Tax tips from Americans in France
Being an American in France makes tax season - and many aspects of life in general - a bit more complicated, thanks to the US policy of citizen-based taxation. The Local has gathered together some tips from Americans living in France about dealing with tax requirements.
For many Americans, living in France comes with an extra set of challenges thanks to citizenship-based taxation and FATCA - US legislation passed in 2010 to track money laundering.
Americans resident in France do not escape the reaches of the IRS - meaning they continue to file US tax declarations and must navigate the complicated rules for non-residents.
Americans, like everyone living in France, must also file the annual French tax declaration - even if they have no income in France.
Meanwhile the FATCA legislation makes everyday tasks like opening a French bank account significantly more difficult for Americans.
Dozens of Americans in France responded to surveys by The Local and SEAT (Stop Extraterritorial American Tax) detailing how they are affected by these policies - from difficulties with banking, planning for retirement, the general time and money spent filling out tax forms each year, as well as conflict with spouses.
READ MORE: Divorce, stress and fines: How citizenship-based taxation affects Americans in France
Some respondents also had advice for other Americans who are living in France or planning to move here;
Tip 1 - Seek out professionals who understand the US-France tax treaty
Many Americans in France find themselves paying for professional help during tax season out of fear that they will incorrectly file or misunderstand complex US tax forms.
But this is a specialist area, so it's important to find an accountant or tax adviser with the correct qualifications and who is fully acquainted with both French and US tax laws.
Christopher Tipton in Dordogne said: "You should consider getting help with the French tax declarations to ensure you are doing them correctly, and getting tax treaty benefits for US sourced income."
The double-taxation treaty between the US and France is meant to prevent Americans from being taxed twice on the same income. In order to benefit from it, forms must be filled out correctly.
One respondent to the SEAT survey said: "In many instances, taxpayers pay tax to both countries (the paying country and the US), sometimes incorrectly paying to the US due to lazy tax preparers who do not look for treaty exemptions, resulting in double taxation."
An anonymous reader of The Local said: "Get a good accountant who understands the double-taxation agreement".
They added: "Thanks to a well-informed accountant here, we find the process of filing straightforward. This said, it takes two rounds: we get a large tax bill in late August/early September, and our accountant writes back to explain how they have failed to take account of the double-taxation agreement. Then we receive a note of reduction of the tax demand (so, far, to zero).
"This is the result of the very good double-taxation agreement, which effectively says that income generated in the US is taxable by the US, and income generated in France is taxable in France. (Income anywhere else could be a matter of dispute, but not a concern for many people.). So, for moment, the system seems to work."
Understanding the implications of the double-taxation agreement - and filing correctly - is also important because you might qualify for some advantages.
In a previous interview with The Local, tax expert, Jonathan Hadida called France "the bees' knees for American retirees" due to the fact that US-sourced pension income is only taxed in the United States.
READ MORE: Ask the expert: What Americans in France need to know about 401(k) and other pensions
To learn more about the tax agreement, Jennifer Hua in Bezons, said "Join AARO and attend the tax seminars. France has one of the best double taxation treaties around... appreciate it!"
Tip 2 - If holding on to US assets, maintain a US address
Reader Ellen Lebelle advised: "If you are an expat (intending to return to the US) then maintain your finances there. Keep an address there."
This is important, as several Americans in the SEAT treaty discussed losing access to US bank accounts and being unable to invest in US mutual funds due to a lack of an American address.
One SEAT respondent had another conundrum, saying: "I do not have an account on the IRS web site which could be helpful and cannot create one because I do not have a US address or phone number."
One reader advised keeping a US cell phone number, specifically, one "you can use in France in order to get security codes for US banking purposes."
For those looking to invest in mutual funds, you will likely be asked for an American address (and sometimes proof of residency). This can limit financial planning options for US-citizens abroad - The Local spoke with some experts about alternative savings options Americans in France can benefit from.
Tip 3 - Trusts and PFICS: Beware of how each country views financial instruments
One respondent to The Local's survey advised: "Do not keep any trusts in your name in the US that could be inherited if you die while domiciled in France, as your heirs will be taxed in France at an exorbitantly high rate".
READ MORE: What Americans in France need to know about trusts
While trusts can be taxed heavily in France, PFICs - passive foreign investment companies - are extremely difficult to report to the IRS. These are pooled investments registered outside of the United States - whether that is a mutual fund, an exchange-traded fund (ETF), a hedge fund, or certain types of insurance products.
One respondent in the SEAT survey, who has been living in France for 23 years, discussed the ramifications of failing to report PFICs and finding herself owing over $16,000 to the IRS for unrealised capital gains
Many Americans in France may not realise that the popular French investment tool 'Assurance Vie' is seen as a PFICs by US fiscal authorities.
READ MORE: 'Death by a thousand cuts': Tax warning for Americans in France
Tip 4 - If you want to stay in France, weigh the pros and cons of renouncing US citizenship
Ellen Lebelle's advise said: "If you are an immigrant (intending to stay in France), then become a French citizen and if you want to create a business, go into a partnership, then consider renouncing US citizenship beforehand."
Similar to Ellen, Victoria in Marseille said: "Get rid of the American nationality if you can!"
One SEAT respondent said: "It’s incredibly burdensome to file US taxes as a non-US resident. Having no financial activities in the US for the past 14 years, I experience worldwide taxation and disclosure of worldwide assets to be costly both in terms of time and expense, as well as an intrusion of privacy.
"If I no longer had immediate family in the US, I would renounce my citizenship solely due to the global taxation and asset reporting."
More than 30,000 Americans have given up their US citizenship over the past decade, according to the list of names published by the US government - however the process is complicated and expensive.
READ MORE: Why more and more Americans in Europe are renouncing their US citizenship
Tip 5 - Keep meticulous records and prepare yourself emotionally
Several readers and respondents to the SEAT survey discussed taking time to separate themselves from family while preparing tax forms to better concentrate.
Others recommended doing your best to keep meticulous records and being generally emotionally prepared for challenges ahead. For example, it may take time to get accepted by a French bank. There is some hope - the French government passed legislation on the subject and some banks are better than others for Americans.
A reader of The Local advised: "If you are moving before you retire, then don't have any illusions about the difficulties you will face.
"You will likely not face them right away - it will happen progressively over time, as your financial interests (bank account, investments, retirement planning, home ownership, business activities, ...) shift from the United States to France."
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For many Americans, living in France comes with an extra set of challenges thanks to citizenship-based taxation and FATCA - US legislation passed in 2010 to track money laundering.
Americans resident in France do not escape the reaches of the IRS - meaning they continue to file US tax declarations and must navigate the complicated rules for non-residents.
Americans, like everyone living in France, must also file the annual French tax declaration - even if they have no income in France.
Meanwhile the FATCA legislation makes everyday tasks like opening a French bank account significantly more difficult for Americans.
Dozens of Americans in France responded to surveys by The Local and SEAT (Stop Extraterritorial American Tax) detailing how they are affected by these policies - from difficulties with banking, planning for retirement, the general time and money spent filling out tax forms each year, as well as conflict with spouses.
READ MORE: Divorce, stress and fines: How citizenship-based taxation affects Americans in France
Some respondents also had advice for other Americans who are living in France or planning to move here;
Tip 1 - Seek out professionals who understand the US-France tax treaty
Many Americans in France find themselves paying for professional help during tax season out of fear that they will incorrectly file or misunderstand complex US tax forms.
But this is a specialist area, so it's important to find an accountant or tax adviser with the correct qualifications and who is fully acquainted with both French and US tax laws.
Christopher Tipton in Dordogne said: "You should consider getting help with the French tax declarations to ensure you are doing them correctly, and getting tax treaty benefits for US sourced income."
The double-taxation treaty between the US and France is meant to prevent Americans from being taxed twice on the same income. In order to benefit from it, forms must be filled out correctly.
One respondent to the SEAT survey said: "In many instances, taxpayers pay tax to both countries (the paying country and the US), sometimes incorrectly paying to the US due to lazy tax preparers who do not look for treaty exemptions, resulting in double taxation."
An anonymous reader of The Local said: "Get a good accountant who understands the double-taxation agreement".
They added: "Thanks to a well-informed accountant here, we find the process of filing straightforward. This said, it takes two rounds: we get a large tax bill in late August/early September, and our accountant writes back to explain how they have failed to take account of the double-taxation agreement. Then we receive a note of reduction of the tax demand (so, far, to zero).
"This is the result of the very good double-taxation agreement, which effectively says that income generated in the US is taxable by the US, and income generated in France is taxable in France. (Income anywhere else could be a matter of dispute, but not a concern for many people.). So, for moment, the system seems to work."
Understanding the implications of the double-taxation agreement - and filing correctly - is also important because you might qualify for some advantages.
In a previous interview with The Local, tax expert, Jonathan Hadida called France "the bees' knees for American retirees" due to the fact that US-sourced pension income is only taxed in the United States.
READ MORE: Ask the expert: What Americans in France need to know about 401(k) and other pensions
To learn more about the tax agreement, Jennifer Hua in Bezons, said "Join AARO and attend the tax seminars. France has one of the best double taxation treaties around... appreciate it!"
Tip 2 - If holding on to US assets, maintain a US address
Reader Ellen Lebelle advised: "If you are an expat (intending to return to the US) then maintain your finances there. Keep an address there."
This is important, as several Americans in the SEAT treaty discussed losing access to US bank accounts and being unable to invest in US mutual funds due to a lack of an American address.
One SEAT respondent had another conundrum, saying: "I do not have an account on the IRS web site which could be helpful and cannot create one because I do not have a US address or phone number."
One reader advised keeping a US cell phone number, specifically, one "you can use in France in order to get security codes for US banking purposes."
For those looking to invest in mutual funds, you will likely be asked for an American address (and sometimes proof of residency). This can limit financial planning options for US-citizens abroad - The Local spoke with some experts about alternative savings options Americans in France can benefit from.
Tip 3 - Trusts and PFICS: Beware of how each country views financial instruments
One respondent to The Local's survey advised: "Do not keep any trusts in your name in the US that could be inherited if you die while domiciled in France, as your heirs will be taxed in France at an exorbitantly high rate".
READ MORE: What Americans in France need to know about trusts
While trusts can be taxed heavily in France, PFICs - passive foreign investment companies - are extremely difficult to report to the IRS. These are pooled investments registered outside of the United States - whether that is a mutual fund, an exchange-traded fund (ETF), a hedge fund, or certain types of insurance products.
One respondent in the SEAT survey, who has been living in France for 23 years, discussed the ramifications of failing to report PFICs and finding herself owing over $16,000 to the IRS for unrealised capital gains
Many Americans in France may not realise that the popular French investment tool 'Assurance Vie' is seen as a PFICs by US fiscal authorities.
READ MORE: 'Death by a thousand cuts': Tax warning for Americans in France
Tip 4 - If you want to stay in France, weigh the pros and cons of renouncing US citizenship
Ellen Lebelle's advise said: "If you are an immigrant (intending to stay in France), then become a French citizen and if you want to create a business, go into a partnership, then consider renouncing US citizenship beforehand."
Similar to Ellen, Victoria in Marseille said: "Get rid of the American nationality if you can!"
One SEAT respondent said: "It’s incredibly burdensome to file US taxes as a non-US resident. Having no financial activities in the US for the past 14 years, I experience worldwide taxation and disclosure of worldwide assets to be costly both in terms of time and expense, as well as an intrusion of privacy.
"If I no longer had immediate family in the US, I would renounce my citizenship solely due to the global taxation and asset reporting."
More than 30,000 Americans have given up their US citizenship over the past decade, according to the list of names published by the US government - however the process is complicated and expensive.
READ MORE: Why more and more Americans in Europe are renouncing their US citizenship
Tip 5 - Keep meticulous records and prepare yourself emotionally
Several readers and respondents to the SEAT survey discussed taking time to separate themselves from family while preparing tax forms to better concentrate.
Others recommended doing your best to keep meticulous records and being generally emotionally prepared for challenges ahead. For example, it may take time to get accepted by a French bank. There is some hope - the French government passed legislation on the subject and some banks are better than others for Americans.
A reader of The Local advised: "If you are moving before you retire, then don't have any illusions about the difficulties you will face.
"You will likely not face them right away - it will happen progressively over time, as your financial interests (bank account, investments, retirement planning, home ownership, business activities, ...) shift from the United States to France."
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