# US Certificate of Residency needed



## LMGE (Aug 6, 2009)

Ok, here is a quite technical question that I would be very greatful if someone could help with:

I am a US Citizen, living in the UK and earning an income in the UK (under the 7 year limit). Under the US/UK tax treaty I am considered a resident in the UK for tax purposes.

Now, I have income coming from France, that will not be subject to UK taxes, and I need a US Certificate of Residency to keep the French taxes at expat levels. It apears that the IRS computer system cannot handle income from a foreign country in which you do not reside, thus all the responses from the IRS states that I am requesting relief from UK taxes and denies the request.

Phone calls are getting me nowhere with the IRS.

Any and all thoughts are welcome.

Thank you.


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## Bevdeforges (Nov 16, 2007)

OK, as a US citizen, you owe taxes on your worldwide income to the US. As a UK resident, you owe taxes on your income to the UK. And, depending on the type of income you have coming in from France, you may or may not owe taxes to the French - but as a non-resident.

I'm not sure what you mean when you say you need a certificate of residency "to keep the French taxes at expat levels." As far as I know, there's no difference between the tax rates charged residents and non-residents - though there are some differences on what types of income are liable to taxes. And France doesn't withhold income tax on income during the year.

You still have to declare the income on your US returns. If it's "earned income" you just claim the overseas earned income exclusion along with your UK salary. (I've done it before and the IRS had no problem with it - admittedly, the other way around. I'm resident in France and had income from the UK as well as from France.) If it's unearned income (under IRS rules), you declare it, and take the tax credit for taxes paid to France. (France has a form for you to declare all foreign income by type, and then they calculate any tax credits you may be entitled to.)

Perhaps a bit more detail about the nature of the income from France might help.
Cheers,
Bev


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## LMGE (Aug 6, 2009)

*follow up details*

Thank you for the quick response

The French income is dividend income. so far, for several years (including when we lived in the US) we obtained a Certificate of Residency from the IRS (form 6166) that allows France to tax dividends at 15% instead of the local 30%.

We filed a foreign income exclusion for income from the UK, but not France. However, for some reason the IRS does not tell the countries apart and assume that we are applying for a 6166 for income derived in the UK. What we need is a 6166 for income from France. The objective is to reduce the taxes in France, not in the US.

I hope this clarifies.

Any further thoughts based on this info.

Thank you






Bevdeforges said:


> OK, as a US citizen, you owe taxes on your worldwide income to the US. As a UK resident, you owe taxes on your income to the UK. And, depending on the type of income you have coming in from France, you may or may not owe taxes to the French - but as a non-resident.
> 
> I'm not sure what you mean when you say you need a certificate of residency "to keep the French taxes at expat levels." As far as I know, there's no difference between the tax rates charged residents and non-residents - though there are some differences on what types of income are liable to taxes. And France doesn't withhold income tax on income during the year.
> 
> ...


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## Bevdeforges (Nov 16, 2007)

Are you sure that what you need isn't a certificate of residency of some sort from the UK? At the moment, you're not resident in the US - certainly not if you're taking the overseas earned income exclusion. 

You may want to consult with a UK tax advisor to see what document they use for UK residents with investments in France.
Cheers,
Bev


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## Punktlich2 (Apr 30, 2009)

Bevdeforges said:


> Are you sure that what you need isn't a certificate of residency of some sort from the UK? At the moment, you're not resident in the US - certainly not if you're taking the overseas earned income exclusion.
> 
> You may want to consult with a UK tax advisor to see what document they use for UK residents with investments in France.
> Cheers,
> Bev


I don't understand the IRS reply, partly because I don't know how you approached them or whether you actually filed Form 8802 (see below).

Bu this is old stuff. The principle of taxation, even for an Amcit, is that on so-called unearned income you owe tax first in your country of residence. For non-doms traditionally that did not apply in the UK unless they remitted the funds to the UK. However, as a practical matter it can involve no extra tax and be easier to use the UK tax treaty with the paying country to claim the lower, or free, rate. For Switzerland, where I have done this, the forms are at: Administration fédérale des contributions AFC - Domicile l'tranger You get the withholding (anticipatory) Swiss tax refunded by filing the form for your country with your UK or US tax return. In the case of a US citizen resident in the UK it really wouldn't matter which except that treaties usually except from refund cases in which you are exempt -- to wit the non-dom situation. 

I haven't had to pursue that in the GB-CH context but for France, look at Art. 8B(7)(c):
"The provisions of sub-paragraph (a) of this paragraph shall not apply if the recipient of the dividends, being other than a pension fund referred to in sub-paragraph (b)(ii) of this paragraph, is not subject to United Kingdom tax in respect of those dividends."

It doesn't matter whether any tax is actually due (you might, for example, be within the zero tax band). The relevant concept is "subject to tax" and this is clearly defined in international tax work.

The UK-France tax treaties are at: HM Revenue & Customs: Tax Treaties in force - France

Now consider the US. Despite what I said above, one problem is that if you are not legally obliged to pay tax to the UK (and whether you are so obliged depends on the source of the original funds as well as whether the proceeds (dividends, interest) are remitted to the UK or otherwise spent here (via a credit card, etc.)) then you cannot claim a tax credit in the USA. That is the basis for the (unreasonable, I think) supposition by some tax advisors that (1) the £30,000 non-dom flat fee is not creditable for US tax purposes and (2) if you don't claim the exemption then whatever tax you do pay to the UK is not creditable. This would be a problem only for the rich.

Although most US tax treaties acknowledge citizenship-based taxation on the part of the USA, foreign collection schemes are not necessarily geared to grant treaty benefits to someone in a third country. Indeed, tax collectors are likely to assume that there is tax avoidance until the contrary is proved. 

As for your present problem. There is an obvious workaround of using, for French tax purposes, a physical address in the USA even if it's just a mailing service like The Ultimate PO Box, Post Office Box and Mail Forwarding Service | Earth Class Mail If you don't like that, then my next suggestion is to consult the Tax Office of the French Embassy in Washington which tends to be both informed and helpful:
French Embassy, Tax Office
4101 Reservoir Road, NW
Washington, DC 20007
Telephone (202) 944-6391
Fax (202) 944-6373
E-mail [email protected]
Their FAQ is here: Most Frequently Asked Questions - France in the United States/ Embassy of France in Washington
And I think the answer to your question, if you can claim a refund as if you were a US resident, is here:

"13 - A 25% withholding tax was charged on my dividends from French source - The treaty states a 15% tax. How can I be refunded of the difference?

"In order to benefit from the reduced withholding tax rate before the payment of the dividends or to be refunded the excess of withholding tax, you have to send to your bank a form 5000-EN certified by the IRS along with US Form 6166, proving that you are a resident of the United States for tax purpose.

"These forms necessary to justify your residence in the United States can be obtained by downloading from our website: Forms 5000-EN, 5001-EN." 
The French forms are at: Forms 5000-EN ; 5001-EN, 5002-EN & 5003-EN - France in the United States/ Embassy of France in Washington 
IRS Form 6166 info is at: Form 6166 - Certification of U.S. Tax Residency
There is a user fee of $35 to file Form 8802 request for IRS Form 6166
I note that while Form 8802 asks for your residence address it allows for foreign addresses. I have never had to file this form for myself or a client so I do not know for sure how the French tax authorities will respond to the notion of "constructive residence". I do know that if you use a US mailing address you may need to file a zero-tax nonresident state tax return to avoid computer mismatch. You don't need to actually fill out the return, just write on it that you have used an accommodation address and (if that is the case) you never lived in that state.

If you cannot claim constructive residency in the USA as a citizen then all you can do is claim a foreign tax credit in the USA on Form 1116.

And if the $35 fee is more than the tax you would get refunded from France, you probably can't legally claim a tax credit for the full 25% but maybe your tax return would slip beneath the radar...

You didn't say how much money is involved. Assuming it is not worth claiming through the IRS procedure, or that you cannot claim constructive tax residency there, then you are left with the UK procedure which is here: Particular agreements: France: Relief from French tax and payment of the avoir fiscal (internal HMRC practice manual)

You will not be asked to defend a decision to subject the dividends to UK tax even though as a non-dom you might avoid the tax. UK tax assessors simply don't care, and why should they? Likewise, the IRS is not going to exercise its right to audit whether you should have paid UK tax or not. Not unless you are super rich, and in that case you would not be inquiring in this forum.

I have not exhausted all the issues, but those are the main ones. And you have certain choices to make.


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