Our French & US Tax Preparation and Consulting Services Include:
- International tax planning
- U.S. federal and state income tax returns
- Dual status & non-resident alien returns
- Expatriate returns
- Fiscal analysis and social security cost optimization
- Report of Foreign Bank and Financial Accounts (FBAR)
- French resident non-resident tax declarations
- French wealth tax returns
Tax planning can encompass a number of areas, and can be for the benefit of the corporate employer, an individual, or both. A sample of the services available follows:
- U.S. and foreign country tax planning for U.S. citizens contemplating an assignment abroad
- U.S. tax planning for foreign nationals contemplating an assignment in the United States
- U.S. tax planning for foreign nationals contemplating an investment in the United States
- Assistance with planning to ascertain the tax consequences of relinquishing U.S. citizenship or resident alien status
We strive to meet each client’s specific needs in planning for the future and achieving their goals in an ever-changing financial and regulatory environment.
As a U.S. citizen or resident alien (green card holders), your worldwide income generally is subject to U.S. income tax regardless of where you are living. You may be required to file even if you don’t owe any tax. However, several income tax benefits might apply if you meet certain requirements while living abroad. If your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test, you may be able to exclude from gross income a limited amount of your foreign earned income. In addition qualifying individuals may also be able to exclude or deduct from their gross income a foreign housing amount. To claim these benefits, you must file a tax return and elect the exclusion.
Further more if you pay foreign taxes, it may be possible to offset these against US taxes if there is a double tax treaty with the country in which you are resident.
A dual status Alien is one, who is both a Resident and Non Resident in the same year. Different Tax rules apply for the time during which you were a Resident and a Non Resident.
For the time period, during which the person is a non resident alien, they have to report only United States source income (effectively connected to a US trade or business or not effectively connected). Effectively connected income is taxed at the standard tax rates that apply to US citizens. For US source income not effectively connected to a US trade or business a 30% flat rate applies, unless it qualifies for a reduced treaty rate.
For the time period, during which the person is a Resident Alien, they have to report their worldwide income. Income is taxed at standard tax rates.
Non-U.S. citizens with assets in or income earned in the U.S., may have a U.S. income tax filing obligation. A non-resident alien must file Form 1040NR or Form 1040NR-EZ if engaged in a trade or business in the US, or has any other US source income.
The motivations for renouncing one’s U.S. citizenship or long term resident status are mixed and complex. But it is clear that taxation plays a large role for many. The US Department of Treasury published guidance concerning the exit tax applicable to expatriates and former long-term green card holders. Under this provision, an expatriating individual who has a net worth of at least US$2 million will be deemed to have sold their worldwide assets for fair market value on the day before expatriation. This “covered expatriate” will pay tax on any resulting net gains in excess of an inflation-adjusted exclusion amount, currently (for 2016) US$693,000. We can assist taxpayers with the filing requirements and in understanding the consequences of losing U.S. status.
It is always important to seek tax advice upon relocation to France but even more important to seek advice prior to one’s relocation in order to minimize the potential tax costs.
Often the highest tax cost borne by an employee or self-employed person who relocates to France is the French social security cost. If appropriate measures are taken, this cost can be alleviated for a defined period (5 years for employees and 2 years for self-employed individuals) through the mechanism of Totalization Agreements. See below an explanation on Totalization Agreements.
We assist our clients in optimizing their social security taxes by utilizing international “Totalization Agreements” which allow them to continue contributing to their home country while working overseas.
If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund or other type of financial account, you may be required to report the account yearly to the Department of the Treasury. Under the Bank Secrecy Act, each United States person must file a FinCEN report 114, Report of Foreign Bank and Financial Accounts (FBAR), if
- The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and
- The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year
Understanding the French income tax structure:
When you become a French tax resident: You are liable to declare your worldwide income on a French tax declaration.
As a French non-tax resident: You are liable to declare and pay tax only on French source income.
Individuals will be regarded as tax residents
- if their home or principal abode is in France,
- if they perform employment or independent services (unless these are only ancillary) in France,
- if their centre of economic interests is in France.
Taxable income includes
- employment income
- self-employment & other professional income
- unemployment insurance income
- pension income
- benefits in kind
- investment income
- certain types of capital gains
- rental & royalty income
Some of the more common tax deductions
- a forfeitary 10% deduction on gross income capped at 12,169€ (for 2015) or actual expenses
- household employee
- home energy saving expenses
- costs of childcare
- charitable donations to a qualified French charity
Income tax rates for 2017 are
|Income in 2016||Rates|
|Up to 9 710 €||0%|
|From 9 710 € to 26 818 €||14%|
|From 26 818 € to 71 898 €||30%|
|From 71 898 € to 152 260 €||41%|
|Above 152 260 €||45%|
There is a system of coefficients according to marital status and number of children which reduces the levels of income tax.
Generally May 31st of the year after the previous calendar year.
Understanding the French social security taxes
As a French tax resident, you will contribute to French social security based on income as either an employer, employee or self-employed. The level of these contributions is one of the highest in the world.
The good news is that taxable income is arrived at after deducting these social security contributions. For example, unlike the US, taxable salary in France is an amount after social security has been deducted (salaire net imposable), whereas the US taxable salary is represented by gross wages before deduction of FICA & Medicare.
The French social security rates vary depending on your employment status (i.e. whether you are an employee, self-employed or an employer). Arriving at the total amount of social security taxes owed, involves a series of complex calculations with rates subject to various floors and ceilings. If you would like to have an idea of your estimated social security tax amount, please contact us for a simulation calculation.
International social security agreements:
For those who have just arrived in France, please note that you may be able to optimize your social security tax obligation, by continuing to pay your contributions to your home country (the country you lived and worked in prior to your relocation to France) whilst receiving benefits (i.e. reimbursement of your health practitioner visits) in France.
As a result of social security agreements between France and numerous countries, an individual can pay a potentially lower contribution rate for a finite period.
Certain administrative procedures are necessary to take advantage of this option. We would be happy to discuss these with you.
The French wealth tax is called Impot sur la solidarite fortune (ISF). This tax has led to a great deal of controversy in the French administration. The most recent news is that the new government will either modify this tax by introducing another form of taxation, more tied in to the revenues generated by assets rather than the assets themselves or abolish this tax altogether.
For those resident in France, wealth tax applies to one’s worldwide net assets, and is calculated annually upon one’s position as of January 1st. The return must be filed by June 15th and any taxes owed must be paid with the return.
For non-French residents, wealth tax applies only to their French assets and hence for those who have purchased a second home in France, it will be necessary to monitor the value of the property each year to ensure that you are not encroaching on the net assets threshold of 800.000€(threshold applicable for 2016).
It is important to mention that citizens of certain treaty countries (countries who have concluded a tax treaty with France) will benefit from a 5 year exemption from wealth tax on all assets located outside of France.
The French wealth tax applies to the wealth of the “household” or “foyer”. By this we mean all members of a household – husband and wife (couples whether married or not) living under the same roof with minor children for whom they are responsible, so that their assets are aggregated, and one single wealth tax return is submitted.