# French Tax



## Tonythepilot86

Hi All,

My family and I are considering relocating to France, we love the place but the taxes look quite punitive. Before I take advice I thought I would just post to see if anyone has made plans to minimize their tax liabilities. If you have any advice on the following that would be great and very much appreciated.

French inheritance tax and ways to reduce or avoid it. 
Worldwide wealth tax and ways to reduce or avoid it.

Thanks in Advance 

Tony


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## Bevdeforges

Inheritance tax pretty much depends on what you own, where it's located, and how your plans for your "estate" differ (or not) from the French "forced inheritance" rules. Probably best discussed with a notaire. Different degrees of relationship with your heirs (spouse, children and parents, if they are still in the picture) are the main drivers in the assessed rates. There are ways to get your property divvied up according to your home country laws, but the tax rates still get assessed at French rates. Big thing is to avoid trying to pass property to non-related parties, cause those are the ones who get hit with the highest rates.

Wealth tax has been changed in recent years so that it's mainly assessed against real property (i.e. real estate) these days. Again, talk to a notaire for specific advise based on what your wealth consists of and where it is.


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## Tonythepilot86

Bevdeforges said:


> Inheritance tax pretty much depends on what you own, where it's located, and how your plans for your "estate" differ (or not) from the French "forced inheritance" rules. Probably best discussed with a notaire. Different degrees of relationship with your heirs (spouse, children and parents, if they are still in the picture) are the main drivers in the assessed rates. There are ways to get your property divvied up according to your home country laws, but the tax rates still get assessed at French rates. Big thing is to avoid trying to pass property to non-related parties, cause those are the ones who get hit with the highest rates.
> 
> Wealth tax has been changed in recent years so that it's mainly assessed against real property (i.e. real estate) these days. Again, talk to a notaire for specific advise based on what your wealth consists of and where it is.


Many thanks for the pointers, kindest Tony


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## Crabtree

The old "French taxes are punitive" thread.The reason why french taxes appear high is because you get a lot for your money( eg you can drive around without slaloming around pot holes as in the UK) Another reason is because you are comparing apples with pears when it comes to the French tax system in that it is a household based system and the total household income is taken into account before being divided up into parts depending on the number in the family including children and certain reductions are also applied You also need to remember that France is at heart a socialist country where the poor do not subsidise the rich as in the UK rather it is the other way round 
The other thing to consider is the Anglo French tax agreement As you do not say anything about your circs it is difficult to give even basic advice eg living and working in France? Living in France working elsewhere? Retiring or inactif? All of these factors will come into play for different aspects of French life 
Lastly have you researched your eligibility for a Visa and what type you would need(unless you have an EU passport of course)


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## Bevdeforges

The other thing is that French taxes change over time (as do all taxes, I guess). I know I was initial "outraged" at the French inheritance laws due to my/our situation and perceived vulnerabilities vis a vis my husband's children (which are not my children). Just as a note, my French sister-in-law was similarly outraged by how the inheritance laws here work when she started looking into her "estate planning" since she is in a somewhat "unusual" situation, too. There are some things you can do in anticipation - like donations entre époux, setting up things like SCIs for real property and purchasing insurance to cover estimated inheritance tax bills.

Over time, the laws have changed a bit and at the moment, I'm quite satisfied with how the laws work out in my circumstances, although there are still a few odds and ends I need to sort out. My s-i-l, not so much. 

The wealth tax is one of those things that is seemingly always up for discussion and debate. Right now it's only on real property, but that could change fairly quickly depending on how the political situation rolls out. 

What's that they say about "death and taxes?" <g>


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## SPGW

Not surprisingly it’s a bit of a minefield and as said by others- depends on your circumstances. I’d agree w Crabtree in that you get some quality of life in return for high rates of income tax.
Don’t expect to reduce income tax liability; the only way I know is to reduce income, or in the last couple of years, make voluntary contributions to a French employer’s retirement fund (PERCOL). And don’t make it the deciding factor in moving or not to France (imho, you have to want to move anywhere for reasons other than finance).
On inheritance - get advice from à notaire, look into the _démembrement des biens _options which allow you to donate the ownership of property to your successor(s) while you retain the ownership of its use (_usufruitier_), on your demise, the successor(s) inherit the use (without being additionally taxed). Donations up to 70 yrs old are also free of inheritance tax up to a certain threshold.
On ISF ( tax on fortune = « global wealth ») watch out for the changing rules, if you’re in that league but don’t hope for any sympathy.


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## Tonythepilot86

Thanks for thoughts/advice-and I do get the trade off for a better way of life, although the financial aspects (in my case) do need serious consideration. Thanks again Tony


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## Physics Guy

I'm going to give a general thanks to the people in this thread. 

As a US citizen looking at a move to France as an inactif person (not officially retired as I will be too young if things go as we are currently thinking) I worry about taxes also. I accept them and think they are just but it is leading to much number crunching to see how it effects our plans given our particular mix of retirement accounts, normal investment accounts, a smallish pension that starts in 4 years when I turn 60, and my wife's small SS when she turns ? (we don't know when we'll take it).


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## Peasant

Bevdeforges said:


> ...and purchasing insurance to cover estimated inheritance tax bills.


I did not know that. Thanks!


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## NYCEnglish

Bear in mind that due to the US/France tax treaty France will not tax US-sourced non-private pensions which includes SS and any IRA distributions you might have - IMO this makes France a bargain from a taxation POV if you are set up accordingly. Of course, Uncle Sam will still tax you if you are a US citizen/GC holder.



Physics Guy said:


> I'm going to give a general thanks to the people in this thread.
> 
> As a US citizen looking at a move to France as an inactif person (not officially retired as I will be too young if things go as we are currently thinking) I worry about taxes also. I accept them and think they are just but it is leading to much number crunching to see how it effects our plans given our particular mix of retirement accounts, normal investment accounts, a smallish pension that starts in 4 years when I turn 60, and my wife's small SS when she turns ? (we don't know when we'll take it).


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## Physics Guy

NYCEnglish said:


> Bear in mind that due to the US/France tax treaty France will not tax US-sourced non-private pensions which includes SS and any IRA distributions you might have -


I'm more worried about tax liabilities on dividends and capital gains from mutual funds held outside of retirement accounts. It's a good complication to have but the prospect of going from going from US capital gains taxes and a standard deduction filing jointly to a situation of no deduction and almost certainly either the 30% bracket or a 30% PFU is prompting some spreadsheet work and research.


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## Bevdeforges

Physics Guy said:


> and almost certainly either the 30% bracket or a 30% PFU is prompting some spreadsheet work and research.


Take a look at the information sheet the French Fisc puts out about taxation of investment income. (Start here: International (EN) ) Like many things here in France, taxation can be a little complicated - at least the first few times through. But for capital gains and other investments, there are a couple of options regarding taxation, plus for foreign investments, there is some recognition of those where you will be paying foreign taxes, too. (I use ClickImpot, an online tax prep service, and all I know is that there is an option to "let the program evaluate which option is more beneficial" which I make use of every year - the options appear to be a "special rate" vs. being taxed at whatever rate your overall income is being taxed at.)


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## newyorkerinparis

Physics Guy said:


> I'm more worried about tax liabilities on dividends and capital gains from mutual funds held outside of retirement accounts. It's a good complication to have but the prospect of going from going from US capital gains taxes and a standard deduction filing jointly to a situation of no deduction and almost certainly either the 30% bracket or a 30% PFU is prompting some spreadsheet work and research.


This is not something you need to worry about. Under the US-France tax treaty, American citizens residing in France pay taxes to the US on dividends and capital gains from US sources. France will give you a credit for the French taxes that would normally be due on this income, so you will not have to pay anything to the French fisc. 

However, you should know that the amount of the dividends. and capital gains will be taken into account in determining your household's overall revenue. It therefore may affect the tax rates you pay on income from other sources that is subject to French tax, assuming you have any.


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## GraceS

Great advice in this thread!

When I started thinking a few years ago about retirement to France, I had the similar questions to Tony and Physics. I found an English speaking notaire familiar with my type of situation via the notaire website directory at Notaries of France (www.notaires.fr). And I got a list of accountant and tax attorneys expert in both the US and French systems from the organization AARO (association of Americans resident overseas). AARO - Association of Americans Resident Overseas 

In meetings of less than an hour, I got an excellent overview of my particular tax responsibilities, plus suggestions that more than saved the cost of the consults. Practical advice. Peace of mind.


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## Physics Guy

newyorkerinparis said:


> This is not something you need to worry about. Under the US-France tax treaty, American citizens residing in France pay taxes to the US on dividends and capital gains from US sources. France will give you a credit for the French taxes that would normally be due on this income, so you will not have to pay anything to the French fisc.


Very interesting. My reading of Bev's helpful link implies, but doesn't state, that the tax credit might only be up to the amount of foreign taxes paid. Waiving all taxes on US investment income for an expat with tax residence in France based on paying US income would be nice. I had always gotten the impression that you paid taxes in your residence nation first and then paid your US taxes (will allowable tax credits for foreign taxes paid).



GraceS said:


> I got a list of accountant and tax attorneys expert in both the US and French systems from the organization AARO (association of Americans resident overseas). AARO - Association of Americans Resident Overseas


I'd seen similar info on their site but I know I'm not going to actually do such a consultation until at least this summer after returning to the US so I bookmarked the site to come back.


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## GraceS

Physics Guy said:


> Very interesting. My reading of Bev's helpful link implies, but doesn't state, that the tax credit might only be up to the amount of foreign taxes paid. Waiving all taxes on US investment income for an expat with tax residence in France based on paying US income would be nice. I had always gotten the impression that you paid taxes in your residence nation first and then paid your US taxes (will allowable tax credits for foreign taxes paid).
> 
> 
> 
> I'd seen similar info on their site but I know I'm not going to actually do such a consultation until at least this summer after returning to the US so I bookmarked the site to come back.


To clarify: yes, AARO allows you to contact them with a question, and one of their members knowledgeable about that topic will give you a brief answer. *What I did was different. *The question I asked AARO was: can you give me a list of either accountants or tax attorneys who speak English and who are expert in both the US and French systems of taxes on individuals? They gave me a list. I then did due diligence and selected an expert for a paid consult.


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## newyorkerinparis

Physics Guy said:


> My reading of Bev's helpful link implies, but doesn't state, that the tax credit might only be up to the amount of foreign taxes paid.


It depends on the specifics of each country's tax treaty with France. Some treaties provide that the credit will be equivalent to the amount of the foreign tax paid, but others (including the US-France treaty) provide for a credit equivalent to the amount of the French tax that would otherwise be owed.


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## Peter_E

Bevdeforges said:


> Take a look at the information sheet the French Fisc puts out about taxation of investment income. (Start here: International (EN) ) Like many things here in France, taxation can be a little complicated - at least the first few times through. But for capital gains and other investments, there are a couple of options regarding taxation, plus for foreign investments, there is some recognition of those where you will be paying foreign taxes, too. (I use ClickImpot, an online tax prep service, and all I know is that there is an option to "let the program evaluate which option is more beneficial" which I make use of every year - the options appear to be a "special rate" vs. being taxed at whatever rate your overall income is being taxed at.)


Hi Bevdeforges
You say you use ClickImpot. Would you recommend it? Does it generate the forms filled as per the paper forms or does it just submit your inputted numbers without you being able to double check them? Does it show you the tax and social contribution calculations, or does it just present you with the amount you need to pay? Thanks


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## Bevdeforges

Physics Guy said:


> My reading of Bev's helpful link implies, but doesn't state, that the tax credit might only be up to the amount of foreign taxes paid. Waiving all taxes on US investment income for an expat with tax residence in France based on paying US income would be nice.


Do not read "implications" into anything coming out of the Fisc - even if you're reading the original French. There are good reasons why they don't just "waive the taxes" as you suggest. And other good reasons why they don't credit the amount of US/foreign tax you claim to have paid on most types of foreign income. They're well aware of tax rates on investments in the US and they know that they have no way to confirm that you actually paid however much you claim you paid. So, they either reduce the amounts you declare by what they know to be the US tax rate on the particular type of investment (i.e. capital gains particularly) or they credit you back at French tax rates, which doesn't exactly avoid any taxation on the amounts, but it does a nice approximation.

You only have to look at the royal FUBAR mess that is today's IRS to see why taking a "reasonable" approach is the way to go.


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## Physics Guy

I disagree. They *could *know exactly how much someone has paid. It would take an agreement between the governments to make at least portions of individual's tax returns available to the other countries tax office which they haven't done but they could. Trivial distinction I know since they *don't*.

You say they are taking the reasonable approach and I don't disagree with that. I'm simply a little surprised that they didn't take the get the most taxes without strictly double taxing approach. Note that I'm not bashing France or the US but tax offices in general.



GraceS said:


> *What I did was different. *The question I asked AARO was: can you give me a list of either accountants or tax attorneys who speak English and who are expert in both the US and French systems of taxes on individuals? They gave me a list. I then did due diligence and selected an expert for a paid consult.


Sorry, I didn't mean to give the impression that you directly used AARO and only AARO for a tax question. I thought it was nicely implied that you used AARO to get information on tax professionals (accountant or lawyer). That's why I'm not going to follow your lead until at least the summer. There is too much going on in my life right now to actively pursue these questions even if I am in the process of figuring out order of magnitude approximations.


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