Expat Taxes in France: A Guide for Americans Living Abroad
- Living as an Expat in France
- France at a Glance
- What Are France’s Taxes like for US Expats?
- Who Has to File a Tax Return in France?
- Who Qualifies as a Tax Resident in France?
- What Types of Taxation Does France Have?
- Does the US Have a Tax Treaty with France?
- Does the US Have a Totalization Treaty with France?
- What Tax Forms Do Americans Living in France Have to File?
- US Tax Forms for Expats
- What Tax Deductions Are Available for Expats Living in France?
- Navigating Tax Compliance for US Expats in France
Living as an Expat in France
Living as an expat in France can be an exciting and rewarding experience. With its rich history, stunning architecture, and world-class cuisine, France offers a unique cultural experience that attracts millions of visitors each year.
As an expat, you can enjoy a high quality of life with excellent healthcare, education, and public transportation systems. France is also known for its excellent work-life balance, allowing you to make the most of your leisure time.
Whether you’re a student, professional, or retiree, France has something to offer everyone. So what are France’s taxes like for US expats? Let’s take a look.
France at a Glance
- Primary Tax Forms: Form 2042
- Tax Year: January 1st to December 31st
- Tax Deadline: March 1st
- Currency: Euro (EUR)
- Population: 67,022,000
- Number of US Expats in France: Over 100,000
- Capital City: Paris
- Primary Language: French
- Tax Treaty: Yes
- Totalization Agreement: Yes
What Are France’s Taxes like for US Expats?
One of the primary concerns of US expats living in France is which government they should file their taxes with. In most cases, the answer is both. This is because anyone living and working in France is required to file a French tax return, and all US citizens, regardless of their location, must file an annual US Federal Tax Return.
However, this can make tax season complicated, leaving you wondering which forms to file and when to file them. Furthermore, there may be other taxes that could impact you as an expat. To simplify the process and clarify your tax obligations, we have provided an overview of France’s tax policies.
Who Has to File a Tax Return in France?
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:
- The withholding tax on their employment or pension income tax reaches the 20% bracket
- They receive certain forms of French-source income
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.)
Who Qualifies as a Tax Resident in France?
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:
- Your primary residence is in France
- Your primary employment or professional activity is derived from France (if you have professional activities in multiple countries, you are considered a resident if most of your activities take place in France)
- France is the center of your economic activity
- You spent at least 183 days in France in a single year
If you don’t meet these qualifications, you are considered a non-resident for tax purposes.
What Types of Taxation Does France Have?
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:
|Earnings in Euros (EUR)||Rate Applicable to Income Level (%)|
|Less than €9,964||0%|
|€9,965 – €27,519||14%|
|€27,520 – €73,779||30%|
|€73,779 – €156,244||41%|
Beyond these rates, there is an additional surtax for income that exceeds certain thresholds.
- Single residents with an income over 250,000 EUR are subject to a surtax of 3%
- Single residents with income over 500,000 EUR are subject to a surtax of 4%
- Married residents with income over 500,000 EUR are subject to a surtax of 3%
- Married residents with income over 1,000,000 EUR are subject to a surtax of 4%
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.
Capital Gains Tax
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.
Capital gains tax rates range depending on the details of the gain. Some examples include:
- Capital gains from the sale of securities are taxed at a flat rate of 30%
- Capital gains from the sale of shares are taxed at 34.5%
- Capital gains related to real estate are taxed at 34.5% (though principal residences are tax-exempt)
France assesses a value-added tax at a flat rate of 20%, with a few exceptions:
- Books are taxed at 10%
- Restaurant meals are taxed at 10%
- Most groceries are taxed at 5.5%
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:
- Street lighting
- Street cleaning
- Collection of waste and recycled materials
- Administrative services
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:
- The annual rent that the property would be expected [Text Wrapping Break]to collect in the open market
- Discounts, family expenses, low-income households, [Text Wrapping Break]and disabilities
- Property management costs
- The tenant’s taxable income
- Tax rates set by the local commune level
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.
- If you work for a US employer in France for less than five years, you will pay into US Social Security
- If you work for a US employer in France for more than five years, you will pay into French social security
- If you are working for a French employer in France, you will pay into the French social security
Does the US Have a Tax Treaty with France?
Yes, the US has a formal tax treaty with France. This treaty helps US expats living in France avoid double taxation.
Under the treaty, US expats living in France may be able to benefit from reduced tax rates or exemptions for certain types of income. Additionally, the treaty provides provisions for resolving tax disputes between the two countries and allows for the exchange of information between tax authorities.
It’s important to note that while the treaty helps to prevent double taxation, US expats in France still need to comply with the tax laws in both countries.
Does the US Have a Totalization Treaty with France?
Under the treaty, US expats working in France can avoid paying social security taxes in both countries, which can result in significant savings. Additionally, the treaty provides for the portability of social security benefits, meaning that individuals who have worked in both countries can still receive benefits in retirement.
It’s important to note that the totalization treaty only applies to social security taxes and benefits, not income taxes. US expats in France still need to comply with the tax laws in both countries.
What Tax Forms Do Americans Living in France Have to File?
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.
French Tax Forms for Expats
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.
- Residents who file a paper return have a deadline of May 18
- Residents who e-file have a deadline of May 24, 31, or June 7, depending on where they live in France
- Non-residents have a deadline of June 7
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:
- February 15
- May 15
- September 15
You can also opt to pay on a monthly schedule if you prefer.
US Tax Forms for Expats
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.
Typically, taxpayers must file Form 1040 by April 15th (April 18th, 2023). However, the IRS automatically extends expats’ due date to June 15th, 2023. Taxpayers can also request a further extension to October 16th, 2023.
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.
What Tax Deductions Are Available for Expats Living in France?
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:
- Foreign Earned Income Exclusion
- Foreign Tax Credit
- Foreign Housing Exclusion (or Deduction)
The Foreign Earned Income Exclusion allows expats to exclude up to a certain amount of their foreign earned income from US taxes. The Foreign Tax Credit provides a credit for taxes paid to foreign governments, which can be used to offset US tax liability. The Foreign Housing Exclusion or Deduction provides additional relief for housing expenses incurred while living abroad.
Navigating Tax Compliance for US Expats in France
We trust that this guide has provided you with a comprehensive understanding of how France’s tax policies impact US expats. However, if you seek further information or assistance, our team of experienced tax experts is always available to assist you.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.