In France, every part of income is subject to taxation unless expressly classified as non-taxable by the French tax authorities. Residents must report their worldwide income and are taxed at progressive rates.
Tax rates for French tax residents:
Beyond these rates, there is an additional surtax for income that exceeds certain thresholds.
France’s taxation primarily revolves around “family units,” and a married couple will be required to file a joint tax return.
Unlike residents, non-residents in France are only taxed on their French-sourced income. Non-resident taxes are typically collected by withholding at the source. These withholding taxes are applied at progressive rates of 0%, 12%, and 20%, depending on the total amount of taxable income.
France taxes the worldwide capital gains of its tax residents. All capital gains are taxed at progressive rates, though there are exemptions for items such as furniture, motor vehicles, and asset transfers due to death or gift.
For non-residents, only capital gains sourced from France are taxable. These are taxed at the same progressive rates that apply to residents.
Capital gains tax rates range depending on the details of the gain. Some examples include:
France assesses a value-added tax at a flat rate of 20%, with a few exceptions:
Inheritance and Gift Tax
France levies a tax on inheritance and gifts. The rates of these taxes vary widely depending on who is receiving them.
The French Council Tax, or “tax d’habitation,” is an annual local tax levied on those occupying a property in France on January 1 of each year. This tax is used to cover community costs such as:
In cases of rental property, tenants with a long-term lease are responsible for paying the Council Tax. If the property is vacant, however, it will be the owner’s responsibility to pay.
The formula to calculate the French Council tax is complex. However, the amount you are required to pay is typically determined by the following criteria:
In addition to the French Council Tax, some expat property owners are subject to a property tax. This applies if you own a home in France and use it as your primary residence.
France provides a comprehensive social security system, funded in part by mandatory contributions from employee salaries. In some cases, this could mean that Americans living and working in France would be required to contribute to both US and French social security systems.
Fortunately, the US-France totalization agreement defines terms for which system expats living and working in France should pay into.
Yes, the US has a formal tax treaty with France. This treaty helps US expats living in France avoid double taxation.
The US always has a totalization agreement with France to clarify which nation’s social security system Americans living in France must contribute to.
Most Americans living in France have to file tax forms with both the US and French governments. Let’s take a look at some of the most common for each.
The primary French tax form is Form 2042. However, Form 2042 isn’t enough on its own. You will generally have to fill out multiple forms, one for each type of income, and attach them to Form 2042 before filing.
If you have paid French taxes before, you will typically receive Form 2042 already completed with French-source income. If you qualify as a tax resident, you will then need to add any worldwide income and capital gains, then endorse and file the form.
French income tax returns are technically due on March 1. However, there are quite a few factors that can change this for US expats living in France.
For expats who are residing in France for their first year, income taxes are typically not due until September since no February or May estimated taxes are mandatory.
If you are required to pay estimated installments, the deadlines are:
You can also opt to pay on a monthly schedule if you prefer.
IRS Form 1040: Individual Income Tax Return
Form 1040 is the standard US individual income tax return. Virtually every US citizen is required to file Form 1040 regardless of where they live and work.
The due date for Form 1040 is typically April 15, but expats get an automatic extension to June 15.
If necessary, you can even request a further extension to October 15
IRS Form 8938: Statement of Specified Foreign Financial Assets (FATCA)
If you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific threshold depends on your filing status as well as whether you are a bona fide resident of France.
Once you’ve completed your FATCA report, file it with your Form 1040.
FinCEN Form 114: Report of Foreign Bank and Financial Accounts (FBAR)
If you have a total of at least $10,000 in one or multiple non-US bank accounts, you have to report it by filing FinCEN Form 114, better known as FBAR.
This form must be filed electronically through the FinCEN BSA E-Filing System. As with Form 1040, the standard due date is April 15, but if you miss that deadline, there’s an automatic extension until October 15.
Because of the US-France tax treaty, most Americans living in France are already exempt from double taxation. However, the IRS also offers several other tax credits and deductions for expats, such as:
Using these tax credits, most expats are able to erase their US taxpaying obligations entirely.
We hope this guide has given you a better understanding of how France’s tax policies impact US expats. If you’d like to learn more, though, our team of tax experts is here to help.
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