US Expat Taxes in France — Complete Guide

US-France Tax Treaty (1994)

The Convention between the United States and France for the Avoidance of Double Taxation, signed August 31, 1994 (and amended by protocol in 2004 and 2009), governs how income is taxed between the two countries.

Key Provisions

• Employment income (Article 15): Taxable in the country where services are performed. If you work in France, France has primary taxing rights.
• Dividends (Article 10): Withholding limited to 15% (or 5% for substantial holdings of 10%+).
• Interest (Article 11): Generally exempt from source-country tax.
• Capital gains (Article 13): Generally taxable only in the country of residence, with exceptions for real property and business assets.
• Pensions (Article 18): Government pensions taxable by the paying country; private pensions taxable by the residence country.
• Saving clause (Article 29): The US reserves the right to tax its citizens on worldwide income regardless of treaty provisions, but must provide a credit for French taxes paid.

US Filing Requirements for Expats in France

French Tax Obligations

Income Tax (Impot sur le Revenu)

France uses a progressive income tax with family quotient system:

Social Charges (CSG/CRDS)

French social charges total approximately 17.2% on investment income:

• CSG (Contribution Sociale Generalisee): 9.2%
• CRDS (Contribution au Remboursement de la Dette Sociale): 0.5%
• Solidarity levy: 7.5%

US tax treatment: The IRS position is that CSG/CRDS are not creditable foreign taxes because they fund social programs rather than general government revenue. However, under the US-France tax treaty, an argument can be made for creditability. This remains a disputed area — consult a cross-border tax advisor.

IFI Wealth Tax (Impot sur la Fortune Immobiliere)

• Applies to net real estate assets above €1.3 million
• Rates: 0.5% to 1.5%
• Only real estate is included (financial assets exempt since 2018)
• Primary residence receives a 30% discount on assessed value

PFIC Issues with French Funds

French collective investment vehicles are classified as Passive Foreign Investment Companies (PFICs) by the IRS:

• OPCVM (Organismes de Placement Collectif en Valeurs Mobilieres) — PFICs
• SICAV (Societes d'Investissement a Capital Variable) — PFICs
• FCP (Fonds Communs de Placement) — PFICs

PFIC taxation is punitive: gains are taxed at the highest ordinary income rate plus an interest charge, calculated as if gains accrued ratably over the holding period. Each PFIC requires a separate Form 8621.

How to avoid PFICs: Invest in US-domiciled ETFs (e.g., VTI, VXUS, BND) through a US-based brokerage like Interactive Brokers. Individual stocks are never PFICs.

Assurance Vie: US Tax Treatment

Assurance Vie is France's most popular savings vehicle, offering favorable French tax treatment after 8 years. However, the IRS does not recognize it as a life insurance product. Key implications:

• Gains are taxable annually as investment income on your US return (not deferred)
• If invested in unit-linked funds (unites de compte), each underlying fund may be a separate PFIC
• Must be reported on FBAR and potentially FATCA Form 8938
• The favorable French 8-year tax treatment does not apply for US tax purposes

Social Security Totalization Agreement

The US-France Totalization Agreement (effective March 2, 1987) prevents double social security taxation:

• Workers posted to France by a US employer for up to 5 years remain in the US Social Security system
• Self-employed individuals generally pay into the system of their country of residence
• Credits earned in both countries can be combined to qualify for benefits in either country

Frequently Asked Questions

Should I use the Foreign Tax Credit or Foreign Earned Income Exclusion?

For most US expats in France, the Foreign Tax Credit (Form 1116)is more beneficial because French tax rates generally exceed US rates. The FEIE caps at $126,500 (2024) and doesn't help with investment income. With FTC, you can credit the full amount of French taxes paid, often resulting in zero additional US tax liability.

Do I need to report my Livret A on the FBAR?

Yes. All French bank accounts, including Livret A, PEL, and even accounts with a zero balance, must be reported on your FBAR if the aggregate value of all your foreign accounts exceeds $10,000 at any point during the year.

Can I contribute to a PER (Plan d'Epargne Retraite)?

You can, but the US tax treatment is uncertain. PER contributions may not be deductible for US tax purposes, and the PER itself may be considered a foreign trust requiring Form 3520 reporting. Consult a cross-border advisor before contributing.

What about state taxes?

Some US states (notably California and New York) may continue to tax you even after moving to France, especially if you maintain ties to the state. Properly establishing French residency and severing state domicile is important.

Sources

• US-France Tax Treaty — Convention of August 31, 1994 (Treasury.gov)
• IRS Publication 54 — Tax Guide for U.S. Citizens and Resident Aliens Abroad
• IRS Form 8621 — Information Return by a Shareholder of a PFIC
• FinCEN — FBAR Filing Instructions (fincen.gov)
• Service-public.fr — French tax obligations for residents
• US-France Social Security Totalization Agreement (ssa.gov)

This guide is for informational purposes only and does not constitute tax or legal advice. Consult a qualified cross-border tax advisor for your specific situation.