American citizens residing in France: what taxes?

Many American citizens decide to move to France, especially for their retirement. This article, therefore, aims to clarify the methods of taxation in France of American source income of American citizens.

1 – In which country will my US pensions be taxed?

France and the United States have concluded a tax treaty with the aim of avoiding double taxation situations. According to this convention, retirement pensions and payments recognized as such are only taxable in the “paying” country. Thus, US-sourced pensions are only taxable in the United States.

For the application of Article 18 of the Tax Convention, France recognizes:

• Qualified plans under Section 401 (a) of the Internal Revenue Code;

• Individual retirement plans (including individual retirement plans that are part of a simplified employee retirement plan that meets the conditions of section 408 (k), individual retirement accounts (retirement individual accounts), individual retirement annuities and accounts covered by section 408 (p)];

• Qualified plans referred to in section 403 (a) and those referred to in section 403 (b), are generally considered to correspond to a pension scheme constituted, established and recognized for tax purposes in France.

2 – In which country will my US property income be taxed?

Once again France and the United States have entered into a tax treaty in order to avoid double taxation situations. The rule according to the convention is taxation in the country where the property is located. To the case at stake US rental income will be taxed in the United States.

3 – What about other income?

The tax treaty neutralizes taxation in France on American source income collected by American citizens resident in France. It is strongly recommended to be advised by a tax expert to clearly determine the place of taxation of each category of income and avoid reporting errors.

4 – Do you have reporting obligations in France?

Yes, as a French tax resident, you are required to declare all of your worldwide income. Article 24 of the same tax treaty defines the modalities to avoid double taxation. Thus income that is only taxable in the United States must be declared on the French tax return, but French income taxes in France are canceled thanks to the imputation of a tax credit.

We remind you that this analysis is applicable as of 23 February 2023 and may be subject to amendments following changes in the tax laws published annually.

We remain available for any additional questions and can offer our assistance on this matter.

This briefing note was written by Maud MESTRE – Tax Manager at Ruff & Associés

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