France has always been a popular destination among tourists and expats from different parts of the world. Speaking the French language is desirable to immerse completely into the French culture. There are many American expats in Paris, Brittany, Dordogne, Normandy, Strasbourg and the Riviera. The French tax system has undergone multiple changes recently. However, the personal income tax (“impôt sur le revenu”) is the principal foreign income tax that American expat France should understand. There is a special tax regime for international assignees effective in 2008. Additionally, Americans living abroad are required to file US expat tax returns.
Do you offer US expat tax services for American expatriates in France? What are foreign income tax rates in France? Should Americans living abroad file US expatriate tax returns when they do not have any US income and work in France? Are there other overseas tax rules that American expat France should be aware of? These are common expat tax questions from our clients in France.
Expat France Tax Rules and Returns
The basic rule is that the US citizens and green card holders are subject to the worldwide taxation. However, American expat France can avoid the effect of double taxation by taking several exclusions:
- Foreign earned income exclusion. American expat France with foreign earned income can exclude up to $101,300 for 2016.
- Foreign housing exclusion. Moreover, American expat France may be able to deduct certain foreign housing expenses if they can claim the foreign income exclusion.
- Foreign tax credit. American expat France can take a foreign tax credit for foreign income taxes paid in France when they file US expatriate tax returns.
American expat France might be also required to report foreign financial accounts to the Department of Treasury.
Tax system in France– FAQ
I am an American expat France. Is my worldwide income taxed in France?
1. American expatriates in France who are considered residents are taxed at progressive rates on their worldwide income.
2. Non-resident individuals are required to pay income taxes only on income from French sources.
France has multiple tax treaties and the USA is one of these countries. American expat France must take into consideration French income taxes by utilizing the foreign tax credit.
Who is considered a tax resident in France?
Residency is based upon a domicile doctrine.
American expat France is considered a resident in one of the following cases:
· s/he has the principal place of abode in France
· s/he has a permanent home in France
· s/he has a professional activity in France
· France is center of expat’s economic activity
What is the tax year in France?
The French tax year is a calendar year and it runs from 1 January to 31 December.
What is an income tax rate in France?
France uses a progressive tax rate scale per the income level. Tax rates are finalized at the end of the year. Employers are not required to withhold a tax at the source of residents. Non-residents are subject to 0%, 12% and 20% income tax withholding.
Which income is considered a taxable income in France?
Most types of remuneration and benefits are taxable in France. The details of expatriate compensation package should be reviewed to determine certain types of income that are exempt. However, “expatriate” allowance may be exempt from the French income tax per the special program for international assignees.
As an American expat France, can I file a tax return on overseas taxes with my wife?
Spouses are required to file a joint return. Dependents and filing status affect the amount of French income tax due.
Is it required to file an expat tax return in France every year?
Tax returns in France must be filed by March 1 with additional extensions until May. Non-residents are generally not required to file an annual tax return unless their compensation reaches a 20% tax bracket.
Does France have a tax treaty or social security agreement with the USA?
A double tax treaty was signed on August 31, 1994 between the USA and France. The USA signed a totalization agreement with France on July 1, 1988 that provides social security protection of expats working in both countries. The FATCA negotiations are conducted between the USA and France. The FATCA will be become effective in 2014. American expatriates in France should seek advice of an expatriate tax preparer to stay compliant and review French tax issues that affect US expatriate tax returns.
This is a summary of basic expat tax questions that American expat France should consider before moving to France, filing the French income tax returns as well as US expatriate tax returns.
American expats who need help with US expatriate tax preparation, FATCA, FBARs, PFIC or any other overseas tax issues, should seek help of expat tax CPA. International tax experts at Artio Partners will assist you with a wide range of expat tax topics.