My wife and I (both US citizens) are interested in potentially living in France. I work from home, and my income is primarily from US sources. That situation would continue wherever we live. What sort of tax situation would we be looking at in France?
Google searches have revealed a bunch of generic info. for folks who are planning to work in France and earn money from French sources, but not for expats living in France but with non-French income.
I’m sure we’ll have to speak to a foreign tax specialist at some point, but I’d like to get a broad-strokes outline before then.
You will find it increasingly difficult to find any European bank that is prepared to provide banking facilities to US nationals, due to the FATCA reporting requirements.
AFAIK, IANATaxExpert, you would first pay US income tax on the US income. Most normal countries, you pay the taxes where the money was earned first, then can deduct that tax paid when you calculate income tax due in the land where you live. If France is like a normal country (i.e. not the USA) you would then calculate French taxes on your income, but deduct the amount paid to the USA from the amount owing.
The gotcha is that unlike most countries, AFAIK, the USA demands you pay taxes on your local (French) income also … with the same proviso - deduct local taxes that were paid first. The USA is the only country other than Eritrea that requires citizens to file tax returns even if they don’t live in the USA (Even if they have never been in the USA). At least, unlike Eritrea, the USA does not threaten your family members still in the country also. Instead, they threaten your bank.
Not sure how the situation is resolved nowadays - for a while many banks overseas were refusing to deal with Americans and closing out their accounts. The US had passed a law to combat income tax evasion that required any bank wanting to do business with US banks to report any accounts held by Americans. Failure, even inadvertent, would result in hefty fines, so it was simpler not to have overseas American customers. This fun situation could even extended to the non-American spouses due to joint filing requirements.
I haven’t seen comments about this lately, I’m not sure if or how this situation is resolved. Hence, ask an expert. What items are acceptable deductions can also be different from country to country.
France too from what I’ve read is one of the countries that charges a “net worth” tax on your total assets (assets, not income). When the infamous Marseilles sewer robbery happened, it was mentioned the total losses may never be known - possibly some safety deposit boxes held money along with jewelry and other valuables not reported to the tax collectors. So if you retire with a nice nest egg - is that taxable?
You might also want to ask how newcomers get covered by their health care system…
You are looking at probably wanting to pay someone to do your separate French and US tax returns.
My sister is a dual French and US citizen living in France. She went there for grad school, got dual citizenship before the US law changed, and dealt with income from both countries as a grad student. (Some of the US exchange programs that she worked for during that period paid her in US dollars and deposited into her US account.) She has done some work with her undergrad university in the US that has involved travel back a couple times. I am not sure how that was funded/paid so she might be on French income only now as a professor.
The good news is that because of the tax treaty between the two when it all is done and settled you likely only pay income taxes in the country you are a resident in. (My sister pays in France because she is a tax resident in France. After the more complicated than normal US return is done she basically does not owe because they intentionally agreed to not double tax each others citizens. The bad news is that tax time is much more complicated and involves niche stuff on two countries’ returns.
The French wealth tax does not kick in until you are worth over 800k Euros. My sister has not had to deal with it. If you are looking at large retirement savings it would go back to how the treaty works that out.
@md-2000 has said most of it. I live in Canada and file a US tax return every year. Having only trivial US income (some bank interest) I actually pay no US tax, but if I did, it would be a credit against Canadian taxes. So I report all my income, calculate what taxes I would owe and then fill out a form, 2116 IIRC, reporting my Canadian taxes paid, calculate what fraction of my income comes from Canadian sources (100%) and then take the smaller of that amount and the US taxes owed onto another form (something like schedule B, I think) and then put that onto a tax credit line on 1040. Colossal waste of time for me and the IRS. While they are so shorthanded that they cannot process tax returns for months, some flunky took the time to write me and say that I had omitted the Schedule B from my return 2 years ago and please fill it out and return.
Then there is the 8938, report of foreign bank accounts. Between my wife and me, we have a dozen or so (retirement accounts, investment accounts, a couple of different banks). For each account, they require the name and address of the bank, the account number and the maximum amount that was in that account during the tax year. Rather than do this every year, I made up my own template modeled on theirs and just change the numbers every year, print it out and include. It just takes a few minutes, but it means it cannot be filed online.