US Expat Taxes Explained: Filing Taxes as an American Living in France

In the event that an individual decides to move to France, it is important for them to understand the implications such a move has for their US expat taxes. France’s beautiful countryside and romantic atmosphere have made it a popular destination for tourists, expatriates, and retirees alike. Americans who live in France are going to be subject to the French taxation system, as well as having obligations to file US expat taxes.

US Expat Taxes in France

If you are a citizen or permanent resident of the United States then you are obligated to file US taxes, in this case US expat taxes, with the IRS each year regardless of the country in which you reside.

In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with Foreign Bank and Other Account Reporting (FBAR) Form 114, in addition to Form 8938 Statement of Specified Foreign Financial Assets.

While the US is one of the few governments that tax the international income of their citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation including:

• The foreign earned income exclusion allows you to decrease your taxable income on US expat taxes by the first $108,700 for 2021 ($107,600 for 2020) earned as a result of your labors while a resident of a foreign country.
• The foreign tax credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar, and
• The foreign housing exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your tax bill.  Please do note that even if you do not believe that you owe any US income taxes, you will more than likely, still be required to file a return.

Who is a Resident of France?

France has three qualifications for an expat to be considered a resident of France.  Meeting any requirement will qualify you as a resident for tax purposes.  The criteria are as follows:

• Your family’s primary home (where your family gathers on a habitual basis) is located in a French territory, or in the event that you do not have a family home, your primary residence is in a French territory.  This is defined by spending more than 183 days in France or spending more time in France than any other foreign country.
• Your primary employment or professional activity is derived from France.  If you have professional activities in many countries, you are considered a resident if most of your activities take place in France.
• France is the place of your center of economic activity.

France taxes “family units,” and a married couple will be required to file a joint tax return.

France Income Tax Rates

In France, all income is subject to French taxation unless specifically identified by the French Tax Authorities.  Tax rates are progressive and are capped at 41%.

The tax rates from the French Tax Authorities are as follows:

Non-residents of France are not eligible for a standard exclusion, and are taxed at a minimum rate of 20%. However, there is a special tax regime for foreign nationals on temporary assignment in France.

To be eligible, the individual must not have been a resident of France in the five years preceding their arrival and must not be assigned to live in France for more than six years. This special regime can only be applied to French taxes for five years.  Additional compensation or benefits are exempt from French taxation, including housing allowances or relocation costs.  These items must be specifically mentioned in the employment contract before beginning employment. Under this same regime, individuals who are recruited by a French employer can also elect a 30% tax exemption in place of the itemized exemptions mentioned above.

US – France Tax Treaty

The US and France have a tax treaty in place which is helpful when determining both which country should be paid specific taxes and at what point those taxes should be paid.  The US – France tax treaty is an expat’s guide to ensuring the taxes are paid to the right country.  The treaty is relatively straightforward, but for any questions it is recommended to seek expat tax advice.

France Tax Due Date

Like the US fiscal year, the French tax year is the calendar year.  When taxes are paid, however, depends on your residence status, where you are located, and how you file.

If you are a resident and filing a paper return, your returns are due May 30^th of the year following the tax year.  If you are a resident and e-filing, your returns will be due on the 9^th, 16^th,or 23^rd of June, depending on your address.

For non-residents, French taxes are going to be due June 30^th.

Social Security in France

The US-France Totalization Agreement explains to which country social security is paid under each residency and employment circumstance.

If a US employer sent you to work for less than five years, you pay into US Social Security.  If your assignment is more than five years, you pay into French social security.  If you were hired in France by either a French or US employer, you pay into France’s social security.  If you are on a US government assignment, you pay into US Social Security regardless of residency.

Is Foreign Income Taxed Within France?

Worldwide income will be taxed in France if you are considered a French resident. While the US-France tax treaty does exclude certain types of income, any excluded income is still taken into consideration when determining what tax rate will be applied to your personal income in France.  For individuals who are non-residents, they will only be required to pay French taxes on income that is sourced from France.

Other Taxes in France

In addition to income tax on salaries paid, there are other forms of taxation in France.

There is a standard TVA (France’s value added tax) rate of 19.6% on consumer goods with a reduced rate on certain items such as food items, which are taxed at 5.5%.

If you are a resident of France, worldwide capital gains are taxed as part of your income.  All capital gains are taxed at progressive rates, though there are exemptions for items such as furniture, motor vehicles, or asset transfer due to death or gift. Capital gains from the sale of shares are taxed at 30.3%.  Capital gains from the sale or real estate are taxed at 28.3%, though principal residences are tax exempt. For non-residents, only capital gains sourced from France are taxable at the same progressive rates.

There is no inheritance, estate, or wealth tax in France.

Saving on US Expat Taxes

If you plan on living in France, it is important to understand your French filing requirements while remembering your US expat tax requirements as well.