France offers a unique experience for expatriates, with its rich history, incredible architecture, and renowned cuisine. Many expats enjoy a high quality of life thanks to the country’s excellent healthcare, education, and public transport systems. Additionally, France is known for promoting a good work-life balance, allowing expats to make the most of their leisure time. Whether you are a student, professional, or retiree, France has much to offer. However, understanding France’s tax system is essential for US expats living abroad.
France at a Glance:
- Primary Tax Form: Form 2042
- Tax Year: January 1 to December 31
- Tax Deadline: March 1
- Currency: Euro (EUR)
- Population: Over 67 million
- US Expats in France: More than 100,000
- Capital: Paris
- Language: French
- Tax Treaty: Yes
- Totalization Agreement: Yes
US Expats in France: Dual Tax Filing Obligations
As a US citizen, you are required to file a federal tax return each year, regardless of where you live or work. In addition to filing with the IRS, expats in France are also required to file a French tax return. This dual obligation can make tax filing complicated, especially when determining which forms to file and which taxes apply. Luckily, the US-France tax treaty helps reduce the likelihood of double taxation on the same income.
Who Must File a Tax Return in France?
Any US expat who qualifies as a tax resident in France must file an annual French income tax return. If your annual income exceeds €10,777, you may also be required to pay French taxes.
Non-residents may not need to file a return if taxes are already withheld at the source. However, non-residents must file a return if:
- Their withholding tax on employment or pension income reaches the 20% bracket
- They receive specific types of French-source income
Tax residents are taxed on their global income, while non-residents are taxed only on French-sourced income. Thanks to the US-France tax treaty, US expats can avoid double taxation on the same income.
Who Qualifies as a Tax Resident in France?
Tax residency in France is determined by meeting any of the following criteria:
- Your primary residence is in France.
- Your primary professional activity is based in France (if you work in multiple countries, you are a resident if the majority of your work is in France).
- France is the center of your economic activity.
- You spend at least 183 days in France within a calendar year.
If you do not meet these qualifications, you are considered a non-resident for tax purposes.
France’s Tax System for Expats
- Income Tax
French tax residents are taxed on their worldwide income at progressive rates. Here are the rates for 2023:
| Income in EUR | Tax Rate (%) |
| Up to €10,777 | 0% |
| €10,778 to €27,478 | 11% |
| €27,479 to €78,570 | 30% |
| €78,571 to €168,994 | 41% |
| Above €168,995 | 45% |
High earners are subject to an additional surtax:
- 3% on income over €250,000 for singles (€500,000 for married couples).
- 4% on income over €500,000 for singles (€1,000,000 for married couples).
Non-residents are taxed only on their French-sourced income, usually through a withholding tax of 0%, 12%, or 20%, depending on the amount.
2. Capital Gains Tax
Capital gains are generally taxed at progressive rates in France. For residents, worldwide capital gains are taxable, while non-residents are taxed only on French-sourced capital gains. Specific capital gains, such as those from the sale of securities, real estate, or shares, are subject to flat rates ranging from 30% to 34.5%.
3. Value-Added Tax (VAT)
France imposes a standard VAT rate of 20%, with reduced rates of 5.5% for groceries and 10% for books and restaurant meals.
4. Inheritance and Gift Tax
France taxes inheritances and gifts at progressive rates, depending on the relationship between the giver and recipient.
5. Council Tax
The French Council Tax (Taxe d’Habitation) is levied annually on those occupying property in France on January 1st. This tax covers local services such as street lighting, waste collection, and street cleaning.
6. Property Tax
Property tax is due on real estate in France, typically at a rate of 1.7% of the property’s appraised value.
7. Social Security
France has a comprehensive social security system funded by employee contributions. US expats may also have to pay into this system. However, the US-France totalization agreement defines which system expats contribute to:
- If employed by a US company in France for less than five years, you’ll pay into US Social Security.
- If working longer than five years or employed by a French company, you’ll contribute to the French social security system.
US-France Tax Treaty and Totalization Agreement
The US and France have a tax treaty designed to prevent double taxation for US expats. This treaty allows expats to claim reduced tax rates or exemptions on certain types of income and provides guidelines on which country should tax specific income types.
The totalization agreement between the US and France helps prevent dual social security contributions, determining which country’s system expats should contribute to and ensuring portability of benefits.
Tax Forms for US Expats in France
French Tax Forms:
- Form 2042: This is the primary tax form for individuals in France. Expats typically need to fill out additional forms depending on their income sources, such as income from investments or foreign assets. Deadlines vary:
- Paper filers: May 18
- E-filers: May 24, 31, or June 7 (depending on location)
- Non-residents: June 7
US Tax Forms:
- Form 1040: Required by the IRS for all US citizens, due April 15, but expats get an automatic extension to June 15.
- Form 8938: Required if you hold foreign assets above certain thresholds.
- FinCEN Form 114 (FBAR): Required for US citizens with foreign accounts exceeding $10,000. The due date is April 15, with an automatic extension to October 15 if needed.
Tax Benefits for US Expats in France
Thanks to the US-France tax treaty, most expats are protected from double taxation. Additional tax credits and deductions available include:
- Foreign Earned Income Exclusion (FEIE): Allows expats to exclude up to a certain amount of foreign-earned income from US taxes.
- Foreign Tax Credit (FTC): Provides credit for taxes paid to the French government.
- Foreign Housing Exclusion: Offers additional deductions for housing costs.
Navigating Tax Compliance for US Expats in France
Understanding your tax obligations in both France and the US can be challenging. If you need assistance, our team of experienced expat tax professionals is here to help. Contact us for personalized advice or to schedule a consultation to ensure you’re fully compliant with both countries’ tax laws.
