# Planning to move to France from US next year - will I really pay next to no taxes?



## NYCEnglish (Mar 22, 2021)

Hi all,

Firstly, thanks to everyone who contributes to this forum, I've been lurking here for a while and the amount of useful information I've read is amazing.

My wife and I plan to move to France next year from the US, I'm a UK/US citizen and she is US.

We will both be 54 and plan to retire, living off savings until social security kicks in along with a work pension I have at 65.

We have decent savings in our regular taxable bank accounts, enough to buy a house with cash, and a good amount in tax-deferred IRA accounts.

Until social security and the work pension kick in we will have no income other than accrued interest from our savings accounts.

As far as I can tell the only tax we would be liable for is any additional French tax on saving account accrued interest and possibly some social charges although the accrued interest each year will be about 5K EUR, so I'm thinking we won't have any social charges also, is this correct?

Once social security (~$55k) and my work pension (~$18K) kick in those incomes should cover most of our expenses in France, especially as it seems we will not have to pay any French taxes on those incomes as they are foreign pension income. Additionally, the IRS calculators here in the US tell me that my US tax liability will be very close to $0.

I've read many articles about this but I cannot believe that my tax bill 54-64 will be tiny as our only income will be ~5K EUR accrued interest and our 65+ tax bill will be very close to zero.

I KNOW I must be missing something as it seems too good to be true!

Thanks!


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## Bevdeforges (Nov 16, 2007)

Well, the first thing that springs to mind is that, without a regular source of income, you may find some difficulties in getting the necessary visas to move to France. Things may change in the visa process when things start up again, but generally speaking, unless you have enough savings to "live off the interest" you are probably going to find that getting the "visiteur" visa (the usual for retirees) may not be an option. But even if it is, don't forget that you will have to show private health coverage (rule of thumb is that it has to be roughly equivalent to the national health care system). If you opt to join the national health care (after 3 months of residence), you will be charged a fix rate based on your declared income (yes, for income tax purposes) - and I'm not sure if they may use your "income of reference" figure, which takes into account income that is "not taxed" but which is declared, and then subject to a tax credit equal to the French tax on the amount.

The other thing to remember is that France derives most of its tax revenues from the VAT, not from income tax. So, no matter what, you'll be paying VAT of 20% on nearly all purchases. If you buy in the US and then import for your own use, they will hit you for VAT on both the invoice price of the items and the shipping charges. There are other "subtle" taxes - like the price of gasoline here (currently about $7+ a gallon - and most of that is tax). 

The other consideration is that taxes here are expected to rise once the Covid situation is resolved, in order to try to pay down some of the costs of the various benefits and costs of the pandemic. How they will do that is anyone's guess at this point, but it pays to be prepared.

Net-net, you probably won't get away scot free on taxes, but even if you do wind up having to pay tax in some form or another, you do get much much more for what you pay in here than back in The Old Country.


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## NYCEnglish (Mar 22, 2021)

Thanks for the reply! Difficulty actually getting the visa has crossed my mind but once we sell our NYC apartment we'll have a lot of cash (that is until we buy a place in France) and I'm hoping that will demonstrate we will have more than enough to live off the interest as you say, the catch being I think I would need to prove this every year at renewal time.

I do understand about the health insurance but paying for private in France is a fraction of the cost we currently pay here in the US (not to mention our OOP expenses here). TBH health insurance and health care are two of the main reasons we want to leave the US, it's outrageous and we are lucky to be healthy people, but that's another story.

I'm not sure I follow your comments about costs for national health care; we would have no income other than accrued interest for the first 10-11 years, are you saying the national health care costs would be based on that? If so, it would be pretty tiny.

Once we do hit 65 and have regular pension income, given the US/France tax treaty it appears that we would be living income tax-free and yet would get quality health care for peanuts; that really blows my mind.

Totally get it about consumption taxes such as VAT and petrol - having lived in England for half of my life I'm well used to those.


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## 255 (Sep 8, 2018)

NYCEnglish -- Just a reminder; you'll be subject to U.S. tax, as long as you remain a citizen, whether you pay French taxes, or not. But you're right -- as far as U.S. taxes are concerned (under current rules,) if you just generate a little interest, in taxed accounts, your federal taxes will be minimal to nil. The "standard deductions" are now quite high; which will mitigate U.S. taxes owed now and after you start drawing social security.

A common strategy, right now, seems to be to convert to a Roth and then when you're ultimately retired, if your only income is a Roth and U.S. Social Security, you'll owe zero "income" taxes to either France or the U.S. Cheers, 255


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## Bevdeforges (Nov 16, 2007)

NYCEnglish said:


> I'm not sure I follow your comments about costs for national health care; we would have no income other than accrued interest for the first 10-11 years, are you saying the national health care costs would be based on that? If so, it would be pretty tiny.


Technically, yes it would be pretty tiny - particularly compared to health care costs in the US. But, don't forget that Covid has cost France (and all the other countries with national health care systems) big time, so exactly how they figure the contributions for those new to the country could very well change. 

Also remember that in France the national health care system only reimburses a portion of your health care expenses (and at the standard, published rates). They usually quote about 70% but the exact rate varies by service or product. The remainder is normally covered by your mutuelle (top-up insurance), which while not mandatory is not something to be blown off, either. Cost of a mutuelle depends on the level of coverage you want and your age at the time you first register (and then will increase each year depending on changes to the mutuelle regulations). Figure on something like 70 to 100€ a month per person for a basic mutuelle for each person over the age of 50 or so. The higher priced plans can include a whole array of additional coverage - like for doctors who charge over and above the national price list, or for some non-standard treatments and services. Still much cheaper than US prices. Eyeglasses and dental services are another area where it may be reasonable to consider pricier mutuelle plans.

But to start out with, you need private cover for the period before you establish your residency (3 months) and it's probably safest to assume you'll need the private cover for 6 to 12 months since the enrollment process can take more time than you expect.



NYCEnglish said:


> Once we do hit 65 and have regular pension income, given the US/France tax treaty it appears that we would be living income tax-free and yet would get quality health care for peanuts; that really blows my mind.


Yeah, the French attitude toward money is a huge "culture shock" after living in the US. But, it could explain why they do seem to make it difficult for early retirees to get a "visiteur visa" (which is the one where you can't work).


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## NYCEnglish (Mar 22, 2021)

Thanks @255 - Yep, my current plan is to convert my IRA to a Roth each year I have no income (pre-65) and keeping the conversion amount below any of the higher tax brackets.  



255 said:


> NYCEnglish -- Just a reminder; you'll be subject to U.S. tax, as long as you remain a citizen, whether you pay French taxes, or not. But you're right -- as far as U.S. taxes are concerned (under current rules,) if you just generate a little interest, in taxed accounts, your federal taxes will be minimal to nil. The "standard deductions" are now quite high; which will mitigate U.S. taxes owed now and after you start drawing social security.
> 
> A common strategy, right now, seems to be to convert to a Roth and then when you're ultimately retired, if your only income is a Roth and U.S. Social Security, you'll owe zero "income" taxes to either France or the U.S. Cheers, 255


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## NYCEnglish (Mar 22, 2021)

Thanks for the detailed response and clarifications - the indicative cost of mutuelles is very useful!

We plan to have to get private insurance for 12 months but compared to US costs it's a bargain.  Understood about the possible rising healthcare costs due to the pandemic, but I think that will be true in most countries and the US healthcare system never needs an excuse to raise premiums even without a pandemic so I'm more nervous about what they'll be here next year.

Assuming we can even get approved for a visiteur visa, do we have to go through the application and approval process every year, or is it possible to get a longer-term approval?

Btw, the 'Recommended Reading' feature on this forum is excellent, it never fails to recommend posts that are relevant to what I'm looking for. 



Bevdeforges said:


> Technically, yes it would be pretty tiny - particularly compared to health care costs in the US. But, don't forget that Covid has cost France (and all the other countries with national health care systems) big time, so exactly how they figure the contributions for those new to the country could very well change.
> 
> Also remember that in France the national health care system only reimburses a portion of your health care expenses (and at the standard, published rates). They usually quote about 70% but the exact rate varies by service or product. The remainder is normally covered by your mutuelle (top-up insurance), which while not mandatory is not something to be blown off, either. Cost of a mutuelle depends on the level of coverage you want and your age at the time you first register (and then will increase each year depending on changes to the mutuelle regulations). Figure on something like 70 to 100€ a month per person for a basic mutuelle for each person over the age of 50 or so. The higher priced plans can include a whole array of additional coverage - like for doctors who charge over and above the national price list, or for some non-standard treatments and services. Still much cheaper than US prices. Eyeglasses and dental services are another area where it may be reasonable to consider pricier mutuelle plans.
> 
> ...


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## Bevdeforges (Nov 16, 2007)

NYCEnglish said:


> Assuming we can even get approved for a visiteur visa, do we have to go through the application and approval process every year, or is it possible to get a longer-term approval?


Your visa is a document that allows you to enter France for a particular purpose. You can only obtain a visa outside France (i.e. through a consulate). Once you get to France, you then need to apply for a residence permit, called a "titre de séjour", which is the document that allows you to remain in France - and serves as your proof that you are legally residing in France. Your first year in France you may only need to validate your visa so that it then serves as your titre de séjour.

The titre de séjour is renewed at the end of your first year in France and you get a carte de séjour (an actual card this time), usually again for a year at a time. After a few years of this, you will probably be offered a multi-year carte de séjour - and at some point you should become eligible for a 10 year card, called a carte de resident (resident's card). Renewing your titre de séjour generally involves you validating that you still meet the requirements of your initial visa, have been playing by the rules (paying your taxes and enrolling in the social insurance system) and there may be a few additional requirements to get the 10 year card (this has varied over the years).


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## NYCEnglish (Mar 22, 2021)

Brilliant, thank you so much. Given it can be tricky for early retirees to get a visa in the first place, and given that each year we have to validate that we've been living by the rules (and we'll have very little taxes to pay) is it usually just as tricky to get the subsequent titre and card de sejours every year? I'd hate to settle down there, ultimately buy a place only to be told au revior!





Bevdeforges said:


> Your visa is a document that allows you to enter France for a particular purpose. You can only obtain a visa outside France (i.e. through a consulate). Once you get to France, you then need to apply for a residence permit, called a "titre de séjour", which is the document that allows you to remain in France - and serves as your proof that you are legally residing in France. Your first year in France you may only need to validate your visa so that it then serves as your titre de séjour.
> 
> The titre de séjour is renewed at the end of your first year in France and you get a carte de séjour (an actual card this time), usually again for a year at a time. After a few years of this, you will probably be offered a multi-year carte de séjour - and at some point you should become eligible for a 10 year card, called a carte de resident (resident's card). Renewing your titre de séjour generally involves you validating that you still meet the requirements of your initial visa, have been playing by the rules (paying your taxes and enrolling in the social insurance system) and there may be a few additional requirements to get the 10 year card (this has varied over the years).


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## Bevdeforges (Nov 16, 2007)

No, once you're here, the renewal process for the carte de séjour actually gets a bit easier and more standard each year. 

One trick some folks here have discovered "the hard way." When you apply for the visa, be sure you indicate that you intend to stay in France from *more than* 1 year rather than simply for 1 year. You'll still only get a visitor visa valid for one year (and which serves as your titre de séjour for that first year once it's validated as such), but if you tick the wrong box you run the risk of receiving a non-renewable visa and that will mean that you have to head back to the US to apply for a new (hopefully renewable) visa. 

Another little "trick" - there is no minimum level of income under which you don't have to file French income taxes. You want to start filing right away because the way they do French income taxes, you file, declaring all your worldwide income and then receive an Avis d'imposition (basically a tax assessment). Even if the Avis comes back with 0 tax due, you want to hang onto this document because it is often asked for to validate your residency and your "revenue of reference" which factors in any elements of your income which play into various administrative considerations, even if it isn't taxed.


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## NYCEnglish (Mar 22, 2021)

Thank you once again, I'm glad to hear once you're there you're in good shape. Now I just have to get my visa approved!


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## tomwins (Dec 27, 2014)

NYCEnglish said:


> Thanks @255 - Yep, my current plan is to convert my IRA to a Roth each year I have no income (pre-65) and keeping the conversion amount below any of the higher tax brackets.


This is a great plan. I have done the same for the last several years and the impact has been significant (as best I can tell by looking at future taxes owed.) As you are doing, I use the upper limit of taxable income as my guide on how much to convert from Traditional to ROTH. Not only does the future impact of this mean tax free growth, it also means reduced Required Minimum Distributions when you get to that point. I will not be able to convert all of my Traditional to Roth but it would be great if you were able to.
Please note, even after you have income, it may be beneficial to continue to do this. I have income and it is working for me. Just keep it in mind and do a calculation when the time comes.


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## NYCEnglish (Mar 22, 2021)

Thanks for the reply, always good to hear verification that a plan is a good one, especially from someone who is actually implementing that plan! Unfortunately, I won't be able to convert all my IRA to a Roth, but I intend to do the conversions for as long as it makes sense. I'd like to hold off getting social security until 67, but I'll play that by ear and see how our health is closer to the time.



tomwins said:


> This is a great plan. I have done the same for the last several years, and the impact has been significant (as best I can tell by looking at future taxes owed.) As you are doing, I use the upper limit of taxable income as my guide on how much to convert from Traditional to ROTH. Not only does the future impact of this mean tax free growth, it also means reduced Required Minimum Distributions when you get to that point. I will not be able to convert all of my Traditional to Roth but it would be great if you were able to.
> Please note, even after you have income, it may be beneficial to continue to do this. I have income and it is working for me. Just keep it in mind and do a calculation when the time comes.


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## 255 (Sep 8, 2018)

tomwins & NYCEnglish -- You both alluded to the fact that "you will not be able to convert all my IRA to a Roth" --why not? Even if you don't get it "all" converted, before you move -- your "distributions" from your traditional IRA to a Roth will not be taxed in France, only in the U.S. and if you keep your transfers (conversions,) under the standard deduction, no taxes in the U.S. either. If you continued this until everything has been converted -- you'll have no RMDs! Cheers, 255


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## tomwins (Dec 27, 2014)

Yes, the taxes on a US IRA in France will be the same whether Roth or Traditional. Withdrawing money from a Roth has no tax consequences. However, a Traditional IRA is taxable in the US when you pull money out of it. And when I turn 72 I must start pulling money out. It is called a Required Minimum Distribution (RMD) and the amount is set by the IRS as a percent of the balance based on age. The older you get the greater the percent you need to pull out. For me, the RMD will push me into a higher tax bracket. I have a pension from a US governmental body and will be getting Social Security from the US. All of these are taxable only by the US and exempt from taxation in France or Spain (the two countries I am considering). 
So it isn't so much the impact of immigrating but an impact that would be there even if I didn't move out of the US.
I started converting funds almost six years ago and can do it a few more before the consequences are not worth it. I've encouraged my younger brother who is still working to contribute to a Roth using the same calculations, i.e. bringing his taxable income to the top limit of the bracket. I'm sure there are a lot of other people out there doing this but NYCEnglish is the only other person I've heard mention it.


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## NYCEnglish (Mar 22, 2021)

Adding to what @tomwins has written, my situation is similar. I have a decent private pension in my future as well as near maximum social security distributions. As soon as these kick in I'll be pushed into a higher tax bracket making Roth conversions less advantageous from a taxation point of view and before that there is no way I can convert all of my IRA into a Roth without hitting higher tax brackets. I'm not complaining, it's a nice problem to have. Like @tomwins has said, it's not to do with the impact of living overseas, I'd have the same problem if I stayed in the US.

PS. I didn't realise Spain also does not tax pension income and thought that was a 'France thing'.


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## Bevdeforges (Nov 16, 2007)

tomwins said:


> All of these are taxable only by the US and exempt from taxation in France or Spain (the two countries I am considering).


I don't know what the situation is in Spain, but let me just clarify here that US pensions (SS and IRAs) are not "exempt" from taxation in France, but rather "taxable in France but subject to a tax credit at French rates." Without getting too technical about it, it means that your US pensions are used in determining your "theoretical" tax and then credited back at your average tax rate. It's a subtle difference, but it can and often does affect your ultimate French tax bill.


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## NYCEnglish (Mar 22, 2021)

By 'ultimate French tax bill' are you referring to the probable increase in social charges given your French tax bracket is higher after reporting US pension income?


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## Bevdeforges (Nov 16, 2007)

NYCEnglish said:


> By 'ultimate French tax bill' are you referring to the probable increase in social charges given your French tax bracket is higher after reporting US pension income?


No. I'm referring strictly to French income tax. (Impot sur le revenu). 

If you add, say, 50,000€ in revenue for US SS and IRA (or other deferred savings type retirement plans that are considered "national pensions"), that will kick you into a higher tax bracket for French tax purposes. The "credit at French rates" that you get is based on the total "theoretical" tax that is calculated at first - so in some sense, you get a bigger tax credit at French rates the more US pension income you declare.

Let's say your total tax bill comes out to 25,000€ on total taxable income (before your credit) of 125,000€. Your tax credit at French rates works out to 50K/125K or 40% of the tax bill, so 0.40 x 25,000 = 10,000€. So, you wind up paying 15,000€ total in income tax. 

You wind up using your tax assessment document as proof of a number of things here in France, including you total income (for things like loans, or eligibility for various government or other programs) - or rather a generated number called your "reference income" which is more than what your actual tax is based on and somewhat less than what would be called in the US your "gross income."


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## NYCEnglish (Mar 22, 2021)

Thanks, I really appreciate your thoughtful and comprehensive responses! What is confusing me is that the US/France tax treaty says that pension income is only taxed by the paying state, in my case the US. While France still wants me to report any pension income, credit is then applied to ensure my French income tax bill stays at zero, so while I may be in a theoretical higher tax bracket in France, I would still pay zero income taxes there. I was assuming that this could affect my social charges, however, but they are tax-deductible on the US side.

All this is assuming that my only income is from pensions/IRAs.


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## Bevdeforges (Nov 16, 2007)

At least for US SS and IRA-like plans, there are no "social charges" related to your declared income. (By social charges, I'm referring to the CSG-CRDS (which isn't really a "social charge" in the sense of it making you eligible for the French health plan).

Where your declared US pension amounts may come into play is if you enroll in the French health care plan (CPAM, or sometimes referred to as PUMA here in the forum) because this is precisely where this "reference income" comes into play. But I think at present, Americans are admitted to the CPAM system without being assessed a % of their "reference income." It used to be handled differently.

As long as you are only receiving income from your US SS and IRA type pensions, you are correct that the French tax credit you are granted will be 100% of whatever tax amount they calculate. If you have side income (from investments and the like) that's where the proportion stuff comes in. (Don't forget, once you get here you may wind up sticking some money aside in a French based savings account.)


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## NYCEnglish (Mar 22, 2021)

Bevdeforges said:


> Where your declared US pension amounts may come into play is if you enroll in the French health care plan (CPAM, or sometimes referred to as PUMA here in the forum) because this is precisely where this "reference income" comes into play. But I think at present, Americans are admitted to the CPAM system without being assessed a % of their "reference income." It used to be handled differently.


Yes, this is what I was referring to. I didn't know Americans don't get assessed a % of their reference income, good news indeed!

Thanks again for the further clarifications.


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