American citizen relocating to France: what taxes will you pay?

American citizen relocating to France : time to anticipate your future tax implications 

American citizen relocating to France  ? You still have many things to foresee, and uncertainties to dispel… Among them: taxation. You will find below some answers about the taxes you will have to pay when you reside in France.

American citizen relocating to France : we are here to help you understand the french tax system 

Income tax

Is there a risk of double taxation?

Individuals domiciled in France for tax purposes must declare all of their worldwide income; consequently, you will have to declare your income from French sources as well as your income from American sources.

However, there will be no double taxation of American sourced income: the United States and France have signed a bilateral agreement that allows the place of taxation to be determined according to the categories of income and the methods for eliminating double taxation. Depending on the nature of the income received, the convention will determine whether it is taxable in France, your country of residence, or in the United States, the source country of the income.

If the income in question is taxable only in the United States, it will still have to be reported on the French income tax return, but the taxation will be cancelled through to the allocation of a tax credit.

The income tax threshold in France

Once the tax base has been determined, the following tax scale is applied:

Please note that this scale is applied by “fiscal share“: this means that the scale takes into account the number of persons making up the fiscal household. Thus, a single person accounts for “1 share”, a married couple or a couple bound by a civil partnership accounts for “two shares”, the first two children of the couple each represent “0.5 share”, then each subsequent child represents a full share.

The tax calculation is performed as follows :

– the net taxable income is divided by the number of shares in the tax household (example: a couple with two children has 3 shares in total)

– the progressive scale is applied

– finally, the result obtained is multiplied by the number of shares in the tax household.

You can read more about how your tax is calculated in France here.

Social contributions

Some categories of income, mainly income from assets (rental income, dividends, capital gains, etc.) are subject to social contributions(social tax) at a rate of 17.2%. 

NB: Until 2019, the U.S. tax authorities refused to recognize these contributions as “taxes”: U.S. citizens who were French residents or who received income from French sources could not therefore deduct these contributions from their U.S. taxes. But on June 17, 2019, the U.S. tax authorities finally acknowledged their mistake and these contributions are now fully deductible.

Declarative modalities

L’impôt sur le revenu doit être déclaré en Mai N+1. En France, l’année fiscale court du 1er janvier au 31 décembre. L’avis d’imposition est généralement envoyé fin août / début septembre. 

American citizen relocating to France : what you need to know about wealth tax (impôt sur la fortune immobilière) in France

You will be liable for this tax if the net value of your real estate assets, calculated per fiscal household, exceeds the threshold of 1.3 million euros.

Taxable Assets :

For individuals domiciled in France for tax purposes, taxable assets consist of all real estate assets held directly and indirectly, in France, but also in the United States and in any other foreign country: built and unbuilt buildings (land), real estate assets, shares or stocks in real estate companies, real estate assets held through trusts, etc…

Temporary exemption for property located abroad: new impatriates benefit from a temporary exemption on their property owned abroad until the end of the 5th year following their installation in France.

Deductible liabilities :

Debts relating to the acquisition of the property, maintenance and repair expenses, expenses for improvement, construction, reconstruction or extension are deductible for the amount still due on January 1 of the tax year (date for the calculation of the tax on real estate assets).

Examples of deductible debts: tax debts related to the property (property tax), real estate loans, etc…

Declarative modalities

This tax must be declared voluntarily and on your own initiative, as soon as you exceed the tax threshold. It is therefore recommended that you regularly assess your real estate assets.

The wealdeclaration must be filed at the same time as the income tax declaration, i.e. in May.

American citizen relocating to France : we assist you in estimating your future french local taxes

In France, there exist 2 main local taxes :

Property tax 

The tax is due each year by the owners of a built or unbuilt property (dwellings, industrial and commercial premises, land, etc.). The property tax is calculated by the tax authorities in relation to the national “cadastral” rental value of the property and the rate determined by the local authorities. 

Residence tax

This tax only concerns secondary residences and is due by the owners or usufructuaries. This tax is calculated directly by the tax authorities in relation to the location of the occupant on 1st January of the tax year. The amount due is calculated by multiplying the net rental value of the real property by the tax rate determined by the regional authorities.