# US/France Taxation



## milliesmith (Feb 2, 2013)

Hello all – again, thank you for this great forum. Trying to complete years of research around potential move to France (decision to be made soon) – we have some questions and if anyone can assist it would be appreciated. Our situation feels complicated although I expect there are lots of people with similar.

My Husband is a US citizen and I am a UK Citizen (former green card holder), living in the UK, considering permanent move to France before Dec 31 2020. I have an employment contract with the French office of a global company, and would have French permanent employment contract. My Husband would be inactive – early retirement. 

1. If we sell our UK property, our main residence after we move to France to become resident, will we have to pay capital gains tax in France? I believe we have 9 months to sell the property in order to not pay CGT? Is this correct? Although I read on Blevins Frank that the rules will change in 2021? Anyone know more on this? I'm confused. We plan to purchase a home in France after we have been there for several months.

2.	My Husband is a US citizen and I am a UK Citizen, previously a green card holder which has now been formally renounced. When I start to take distributions on my IRA and USSS in the future when I retire before retirement age, how will I be taxed? How does the W8-BEN help with my tax rate?

3.	Taking distributions from our IRAs Roth and Traditional – I have read on the forum, we should have the Broker in the US, transfer the $ amount to a US bank account which we have, and then use Transferwise to convert currency and deposit into our France bank account, correct? 

4.	We are behind on US Tax filing – would you recommend getting started with catch up process immediately or wait until we are in France to save complications around a new address etc?

5.	For the proceeds of our house sale – are most people investing funds like this in the UK, and then transferring income as needed? Or is it best to invest in France? I would think beneficial to keep in UK to take advantage of the EURO - if it stays favourable? Thoughts?

6. Can anyone recommend a France based, UK/US/France tax account please?

Thank you so much!


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## Bevdeforges (Nov 16, 2007)

Hi and welcome to the forums here. OK, let's take your questions in order:



> 1. If we sell our UK property, our main residence after we move to France to become resident, will we have to pay capital gains tax in France? I believe we have 9 months to sell the property in order to not pay CGT? Is this correct? Although I read on Blevins Frank that the rules will change in 2021? Anyone know more on this? I'm confused. We plan to purchase a home in France after we have been there for several months.


Generally speaking, taxes on real property (i.e. buildings and land) are based on the tax law of the country in which the property is located - except for US citizens. Not sure what changes Blevins Frank is talking about - possibly related to Brexit? But I don't believe either the UK or France charge capital gains on the sale of a personal residence. The US, on the other hand, will hit your husband for tax on any gain over $250K (assuming he files as married, filing separately).



> 2. My Husband is a US citizen and I am a UK Citizen, previously a green card holder which has now been formally renounced. When I start to take distributions on my IRA and USSS in the future when I retire before retirement age, how will I be taxed? How does the W8-BEN help with my tax rate?


Assuming that your husband files as married, filing separately, you will then be simply withheld at the NRA (non-resident alien) rates - currently 30%. (For your US SS the rate is applied to 85% of your benefit, not the whole thing.) The W8-BEN only gives the financial institution holding your IRA "proof" that you are not a US citizen - and for all payouts from your IRA they will have to withhold 30%. The good news is that you will not have to file any sort of US tax return (unless you have other US source income that is not being withheld).



> 3. Taking distributions from our IRAs Roth and Traditional – I have read on the forum, we should have the Broker in the US, transfer the $ amount to a US bank account which we have, and then use Transferwise to convert currency and deposit into our France bank account, correct?


That's not a legal or tax requirement. See what your broker/financial institution has as a policy for transferring funds to a foreign account. Some will make the transfer without additional charges, though most French banks will charge you to "accept" a foreign wire transfer (and an additional charge if you have your French bank do the exchange). It may work out better/easier for you if you set up a Transferwise "borderless account" and have your distribution transferred to the US bank account numbers they give you. You can then change into euros and transfer into your French bank account directly, saving most of the transaction costs and avoiding having to maintain a US bank account.



> 4. We are behind on US Tax filing – would you recommend getting started with catch up process immediately or wait until we are in France to save complications around a new address etc?


By saying "we" I'm guessing that you are filing jointly. You may want to re-think this one, given that you probably don't have a filing obligation. Granted, filing jointly you avoid the 30% NRA rate on your SS and IRA distributions, but it depends a bit on your other sources of income. If your husband files married filing separately, you have the possibility of adjusting ownership of assets or accounts to keep them out of the IRS' grasp. Or, when you sell the house in the UK, your husband would only be subject to any possible tax on one half the proceeds.

Change of address is not a big deal - there is an IRS form you can use to report a change of address at any time. And you file from your current address, no matter what year you are filing for.


> 5. For the proceeds of our house sale – are most people investing funds like this in the UK, and then transferring income as needed? Or is it best to invest in France? I would think beneficial to keep in UK to take advantage of the EURO - if it stays favourable? Thoughts?


There are lots of variables involved in this one, not least of which is where the exchange rate is headed. If you should need that money in a hurry, you pretty much have to deal with the exchange rate at the moment. Once it has been exchanged into euros, you know how much you're dealing with. But it depends, too, on what you're planning on using the money for - buying a new property, investing in euro denominated funds, day to day living expenses. 



> 6. Can anyone recommend a France based, UK/US/France tax account please?


You'll get lots of different opinions on this. My feeling is that the tax systems are pretty much separate and distinct and it may be best to deal with them each separately. Besides, once you move to France, you should be able to extricate yourselves from the UK system (i.e. by being non-resident in the UK and applying for recognition of this). The US system is more difficult to get free of - at least for your husband given that he is a citizen.


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## 255 (Sep 8, 2018)

milliesmith -- In answer to your questions (in order

"1. If we sell our UK property, our main residence after we move to France to become resident, will we have to pay capital gains tax in France? I believe we have 9 months to sell the property in order to not pay CGT? Is this correct? Although I read on Blevins Frank that the rules will change in 2021? Anyone know more on this? I'm confused. We plan to purchase a home in France after we have been there for several months."

Assuming you and your husband are 50% owners and you sell the property while resident in the UK (and meet the UK "Private Residence Relief" rules, https://www.gov.uk/tax-sell-home) your home will not be subject to UK CG taxes. It does appear that if you close within 9 months you can gain GCT relief: https://www.gov.uk/tax-sell-home/absence-from-home . If you sell the residence while you are resident in France -- different rules apply (https://www.gov.uk/tax-live-abroad-sell-uk-home ) and you may in fact owe capital gains taxes to the UK. As far as U.S. taxation, you will receive a 250,000 USD exemption on any gain, each. So depending on the total gain, as long as your capital gain is less than 500,000 USD -- there will be no U.S. GCT owed. In any event, there should be no GCT in France.

"2. My Husband is a US citizen and I am a UK Citizen, previously a green card holder which has now been formally renounced. When I start to take distributions on my IRA and USSS in the future when I retire before retirement age, how will I be taxed? How does the W8-BEN help with my tax rate?"

Assuming your husband is filing as "Married, Filing Separately" and you are receiving SSA retirement payments and IRA distributions as a "Foreign Person," your withholding rate will be 30% for each, however the withholding for your SSA retirement will only be based on 85% of your distribution, so about 25.5%
total. https://www.ssa.gov/international/A...siders you to,percent of your monthly benefit. https://www.irs.gov/retirement-plans/plan-distributions-to-foreign-persons-require-withholding The US-France tax treaty exempts both social security and IRAs from taxation in France -- see some of the many threads where Bevdeforges has explained how French tax forms are filled out.

"3. Taking distributions from our IRAs Roth and Traditional – I have read on the forum, we should have the Broker in the US, transfer the $ amount to a US bank account which we have, and then use Transferwise to convert currency and deposit into our France bank account, correct?"

That will work.

"4. We are behind on US Tax filing – would you recommend getting started with catch up process immediately or wait until we are in France to save complications around a new address etc?"

I would recommend filing immediately, especially if you haven't received your stimulus check yet, (best deposited to a U.S. bank.) You can change your residence address at any time.

"5. For the proceeds of our house sale – are most people investing funds like this in the UK, and then transferring income as needed? Or is it best to invest in France? I would think beneficial to keep in UK to take advantage of the EURO - if it stays favourable? Thoughts?"

Personally, the fewer connections to the UK -- the lower the risk to being classified as a tax resident in the UK. It may never become an issue -- but with all countries going to have a need to cover COVID-19 expenditures, there is no telling what changes may happen in the future. You're already beholden to the U.S. & France -- why risk it?

"6. Can anyone recommend a France based, UK/US/France tax account please?"

I suspect this will be hard (if not impossible) to find outside the big four accounting firms. Assuming you extricate yourselves successfully from the UK for taxes -- the UK won't be an issue after the first year (last years taxes and the sale of your home.) https://www.gov.uk/moving-or-retiring-abroad . That means France will be your residence and you'll owe your taxes there. Of course your husband will pay U.S. taxes for life, as long as he is a citizen (hasn't renounced.) I assume he didn't take UK citizenship, for whatever reason, since you didn't mention it -- but you'll both be eligible to apply for French citizenship after residing in France for 5 years. Personally, I think a second citizenship makes sense, whether he renounces his U.S. citizenship, or not. Taken individually, both the French and U.S. tax filings should be within your grasp (unless your taxes are exceedingly complicated.) There are many threads on this forum. Cheers, 255


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## milliesmith (Feb 2, 2013)

Thank you so much Bev and 255. We are very very grateful....so much information out there, it's helpful to get some clear and simple explanations to work with. We'll review your feedback thoroughly....potentially more questions in the future.
Thank you again!


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