Are capital gains tax exempt in France for a US Citizen?

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goos_news
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by goos_news »

You are right, I had not noticed they lopped off the additional subparagraphs 24.1.b.ii, 24.1.b.iii, 24.1.b.iv and 24.1.b.v

On the issue of CSM, you've hit upon a bit of a controversy. The French code is very broad in the exemption of the retired. However, the URSSAF, the department chartered with assessing the CSM, has issued the following declaration as it applied to pension received by non-EU/EEA residents not in possession of an S-1:
https://www.urssaf.fr/portail/home/espa ... ement.html
La cotisation subsidiaire maladie est-elle due par les personnes bénéficiant d’une pension de retraite étrangère ?
Si elles n’exercent pas d’activité professionnelle complémentaire en France, la cotisation subsidiaire maladie n’est pas due par les personnes résidant de manière stable et régulière en France et percevant une pension de retraite d’un État relevant de l’Union européenne ou de la Suisse.

Pour les pensions de retraite servies par un État hors Union européenne ou la Suisse, la perception de cette pension permettra d’exonérer la personne uniquement si la prise en charge de ses frais de santé, ainsi que ceux des membres de sa famille qui résident avec elles, est supportée définitivement par le régime étranger qui sert la pension de retraite.

Pour justifier que la prise en charge de ses frais de santé et de ceux des membres de sa famille sont supportés par le régime étranger, le titulaire de la pension de retraite adresse à l’Urssaf le formulaire prévu dans le cadre de la convention bilatérale de Sécurité sociale conclue entre la France et l’autre pays (formulaires similaires au formulaire S1 prévu par le règlement CE n° 883/2004).
La cotisation subsidiaire maladie est-elle due par les personnes bénéficiant d’une pension de retraite étrangère ?

This is a bit controversial as people rightly note it is not in alignment with the broad language in the French code.

In practice, some people (non EU/EEA) have still received exonerations (those of age, and receiving social security). Others who are pre-retirement age but not economically active have received their CSM bills.
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

I was looking into this and never found a definitive answer. It's clear that any amount of EU/FR pension will exclude you from having to pay the CSM.

One thing is sure, any amount of retirement withdrawals from US accounts is not subject to the CSM, similarly to it not being subject to the exit tax.
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squirrel1963
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by squirrel1963 »

EddyB wrote: Sat Apr 02, 2022 3:06 pm
Marseille07 wrote: Fri Mar 25, 2022 5:04 pm
drk wrote: Fri Mar 25, 2022 5:03 pm Americans living abroad are subject to double taxation above the FEIE.
Are we talking about an amount above the FEIE? It wasn't clear to me from the OP.
We’re not talking about foreign income, or earned income, so we’re certainly not talking about the FEIE.

However, although not every treaty is perfect as regards double taxation, the great majority of income realized by Americans residing in a treaty country is meant to avoid double taxation, whether through assigning exclusive rights, providing for credit, or otherwise. It shouldn’t be surprising when that’s the result.
What seems to be rather unique is that France doesn't impose additional taxation unlike Italy for instance, which imposes a 26% flat tax on capital gains and dividends. Furthermore Italy considers Roth IRA accounts as taxable, and has very high income tax brackets (with low thresholds) for income from social security. You will be able to get a tax credit from the IRS for taxes paid to the Italian government to avoid double taxation, but you'll definitely pay a lot more taxes than in the US.
From what I've read of the tax treaties with Portugal and Spain, the same applies to them.
Also, most European countries do not recognize the tax free status of ROTH IRA accounts.
So France seems to be a rather unique example where you only really pay US tax for the most part (instead of the higher European taxes).
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EddyB
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by EddyB »

squirrel1963 wrote: Wed Dec 21, 2022 4:41 pm
EddyB wrote: Sat Apr 02, 2022 3:06 pm
Marseille07 wrote: Fri Mar 25, 2022 5:04 pm
drk wrote: Fri Mar 25, 2022 5:03 pm Americans living abroad are subject to double taxation above the FEIE.
Are we talking about an amount above the FEIE? It wasn't clear to me from the OP.
We’re not talking about foreign income, or earned income, so we’re certainly not talking about the FEIE.

However, although not every treaty is perfect as regards double taxation, the great majority of income realized by Americans residing in a treaty country is meant to avoid double taxation, whether through assigning exclusive rights, providing for credit, or otherwise. It shouldn’t be surprising when that’s the result.
What seems to be rather unique is that France doesn't impose additional taxation unlike Italy for instance, which imposes a 26% flat tax on capital gains and dividends. Furthermore Italy considers Roth IRA accounts as taxable, and has very high income tax brackets (with low thresholds) for income from social security. You will be able to get a tax credit from the IRS for taxes paid to the Italian government to avoid double taxation, but you'll definitely pay a lot more taxes than in the US.
From what I've read of the tax treaties with Portugal and Spain, the same applies to them.
Also, most European countries do not recognize the tax free status of ROTH IRA accounts.
So France seems to be a rather unique example where you only really pay US tax for the most part (instead of the higher European taxes).
I'm not sure what you mean by "additional taxation" (Italy applies either the substitute 26% rate---including for interest, except for more-favorably taxed government interest---or ordinary income tax rates, depending on the details of the investment), but there's no doubt that for US citizens, the default treatment in Italy is worse than the treatment in France. (I say default because, if one is using one of the repatriation or inbound schemes, Italy likely comes out ahead of France in many scenarios, although the US citizen ends up in more-or-less the same place regardless.)

One can find a range of opinions about exactly what to do with a Roth under Italian tax law. If one puts accumulating UCITs in the Roth, there seem to be some advisors who say it can just be disregarded until withdrawal (when perhaps I'd move primarily to France...).
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squirrel1963
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by squirrel1963 »

EddyB wrote: Wed Dec 21, 2022 5:17 pm
squirrel1963 wrote: Wed Dec 21, 2022 4:41 pm
EddyB wrote: Sat Apr 02, 2022 3:06 pm
Marseille07 wrote: Fri Mar 25, 2022 5:04 pm
drk wrote: Fri Mar 25, 2022 5:03 pm Americans living abroad are subject to double taxation above the FEIE.
Are we talking about an amount above the FEIE? It wasn't clear to me from the OP.
We’re not talking about foreign income, or earned income, so we’re certainly not talking about the FEIE.

However, although not every treaty is perfect as regards double taxation, the great majority of income realized by Americans residing in a treaty country is meant to avoid double taxation, whether through assigning exclusive rights, providing for credit, or otherwise. It shouldn’t be surprising when that’s the result.
What seems to be rather unique is that France doesn't impose additional taxation unlike Italy for instance, which imposes a 26% flat tax on capital gains and dividends. Furthermore Italy considers Roth IRA accounts as taxable, and has very high income tax brackets (with low thresholds) for income from social security. You will be able to get a tax credit from the IRS for taxes paid to the Italian government to avoid double taxation, but you'll definitely pay a lot more taxes than in the US.
From what I've read of the tax treaties with Portugal and Spain, the same applies to them.
Also, most European countries do not recognize the tax free status of ROTH IRA accounts.
So France seems to be a rather unique example where you only really pay US tax for the most part (instead of the higher European taxes).
I'm not sure what you mean by "additional taxation" (Italy applies either the substitute 26% rate---including for interest, except for more-favorably taxed government interest---or ordinary income tax rates, depending on the details of the investment), but there's no doubt that for US citizens, the default treatment in Italy is worse than the treatment in France. (I say default because, if one is using one of the repatriation or inbound schemes, Italy likely comes out ahead of France in many scenarios, although the US citizen ends up in more-or-less the same place regardless.)

One can find a range of opinions about exactly what to do with a Roth under Italian tax law. If one puts accumulating UCITs in the Roth, there seem to be some advisors who say it can just be disregarded until withdrawal (when perhaps I'd move primarily to France...).
Yeah you could certainly take advantage of the 7% tax regime for 10 years (I think) if you are willing to move to a small village in the south.

I didn't think about buying UCITS funds in Roth, still though you'd get taxed at withdrawal, which means double taxation (the first taxation being when you contribute after tax dollars to Roth).
My wife and I have been thinking for quite a while moving to Europe, but the more I learn about Italian taxation, rhe more I like France :-) the train network in Europe is very efficient, so I'm not so picky between France and Italy :-)
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EddyB
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by EddyB »

squirrel1963 wrote: Thu Dec 22, 2022 11:30 am
EddyB wrote: Wed Dec 21, 2022 5:17 pm
squirrel1963 wrote: Wed Dec 21, 2022 4:41 pm
EddyB wrote: Sat Apr 02, 2022 3:06 pm
Marseille07 wrote: Fri Mar 25, 2022 5:04 pm

Are we talking about an amount above the FEIE? It wasn't clear to me from the OP.
We’re not talking about foreign income, or earned income, so we’re certainly not talking about the FEIE.

However, although not every treaty is perfect as regards double taxation, the great majority of income realized by Americans residing in a treaty country is meant to avoid double taxation, whether through assigning exclusive rights, providing for credit, or otherwise. It shouldn’t be surprising when that’s the result.
What seems to be rather unique is that France doesn't impose additional taxation unlike Italy for instance, which imposes a 26% flat tax on capital gains and dividends. Furthermore Italy considers Roth IRA accounts as taxable, and has very high income tax brackets (with low thresholds) for income from social security. You will be able to get a tax credit from the IRS for taxes paid to the Italian government to avoid double taxation, but you'll definitely pay a lot more taxes than in the US.
From what I've read of the tax treaties with Portugal and Spain, the same applies to them.
Also, most European countries do not recognize the tax free status of ROTH IRA accounts.
So France seems to be a rather unique example where you only really pay US tax for the most part (instead of the higher European taxes).
I'm not sure what you mean by "additional taxation" (Italy applies either the substitute 26% rate---including for interest, except for more-favorably taxed government interest---or ordinary income tax rates, depending on the details of the investment), but there's no doubt that for US citizens, the default treatment in Italy is worse than the treatment in France. (I say default because, if one is using one of the repatriation or inbound schemes, Italy likely comes out ahead of France in many scenarios, although the US citizen ends up in more-or-less the same place regardless.)

One can find a range of opinions about exactly what to do with a Roth under Italian tax law. If one puts accumulating UCITs in the Roth, there seem to be some advisors who say it can just be disregarded until withdrawal (when perhaps I'd move primarily to France...).
Yeah you could certainly take advantage of the 7% tax regime for 10 years (I think) if you are willing to move to a small village in the south.

I didn't think about buying UCITS funds in Roth, still though you'd get taxed at withdrawal, which means double taxation (the first taxation being when you contribute after tax dollars to Roth).
My wife and I have been thinking for quite a while moving to Europe, but the more I learn about Italian taxation, rhe more I like France :-) the train network in Europe is very efficient, so I'm not so picky between France and Italy :-)
The 7% rate is geographically limited, but neither the HNW program nor the 70% reduction is. But, like I said, if the time comes to withdraw those Roth funds, I might spend a year or two living somewhere else.

What I find painful is the stuff where the US charges me (an Italian and US citizen, in Italy) a higher rate than Italy does, and the fact that as a US citizen resident in Italy, it's seemingly impossible to use simple diversified funds without falling into one or the other country's punitive tax system for "foreign" funds (except for UCITS in IRAs). That is, in my opinion, an absolute failure between the two countries, given that they're supposed to be communicating about our tax filings anyway.
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squirrel1963
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by squirrel1963 »

EddyB wrote: Thu Dec 22, 2022 3:21 pm
squirrel1963 wrote: Thu Dec 22, 2022 11:30 am
EddyB wrote: Wed Dec 21, 2022 5:17 pm
squirrel1963 wrote: Wed Dec 21, 2022 4:41 pm
EddyB wrote: Sat Apr 02, 2022 3:06 pm

We’re not talking about foreign income, or earned income, so we’re certainly not talking about the FEIE.

However, although not every treaty is perfect as regards double taxation, the great majority of income realized by Americans residing in a treaty country is meant to avoid double taxation, whether through assigning exclusive rights, providing for credit, or otherwise. It shouldn’t be surprising when that’s the result.
What seems to be rather unique is that France doesn't impose additional taxation unlike Italy for instance, which imposes a 26% flat tax on capital gains and dividends. Furthermore Italy considers Roth IRA accounts as taxable, and has very high income tax brackets (with low thresholds) for income from social security. You will be able to get a tax credit from the IRS for taxes paid to the Italian government to avoid double taxation, but you'll definitely pay a lot more taxes than in the US.
From what I've read of the tax treaties with Portugal and Spain, the same applies to them.
Also, most European countries do not recognize the tax free status of ROTH IRA accounts.
So France seems to be a rather unique example where you only really pay US tax for the most part (instead of the higher European taxes).
I'm not sure what you mean by "additional taxation" (Italy applies either the substitute 26% rate---including for interest, except for more-favorably taxed government interest---or ordinary income tax rates, depending on the details of the investment), but there's no doubt that for US citizens, the default treatment in Italy is worse than the treatment in France. (I say default because, if one is using one of the repatriation or inbound schemes, Italy likely comes out ahead of France in many scenarios, although the US citizen ends up in more-or-less the same place regardless.)

One can find a range of opinions about exactly what to do with a Roth under Italian tax law. If one puts accumulating UCITs in the Roth, there seem to be some advisors who say it can just be disregarded until withdrawal (when perhaps I'd move primarily to France...).
Yeah you could certainly take advantage of the 7% tax regime for 10 years (I think) if you are willing to move to a small village in the south.

I didn't think about buying UCITS funds in Roth, still though you'd get taxed at withdrawal, which means double taxation (the first taxation being when you contribute after tax dollars to Roth).
My wife and I have been thinking for quite a while moving to Europe, but the more I learn about Italian taxation, rhe more I like France :-) the train network in Europe is very efficient, so I'm not so picky between France and Italy :-)
The 7% rate is geographically limited, but neither the HNW program nor the 70% reduction is. But, like I said, if the time comes to withdraw those Roth funds, I might spend a year or two living somewhere else.

What I find painful is the stuff where the US charges me (an Italian and US citizen, in Italy) a higher rate than Italy does, and the fact that as a US citizen resident in Italy, it's seemingly impossible to use simple diversified funds without falling into one or the other country's punitive tax system for "foreign" funds (except for UCITS in IRAs). That is, in my opinion, an absolute failure between the two countries, given that they're supposed to be communicating about our tax filings anyway.
I completely agree with you (I'm also dual IT / US citizen). If we ever move back to Europe it will almost for sure be France, and we'll keep the vast majority of our investments in the US. The punitive taxation rules are terrible, we have some holdings in Italy and to avoid PFIC I've made my own "Eurostoxx 15" ETF :-) This is money that is earmarked to eventually buy an apartment or house in Europe, so it makes sense to hold it there despite having to pay 26% tax on the dividends.

For the truly wealthy with high income there is also the 100K flat tax regime, but regrettably we are far below that threshold.
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

Full webinar about this: https://youtu.be/LY2WKG-XTgw?t=499

In english
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squirrel1963
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by squirrel1963 »

assyadh wrote: Mon Jan 09, 2023 1:33 pm Full webinar about this: https://youtu.be/LY2WKG-XTgw?t=499

In english
Very informative thanks much. I've come to the conclusion that if we ever move to Europe we'll move to France and not Italy. The latter tax system is just too complicated and expensive for a US citizen, especially in regard to Roth IRAs.
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

squirrel1963 wrote: Mon Jan 09, 2023 5:18 pm
assyadh wrote: Mon Jan 09, 2023 1:33 pm Full webinar about this: https://youtu.be/LY2WKG-XTgw?t=499

In english
Very informative thanks much. I've come to the conclusion that if we ever move to Europe we'll move to France and not Italy. The latter tax system is just too complicated and expensive for a US citizen, especially in regard to Roth IRAs.
No problem. I have other resources but the webinar above is plenty information / confirmation. Bottom line is yes you avoid all income tax and social charges but you sure as hell might get audited and will need to pushback.
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ray.james
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ray.james »

squirrel1963 wrote: Mon Jan 09, 2023 5:18 pm
assyadh wrote: Mon Jan 09, 2023 1:33 pm Full webinar about this: https://youtu.be/LY2WKG-XTgw?t=499

In english
Very informative thanks much. I've come to the conclusion that if we ever move to Europe we'll move to France and not Italy. The latter tax system is just too complicated and expensive for a US citizen, especially in regard to Roth IRAs.
+1. Absolute gold. Thanks for sharing it!
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939
choubi_epsylon
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by choubi_epsylon »

First time poster here. Very interesting topic. I was wondering if anyone has experience on getting the full credit of the French tax on capital gains and dividends for a mixed nationality couple (one US citizen and a Non-Resident Alien).

- If the brokerage account is in the name of the US citizen, would there be any pushback from the French treasury to get credit on the full amount, since there is no possibility in the French system to file separately? I assume not.

- In the case of a joint US brokerage account, would the IRS tax all capital gains / dividends under the US resident rule if Married Filing Separately? And would there be a similar pushback from the French treasury? I don't think this would work.

It seems more prudent to keep all assets under the name of the US spouse to get the benefits of the tax treaty.
Last edited by choubi_epsylon on Wed Mar 08, 2023 6:24 am, edited 1 time in total.
keri
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by keri »

And, another question, is France so friendly when it comes to estate tax? Does anyone know whether, pursuant to French inheritance rules, a Transfer on Death account held in the US where the deceased is both a US citizen and a French resident at time of death will be subject to French inheritance tax?
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

keri wrote: Wed Mar 08, 2023 9:25 am And, another question, is France so friendly when it comes to estate tax? Does anyone know whether, pursuant to French inheritance rules, a Transfer on Death account held in the US where the deceased is both a US citizen and a French resident at time of death will be subject to French inheritance tax?
Yes and no. It's more complex than that.

As per the estate tax treaty, Movable property is subject to estate or inheritance taxes where the deceased is a resident. Immovable property is taxes where it's located.
In addition, France has a provision to offset forced heirship inequalities by giving more from French based property if a heir doesn't get his share. It's complex but exist.

Short answer is don't die in France unless you are ready to pay.

Longer answer is there is a way to pay 0% tax from a surviving spouse and you need to chat with a notaire. You change your marital contract. The downside is that you get less tax free room when the second spouse dies. But by then you could be back in the US. But then the exit tax may apply, but it doesn't really because of the tax treaty. See the complications?
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by keri »

Ok. Real property in France will be subject to inheritance tax in France. So will money held in accounts based in France.

Cash held in a USA based TOD account is moveable property I suppose but since the account ownership transfers automatically to the designated person on death of the initial owner how does French law regard it? (I note a French resident is required to identify on French tax returns all overseas accounts).

For example: US citizen and French resident dies, his non French resident ( and non French citizen) daughter is now automatically owner of the deceased's US account as per its TOD. Is that account subject to French inheritance law?
ShadowCat
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

keri wrote: Thu Mar 09, 2023 8:15 am Ok. Real property in France will be subject to inheritance tax in France. So will money held in accounts based in France.

Cash held in a USA based TOD account is moveable property I suppose but since the account ownership transfers automatically to the designated person on death of the initial owner how does French law regard it? (I note a French resident is required to identify on French tax returns all overseas accounts).

For example: US citizen and French resident dies, his non French resident ( and non French citizen) daughter is now automatically owner of the deceased's US account as per its TOD. Is that account subject to French inheritance law?
Without directly answering your question with respect to France, do be aware that TOD does *not* affect estate taxation ever. So in general, a US account that has been labelled TOD but is otherwise subject to estate tax (either in the US or another country due to an estate tax treaty) is still subject to the tax even if an improper transfer occurred.

Basically, if the US custodian makes a mistake and honors the TOD not realizing there is estate tax owed (either to the US or another country), the estate tax is still owed.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by keri »

Yes, I should have been more clear. A TOD falls outside probate in most US states I believe. Estate tax may or may not be due. I think if the French fisc and notaire understand from the tax returns of the decedent that there is a US account they would request data from the US in order to subject it to the rather rigorous inheritance tax rules. Whether a US bank complies is another matter!

France is not so great to die in if you have more than the untaxed allocations permitted by its rules. It is pretty good to live in though.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

keri wrote: Thu Mar 09, 2023 12:14 pm Yes, I should have been more clear. A TOD falls outside probate in most US states I believe. Estate tax may or may not be due. I think if the French fisc and notaire understand from the tax returns of the decedent that there is a US account they would request data from the US in order to subject it to the rather rigorous inheritance tax rules. Whether a US bank complies is another matter!

France is not so great to die in if you have more than the untaxed allocations permitted by its rules. It is pretty good to live in though.
Indeed, France has quite high estate taxes when compared to the United States.

Regarding the bank complying: since the US-France estate tax treaty is a valid treaty under US law, the French government can use US courts to enforce it. So if a bank refused to enforce it or if a bank erroneously transferred the funds to an heir, in theory the French government can use its own courts or the US judicial system to enforce it. If you've got a few million dollars in question, my guess is that they'e find it worth the effort to go after your heirs.

Of course this is easily avoided by just not dying while a French tax resident/domiciliary :wink:
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

You can live as a retired couple with a large taxable brokerage account.

Change your marital contract from communauté de biens réduite aux acquêts to a communauté universelle avec clause d'attribution au dernier survivant. Link: https://notaires-office.fr/clause-attri ... er-vivant/

This bypasses the inheritance tax on the first death
And everything goes tax free to the surviving spouse, but more importantly no forced heirship rules

Then you move out of France if inheritance taxes are really a concern.

As long as both spouses don't die in a car accident together :mrgreen:
3333
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by 3333 »

I am a US citizen living in France.

I am considering an in-kind transfer of mutual funds from Vanguard USA to Interactive Brokers Ireland(IB IE). They will be the same US-based mutual funds I purchased in the US, just housed at another brokerage. In other words, I will not be buying European domiciled mutual funds. (I am retired and will periodically sell these funds. I don't plan to buy more funds from IB IE and I can rebalance using my 403(B) in the US, so this strategy will fit my needs).

Given that I would be moving mutual funds out of the US to IB Ireland, I just want to make sure that the same principles of the US-France Tax treaty apply here for avoiding double taxation, and to clarify whether any other reporting is needed.

I am primarily seeking input on how this would need to be handled by French tax officials. My understanding is that from the perspective of US taxes, they will be US domiciled mutual funds, IB IE will issue me a 1099 and will pay US income taxes as usual.

In terms of reporting on French income tax, I assume that I will need to declare the IB IE account on form 3916 as well as declaring the income, the theoretical French tax will then be calculated on any income / losses arising from those funds, which will then result in awarding a tax credit for any amount due (given that those mutual funds are taxed in the United States).

I am basically just looking for confirmation that doing what I describe above would result in my mutual funds being taxed in the United States and not France, and I am wondering if other US citizens living in France have used IB IE in a similar manner.
jenplus4fr
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by jenplus4fr »

Can I please jump in and ask how you think capital gain distributions are reported? I was told orally by the tax office years ago that it was not reportable as income in France, but I've since been told by others that it should be reported in the dividends category... Any takers?!

And, in answer to the original question, my understanding has been that US citizens resident in France get a tax credit equal to the calculated French tax on US source investment income. Non-US citizens resident in France get a tax credit equal to the US tax paid on that income. I'm relieved that I've read the treaty right, it seems.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by choubi_epsylon »

choubi_epsylon wrote: Wed Mar 08, 2023 5:09 am First time poster here. Very interesting topic. I was wondering if anyone has experience on getting the full credit of the French tax on capital gains and dividends for a mixed nationality couple (one US citizen and a Non-Resident Alien).

- If the brokerage account is in the name of the US citizen, would there be any pushback from the French treasury to get credit on the full amount, since there is no possibility in the French system to file separately? I assume not.

- In the case of a joint US brokerage account, would the IRS tax all capital gains / dividends under the US resident rule if Married Filing Separately? And would there be a similar pushback from the French treasury? I don't think this would work.

It seems more prudent to keep all assets under the name of the US spouse to get the benefits of the tax treaty.
I am following up on this previous post. Did anybody have issues claiming the full credit of the French tax in case of a mixed nationality couple, or were you successful?
ShadowCat
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

Anyone know/have any experience with Health Savings Accounts (HSAs) and French taxation? I assume HSAs are totally unrecognized by France and thus treated as regular taxable brokerage accounts. If that's the case, would US situs funds within the HSA held by a US citizen who is a French resident then be tax free from a French stand point since US capital gains and dividends are always tax free in France for US citizens?
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

ShadowCat wrote: Tue Jul 18, 2023 5:58 am Anyone know/have any experience with Health Savings Accounts (HSAs) and French taxation? I assume HSAs are totally unrecognized by France and thus treated as regular taxable brokerage accounts. If that's the case, would US situs funds within the HSA held by a US citizen who is a French resident then be tax free from a French stand point since US capital gains and dividends are always tax free in France for US citizens?
HSAs are not recognized in France hence they behave as a taxable brokerage account. You assumption is right.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

choubi_epsylon wrote: Thu Jul 06, 2023 2:59 am
choubi_epsylon wrote: Wed Mar 08, 2023 5:09 am First time poster here. Very interesting topic. I was wondering if anyone has experience on getting the full credit of the French tax on capital gains and dividends for a mixed nationality couple (one US citizen and a Non-Resident Alien).

- If the brokerage account is in the name of the US citizen, would there be any pushback from the French treasury to get credit on the full amount, since there is no possibility in the French system to file separately? I assume not.

- In the case of a joint US brokerage account, would the IRS tax all capital gains / dividends under the US resident rule if Married Filing Separately? And would there be a similar pushback from the French treasury? I don't think this would work.

It seems more prudent to keep all assets under the name of the US spouse to get the benefits of the tax treaty.
I am following up on this previous post. Did anybody have issues claiming the full credit of the French tax in case of a mixed nationality couple, or were you successful?
The nationality of the income earner matters, not the spouse. In France you attribute income to the earner, not jointly.

Ex: if you made 100k in capital gains on a joint account then each spouse made 50k. The implications for tax then depend on the US citizenship status of each spouse.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

jenplus4fr wrote: Sun Apr 02, 2023 11:42 am Can I please jump in and ask how you think capital gain distributions are reported? I was told orally by the tax office years ago that it was not reportable as income in France, but I've since been told by others that it should be reported in the dividends category... Any takers?!

And, in answer to the original question, my understanding has been that US citizens resident in France get a tax credit equal to the calculated French tax on US source investment income. Non-US citizens resident in France get a tax credit equal to the US tax paid on that income. I'm relieved that I've read the treaty right, it seems.
If you scroll up in the thread I laid out exactly which form and which box to fill. On the 26th of April 2022.

Best,
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

3333 wrote: Wed Mar 29, 2023 5:48 am I am a US citizen living in France.

I am considering an in-kind transfer of mutual funds from Vanguard USA to Interactive Brokers Ireland(IB IE). They will be the same US-based mutual funds I purchased in the US, just housed at another brokerage. In other words, I will not be buying European domiciled mutual funds. (I am retired and will periodically sell these funds. I don't plan to buy more funds from IB IE and I can rebalance using my 403(B) in the US, so this strategy will fit my needs).

Given that I would be moving mutual funds out of the US to IB Ireland, I just want to make sure that the same principles of the US-France Tax treaty apply here for avoiding double taxation, and to clarify whether any other reporting is needed.

I am primarily seeking input on how this would need to be handled by French tax officials. My understanding is that from the perspective of US taxes, they will be US domiciled mutual funds, IB IE will issue me a 1099 and will pay US income taxes as usual.

In terms of reporting on French income tax, I assume that I will need to declare the IB IE account on form 3916 as well as declaring the income, the theoretical French tax will then be calculated on any income / losses arising from those funds, which will then result in awarding a tax credit for any amount due (given that those mutual funds are taxed in the United States).

I am basically just looking for confirmation that doing what I describe above would result in my mutual funds being taxed in the United States and not France, and I am wondering if other US citizens living in France have used IB IE in a similar manner.
I would personally keep the account in the US just to be rock solid wrt to the tax treaty article. Easier to explain that the source is US based.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by international001 »

3333 wrote: Wed Mar 29, 2023 5:48 am I am a US citizen living in France.

I am considering an in-kind transfer of mutual funds from Vanguard USA to Interactive Brokers Ireland(IB IE). They will be the same US-based mutual funds I purchased in the US, just housed at another brokerage. In other words, I will not be buying European domiciled mutual funds. (I am retired and will periodically sell these funds. I don't plan to buy more funds from IB IE and I can rebalance using my 403(B) in the US, so this strategy will fit my needs).
Mutual funds or ETFs? I thought you were not able to hold mutual funds if you were not a US resident
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by BeBH65 »

3333 wrote: Wed Mar 29, 2023 5:48 am I am a US citizen living in France.

I am considering an in-kind transfer of mutual funds from Vanguard USA to Interactive Brokers Ireland(IB IE). They will be the same US-based mutual funds I purchased in the US, just housed at another brokerage. In other words, I will not be buying European domiciled mutual funds. (I am retired and will periodically sell these funds. I don't plan to buy more funds from IB IE and I can rebalance using my 403(B) in the US, so this strategy will fit my needs).

...

I am primarily seeking input on how this would need to be handled by French tax officials. My understanding is that from the perspective of US taxes, they will be US domiciled mutual funds, IB IE will issue me a 1099 and will pay US income taxes as usual.
Do you have confirmation that you can transfer funds from a us broker to a foreign broker?
Do.you have confirmation that you will recieve is tax forms from a foreign broker?
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

assyadh wrote: Tue Jul 18, 2023 6:35 pm
ShadowCat wrote: Tue Jul 18, 2023 5:58 am Anyone know/have any experience with Health Savings Accounts (HSAs) and French taxation? I assume HSAs are totally unrecognized by France and thus treated as regular taxable brokerage accounts. If that's the case, would US situs funds within the HSA held by a US citizen who is a French resident then be tax free from a French stand point since US capital gains and dividends are always tax free in France for US citizens?
HSAs are not recognized in France hence they behave as a taxable brokerage account. You assumption is right.
My god, France is truly an amazing place tax-wise for a US citizen. That is amazing.

As an aside, did you ever decide to intentionally take up US citizenship in order to utilize the treaty benefits if/when you move back to France? Have all of the tax treaty benefits, in your opinion, outweighed the future hassle of FATCA, FBAR, etc for when you retire to France?
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

ShadowCat wrote: Wed Jul 19, 2023 7:58 am
assyadh wrote: Tue Jul 18, 2023 6:35 pm
ShadowCat wrote: Tue Jul 18, 2023 5:58 am Anyone know/have any experience with Health Savings Accounts (HSAs) and French taxation? I assume HSAs are totally unrecognized by France and thus treated as regular taxable brokerage accounts. If that's the case, would US situs funds within the HSA held by a US citizen who is a French resident then be tax free from a French stand point since US capital gains and dividends are always tax free in France for US citizens?
HSAs are not recognized in France hence they behave as a taxable brokerage account. You assumption is right.
My god, France is truly an amazing place tax-wise for a US citizen. That is amazing.

As an aside, did you ever decide to intentionally take up US citizenship in order to utilize the treaty benefits if/when you move back to France? Have all of the tax treaty benefits, in your opinion, outweighed the future hassle of FATCA, FBAR, etc for when you retire to France?
My original intention was to relinquish a green card right before any exit tax is due then sell my etf portfolio in a 0% cap gains tax country before eventually retiring in France at old age

I may apply for citizenship as a hedge against sequence of return risk. Long term there is still the risk albeit small that capital gains get taxed heavily in the US. Plus the rest of the citizenship based taxation shenanigans (estate planning, banking lockdown, etc). But it's true that if the center of your money is in the US then it's different.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

Check this out, starting around 20:00 https://youtu.be/EeGF6rFr2O4
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by anagram »

assyadh wrote: Tue Jul 18, 2023 6:40 pm
3333 wrote: Wed Mar 29, 2023 5:48 am I am a US citizen living in France.

I am considering an in-kind transfer of mutual funds from Vanguard USA to Interactive Brokers Ireland(IB IE). They will be the same US-based mutual funds I purchased in the US, just housed at another brokerage. In other words, I will not be buying European domiciled mutual funds. (I am retired and will periodically sell these funds. I don't plan to buy more funds from IB IE and I can rebalance using my 403(B) in the US, so this strategy will fit my needs).

Given that I would be moving mutual funds out of the US to IB Ireland, I just want to make sure that the same principles of the US-France Tax treaty apply here for avoiding double taxation, and to clarify whether any other reporting is needed.

I am primarily seeking input on how this would need to be handled by French tax officials. My understanding is that from the perspective of US taxes, they will be US domiciled mutual funds, IB IE will issue me a 1099 and will pay US income taxes as usual.

In terms of reporting on French income tax, I assume that I will need to declare the IB IE account on form 3916 as well as declaring the income, the theoretical French tax will then be calculated on any income / losses arising from those funds, which will then result in awarding a tax credit for any amount due (given that those mutual funds are taxed in the United States).

I am basically just looking for confirmation that doing what I describe above would result in my mutual funds being taxed in the United States and not France, and I am wondering if other US citizens living in France have used IB IE in a similar manner.
I would personally keep the account in the US just to be rock solid wrt to the tax treaty article. Easier to explain that the source is US based.
Which brokerage would you use? For example, Schwab cannot open accounts for residents of France.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

anagram wrote: Fri Aug 04, 2023 1:13 am
assyadh wrote: Tue Jul 18, 2023 6:40 pm
3333 wrote: Wed Mar 29, 2023 5:48 am I am a US citizen living in France.

I am considering an in-kind transfer of mutual funds from Vanguard USA to Interactive Brokers Ireland(IB IE). They will be the same US-based mutual funds I purchased in the US, just housed at another brokerage. In other words, I will not be buying European domiciled mutual funds. (I am retired and will periodically sell these funds. I don't plan to buy more funds from IB IE and I can rebalance using my 403(B) in the US, so this strategy will fit my needs).

Given that I would be moving mutual funds out of the US to IB Ireland, I just want to make sure that the same principles of the US-France Tax treaty apply here for avoiding double taxation, and to clarify whether any other reporting is needed.

I am primarily seeking input on how this would need to be handled by French tax officials. My understanding is that from the perspective of US taxes, they will be US domiciled mutual funds, IB IE will issue me a 1099 and will pay US income taxes as usual.

In terms of reporting on French income tax, I assume that I will need to declare the IB IE account on form 3916 as well as declaring the income, the theoretical French tax will then be calculated on any income / losses arising from those funds, which will then result in awarding a tax credit for any amount due (given that those mutual funds are taxed in the United States).

I am basically just looking for confirmation that doing what I describe above would result in my mutual funds being taxed in the United States and not France, and I am wondering if other US citizens living in France have used IB IE in a similar manner.
I would personally keep the account in the US just to be rock solid wrt to the tax treaty article. Easier to explain that the source is US based.
Which brokerage would you use? For example, Schwab cannot open accounts for residents of France.
Interactive Brokers.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by anagram »

assyadh wrote: Fri Aug 04, 2023 11:05 am
anagram wrote: Fri Aug 04, 2023 1:13 am
assyadh wrote: Tue Jul 18, 2023 6:40 pm
3333 wrote: Wed Mar 29, 2023 5:48 am I am a US citizen living in France.

I am considering an in-kind transfer of mutual funds from Vanguard USA to Interactive Brokers Ireland(IB IE). They will be the same US-based mutual funds I purchased in the US, just housed at another brokerage. In other words, I will not be buying European domiciled mutual funds. (I am retired and will periodically sell these funds. I don't plan to buy more funds from IB IE and I can rebalance using my 403(B) in the US, so this strategy will fit my needs).

Given that I would be moving mutual funds out of the US to IB Ireland, I just want to make sure that the same principles of the US-France Tax treaty apply here for avoiding double taxation, and to clarify whether any other reporting is needed.

I am primarily seeking input on how this would need to be handled by French tax officials. My understanding is that from the perspective of US taxes, they will be US domiciled mutual funds, IB IE will issue me a 1099 and will pay US income taxes as usual.

In terms of reporting on French income tax, I assume that I will need to declare the IB IE account on form 3916 as well as declaring the income, the theoretical French tax will then be calculated on any income / losses arising from those funds, which will then result in awarding a tax credit for any amount due (given that those mutual funds are taxed in the United States).

I am basically just looking for confirmation that doing what I describe above would result in my mutual funds being taxed in the United States and not France, and I am wondering if other US citizens living in France have used IB IE in a similar manner.
I would personally keep the account in the US just to be rock solid wrt to the tax treaty article. Easier to explain that the source is US based.
Which brokerage would you use? For example, Schwab cannot open accounts for residents of France.
Interactive Brokers.
Thank you for starting this topic. This is really useful information. I see that Interactive Brokers has a Free Trial so I am going to look at how their platform works. I wish Schwab could open international accounts for French residents.

Will Interactive Brokers keep the brokerage account (taxable, IRA, Roth) in the US even if you are resident in France? As opposed to moving the account to Ireland?
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by sperry8 »

While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

sperry8 wrote: Mon Aug 07, 2023 5:56 am While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pension, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married) and a maximum calculable base of around €325,000, that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.

Edit: Typos and clarified calculable base
Last edited by ShadowCat on Mon Aug 07, 2023 6:48 am, edited 2 times in total.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by sperry8 »

ShadowCat wrote: Mon Aug 07, 2023 6:18 am
sperry8 wrote: Mon Aug 07, 2023 5:56 am While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pensikn, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married), that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.
I fall into your category of "astronomical". My Divs/CGs/Int Inc gets close, but not over, their abatement levels of 329,000€. Thus, I'd pay a similar amount for HC coverage as I do in the States (although perhaps getting better care as you mention). I realize most who retire there would not be in a similar situation. At least the payments would end once I start collecting SS (which, should we decided to make the move and retire to France, may change the calculus of when I start collecting it).
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

sperry8 wrote: Mon Aug 07, 2023 6:47 am
ShadowCat wrote: Mon Aug 07, 2023 6:18 am
sperry8 wrote: Mon Aug 07, 2023 5:56 am While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pensikn, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married), that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.
I fall into your category of "astronomical". My Divs/CGs/Int Inc gets close, but not over, their abatement levels of 329,000€. Thus, I'd pay a similar amount for HC coverage as I do in the States (although perhaps getting better care as you mention). I realize most who retire there would not be in a similar situation. At least the payments would end once I start collecting SS (which, should we decided to make the move and retire to France, may change the calculus of when I start collecting it).
You can also think of it this way: you'll pay a flat tax of 6.5% of the 320k€ to live in France. And this flat tax includes health care coverage for all your dependents.

Presented like that it's a tremendous deal no? :D.

I have seen first hand how valuable Healthcare coverage for an elderly person can be in France, having my family still living there. Believe me, the 6.5% is a low amount to get rid of the insanity of the US system. I would trade my HSA, deductible and Max out of pocket everyday, just for the assurance that my insurer won't come back saying "sorry can't cover this because x y or z"

These ~20k€ will be the max you'll ever pay every year. Quite a hedge.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by anagram »

assyadh wrote: Mon Aug 07, 2023 10:58 am
sperry8 wrote: Mon Aug 07, 2023 6:47 am
ShadowCat wrote: Mon Aug 07, 2023 6:18 am
sperry8 wrote: Mon Aug 07, 2023 5:56 am While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pensikn, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married), that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.
I fall into your category of "astronomical". My Divs/CGs/Int Inc gets close, but not over, their abatement levels of 329,000€. Thus, I'd pay a similar amount for HC coverage as I do in the States (although perhaps getting better care as you mention). I realize most who retire there would not be in a similar situation. At least the payments would end once I start collecting SS (which, should we decided to make the move and retire to France, may change the calculus of when I start collecting it).
You can also think of it this way: you'll pay a flat tax of 6.5% of the 320k€ to live in France. And this flat tax includes health care coverage for all your dependents.

Presented like that it's a tremendous deal no? :D.

I have seen first hand how valuable Healthcare coverage for an elderly person can be in France, having my family still living there. Believe me, the 6.5% is a low amount to get rid of the insanity of the US system. I would trade my HSA, deductible and Max out of pocket everyday, just for the assurance that my insurer won't come back saying "sorry can't cover this because x y or z"

These ~20k€ will be the max you'll ever pay every year. Quite a hedge.
Can you say more about healthcare coverage for an elderly person in France? For example, what is available later in life if a person needs some assistance at home? Or if the person should unfortunately suffer from memory loss? What are the waiting periods like?
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sperry8
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by sperry8 »

assyadh wrote: Mon Aug 07, 2023 10:58 am
sperry8 wrote: Mon Aug 07, 2023 6:47 am
ShadowCat wrote: Mon Aug 07, 2023 6:18 am
sperry8 wrote: Mon Aug 07, 2023 5:56 am While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pensikn, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married), that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.
I fall into your category of "astronomical". My Divs/CGs/Int Inc gets close, but not over, their abatement levels of 329,000€. Thus, I'd pay a similar amount for HC coverage as I do in the States (although perhaps getting better care as you mention). I realize most who retire there would not be in a similar situation. At least the payments would end once I start collecting SS (which, should we decided to make the move and retire to France, may change the calculus of when I start collecting it).
You can also think of it this way: you'll pay a flat tax of 6.5% of the 320k€ to live in France. And this flat tax includes health care coverage for all your dependents.

Presented like that it's a tremendous deal no? :D.

I have seen first hand how valuable Healthcare coverage for an elderly person can be in France, having my family still living there. Believe me, the 6.5% is a low amount to get rid of the insanity of the US system. I would trade my HSA, deductible and Max out of pocket everyday, just for the assurance that my insurer won't come back saying "sorry can't cover this because x y or z"

These ~20k€ will be the max you'll ever pay every year. Quite a hedge.
It's a nice "deal" for me for sure... but for my heirs/family, not so much. You have to add the inheritance taxes that are ~45% on my Estate. Of course, back to the health care... at least those payments will only be temporary, ending when I begin receiving SS.
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Topic Author
assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

anagram wrote: Mon Aug 07, 2023 11:14 am
assyadh wrote: Mon Aug 07, 2023 10:58 am
sperry8 wrote: Mon Aug 07, 2023 6:47 am
ShadowCat wrote: Mon Aug 07, 2023 6:18 am
sperry8 wrote: Mon Aug 07, 2023 5:56 am While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pensikn, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married), that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.
I fall into your category of "astronomical". My Divs/CGs/Int Inc gets close, but not over, their abatement levels of 329,000€. Thus, I'd pay a similar amount for HC coverage as I do in the States (although perhaps getting better care as you mention). I realize most who retire there would not be in a similar situation. At least the payments would end once I start collecting SS (which, should we decided to make the move and retire to France, may change the calculus of when I start collecting it).
You can also think of it this way: you'll pay a flat tax of 6.5% of the 320k€ to live in France. And this flat tax includes health care coverage for all your dependents.

Presented like that it's a tremendous deal no? :D.

I have seen first hand how valuable Healthcare coverage for an elderly person can be in France, having my family still living there. Believe me, the 6.5% is a low amount to get rid of the insanity of the US system. I would trade my HSA, deductible and Max out of pocket everyday, just for the assurance that my insurer won't come back saying "sorry can't cover this because x y or z"

These ~20k€ will be the max you'll ever pay every year. Quite a hedge.
Can you say more about healthcare coverage for an elderly person in France? For example, what is available later in life if a person needs some assistance at home? Or if the person should unfortunately suffer from memory loss? What are the waiting periods like?
Waiting periods are OK depending g on your age and conditions I believe.

One of my grand parents has a heavy diabetes case. Her medical file is flagged for that so that many of other treatments are free of charge because of that preexisting condition.

Ex: all the dental work is free of charge because of the diabetes. My grand parent does not carry dental insurance.

It's an anecdotal experience, but I have accompanied my grand parent to various exams, xrays, appointments with specialist etc that would cost an arm and a leg in the US. She does not speak French, but the system is just more respectful. I grew up there, and it was a "medical culture shock" when I moved to the US.
Topic Author
assyadh
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Joined: Tue Sep 18, 2018 12:44 pm

Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

sperry8 wrote: Mon Aug 07, 2023 11:30 am
assyadh wrote: Mon Aug 07, 2023 10:58 am
sperry8 wrote: Mon Aug 07, 2023 6:47 am
ShadowCat wrote: Mon Aug 07, 2023 6:18 am
sperry8 wrote: Mon Aug 07, 2023 5:56 am While one will get credits against US Investment Income including Capital Gains, there is potentially a 6.5% "health care" tax (called cotisation subsidiaire maladie "CSM") in France against capital gains (with caveats, see below). https://aaro.org/health-insurance/speci ... -in-france

As discussed in the article, there is an exemption from this tax for a certain minimum, it appears 20,500€ per person (slightly higher a/o today as it's inflation adjusted). Thereafter you'll be paying 6.5% on Worldwide Investment income* (capped on income of ~325,000€).

Notes:

1- *Pensioners are exempt from these taxes. So if you're collecting SS, you likely don't have to pay this tax.
2- *If married, due to the French concept of ayant droit, and one partner earns more than 8,200€ in income, neither partner is subject to the CSM.
3- further note: France's Constitutional Council has ruled that the CSM is not a “tax” (impôt de toute nature), but a quid pro quo. Therefore, ask your tax adviser if it is deductible as a foreign tax credit on your U.S. return."

So as long as one partner earns 8,200€ or as long as one partner is collecting SS, the CSM tax likely doesn't have to be paid. However, if neither is true, you likely end up paying 0% CG taxes in France (via credits on their tax return), but end up paying 6.5% on CGs/Divs/Int Inc, on amounts over ~20,500€ per person (double that if married).
Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pensikn, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married), that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.
I fall into your category of "astronomical". My Divs/CGs/Int Inc gets close, but not over, their abatement levels of 329,000€. Thus, I'd pay a similar amount for HC coverage as I do in the States (although perhaps getting better care as you mention). I realize most who retire there would not be in a similar situation. At least the payments would end once I start collecting SS (which, should we decided to make the move and retire to France, may change the calculus of when I start collecting it).
You can also think of it this way: you'll pay a flat tax of 6.5% of the 320k€ to live in France. And this flat tax includes health care coverage for all your dependents.

Presented like that it's a tremendous deal no? :D.

I have seen first hand how valuable Healthcare coverage for an elderly person can be in France, having my family still living there. Believe me, the 6.5% is a low amount to get rid of the insanity of the US system. I would trade my HSA, deductible and Max out of pocket everyday, just for the assurance that my insurer won't come back saying "sorry can't cover this because x y or z"

These ~20k€ will be the max you'll ever pay every year. Quite a hedge.
It's a nice "deal" for me for sure... but for my heirs/family, not so much. You have to add the inheritance taxes that are ~45% on my Estate. Of course, back to the health care... at least those payments will only be temporary, ending when I begin receiving SS.
Yes it can be harsh. If you're married, I would suggest you change your French marital contract so that the entire estate goes to the surviving spouse, then this spouse moves back to the US.
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anagram
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by anagram »

assyadh wrote: Mon Aug 07, 2023 12:00 pm
anagram wrote: Mon Aug 07, 2023 11:14 am
assyadh wrote: Mon Aug 07, 2023 10:58 am
sperry8 wrote: Mon Aug 07, 2023 6:47 am
ShadowCat wrote: Mon Aug 07, 2023 6:18 am

Yes, this has been confirmed since the French consider CSM as you pointed out as a quid pro quo and those not taking a pensikn, such as Social Security, will be subject to it.

However, non-investment income such as withdrawals from an IRA or Roth conversions are exempt. So you can still be "tax exempt" fully from all retirement account income as far as France is concerned. So it's only a 6.5% surcharge on investment income.

Given a €20,500 exemption (times two if married), that's a steal for the quality of healthcare one would be getting in France. Unless you have astronomically high capital gains, the surcharge one would pay would be less than buying a comparable plan on the private market in the United States.
I fall into your category of "astronomical". My Divs/CGs/Int Inc gets close, but not over, their abatement levels of 329,000€. Thus, I'd pay a similar amount for HC coverage as I do in the States (although perhaps getting better care as you mention). I realize most who retire there would not be in a similar situation. At least the payments would end once I start collecting SS (which, should we decided to make the move and retire to France, may change the calculus of when I start collecting it).
You can also think of it this way: you'll pay a flat tax of 6.5% of the 320k€ to live in France. And this flat tax includes health care coverage for all your dependents.

Presented like that it's a tremendous deal no? :D.

I have seen first hand how valuable Healthcare coverage for an elderly person can be in France, having my family still living there. Believe me, the 6.5% is a low amount to get rid of the insanity of the US system. I would trade my HSA, deductible and Max out of pocket everyday, just for the assurance that my insurer won't come back saying "sorry can't cover this because x y or z"

These ~20k€ will be the max you'll ever pay every year. Quite a hedge.
Can you say more about healthcare coverage for an elderly person in France? For example, what is available later in life if a person needs some assistance at home? Or if the person should unfortunately suffer from memory loss? What are the waiting periods like?
Waiting periods are OK depending g on your age and conditions I believe.

One of my grand parents has a heavy diabetes case. Her medical file is flagged for that so that many of other treatments are free of charge because of that preexisting condition.

Ex: all the dental work is free of charge because of the diabetes. My grand parent does not carry dental insurance.

It's an anecdotal experience, but I have accompanied my grand parent to various exams, xrays, appointments with specialist etc that would cost an arm and a leg in the US. She does not speak French, but the system is just more respectful. I grew up there, and it was a "medical culture shock" when I moved to the US.
Thank you for the thoughts. I agree it is anecdotal but I have heard smilier stories from a friend in France. The whole hospital billing system in the US is quite mad. I experienced "medical culture shock" as well.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

anagram wrote: Mon Aug 07, 2023 12:35 pm Thank you for the thoughts. I agree it is anecdotal but I have heard smilier stories from a friend in France. The whole hospital billing system in the US is quite mad. I experienced "medical culture shock" as well.
The underappreciated aspect of having French health cover as a French resident is that you then have access to the European Health Insurance Card (EHIC). The EHIC covers you for emergency care and/or care that cannot be reasonably delayed, including for care from pre-existing conditions, while you are outside your home country but within a country that honors the EHIC. The cover provided is required to be on par with the cover provided to residents of that country.

This plus how cheap air and rail travel is within Europe lets you continue to explore and travel within the EU/EEA/Switzerland/UK even after you start having health issues in your 60's, 70's, and even 80's. All without having to pay obscene traveler's health insurance costs each time you wish to travel. Just hop on a plane/train and take a three week trip to Portugal/Spain/Belgium/Netherlands/Switzerland/Germany/Italy/etc.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

sperry8 wrote: Mon Aug 07, 2023 11:30 am It's a nice "deal" for me for sure... but for my heirs/family, not so much. You have to add the inheritance taxes that are ~45% on my Estate. Of course, back to the health care... at least those payments will only be temporary, ending when I begin receiving SS.
Yeah, the French estate tax is extremely off-putting to say the least; assyadh's solution of making sure your spouse inherits everything (spouses are exempt from estate tax in France) and then relocating to the US is one option. Another option could be to go ahead and give your heirs their inheritance right now before you relocate to France. But I agree with you that it is definitely not ideal.

One of the YouTube videos that assyadh linked to had a tax advisor who put it this way: "For an American, France is a great place to retire and a terrible place to die". I thought that was a funny way of putting it, but seems true if you're concerned about estate tax.
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anagram
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by anagram »

ShadowCat wrote: Mon Aug 07, 2023 4:31 pm
anagram wrote: Mon Aug 07, 2023 12:35 pm Thank you for the thoughts. I agree it is anecdotal but I have heard smilier stories from a friend in France. The whole hospital billing system in the US is quite mad. I experienced "medical culture shock" as well.
The underappreciated aspect of having French health cover as a French resident is that you then have access to the European Health Insurance Card (EHIC). The EHIC covers you for emergency care and/or care that cannot be reasonably delayed, including for care from pre-existing conditions, while you are outside your home country but within a country that honors the EHIC. The cover provided is required to be on par with the cover provided to residents of that country.

This plus how cheap air and rail travel is within Europe lets you continue to explore and travel within the EU/EEA/Switzerland/UK even after you start having health issues in your 60's, 70's, and even 80's. All without having to pay obscene traveler's health insurance costs each time you wish to travel. Just hop on a plane/train and take a three week trip to Portugal/Spain/Belgium/Netherlands/Switzerland/Germany/Italy/etc.
I was aware of the EHIC. You're right, it is very civilized to be able to travel within Europe and receive medical care anywhere if needed.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by sperry8 »

ShadowCat wrote: Mon Aug 07, 2023 4:36 pm
sperry8 wrote: Mon Aug 07, 2023 11:30 am It's a nice "deal" for me for sure... but for my heirs/family, not so much. You have to add the inheritance taxes that are ~45% on my Estate. Of course, back to the health care... at least those payments will only be temporary, ending when I begin receiving SS.
Yeah, the French estate tax is extremely off-putting to say the least; assyadh's solution of making sure your spouse inherits everything (spouses are exempt from estate tax in France) and then relocating to the US is one option. Another option could be to go ahead and give your heirs their inheritance right now before you relocate to France. But I agree with you that it is definitely not ideal.

One of the YouTube videos that assyadh linked to had a tax advisor who put it this way: "For an American, France is a great place to retire and a terrible place to die". I thought that was a funny way of putting it, but seems true if you're concerned about estate tax.
Well, I'll be dead, but wiping away 45% of my heirs inheritance does grate on me.

I also found what appears to be another concerning issue when retiring to France. Tax on Real Estate Properties (IFI tax). If one owns a home in the US and France (or just France, or I believe just the US) and the net worth of those home(s) are over 1,300,000 Euro, taxes are due (with the stipulation that US citizens are exempt from this tax for the first 5 years and a 2nd stipulation that your primary residence is reduced by 30% for valuation purposes). So assuming one retires to France and still owns a US home, after 5 years they can pay anywhere from .5% - 1.5% tax annually on all their properties. So basically your carrying costs for your US property goes up after 5 years (especially harsh since if you've retired/moved to France you aren't living in that home most of the time).

In my case I believe IFI would be applicable, as I own a US vacation home and would keep it if I decided to move/retire to France. Even if I only rented in France - after 5 years, France would start taxing me on the US home. Perhaps this scenario doesn't apply to most - it appears IFI is a tax only 164,000 people paid in 2022 - but if I'm understanding it correctly, it'd be a harsh tax for someone who wants to keep a home outside of France. Maybe most people who move/retire to France liquidate their other real estate - or are rich enough not to care about paying a few thousand dollars per month in taxes to carry a 2nd home.

Another concerning item re France is the "exit tax". I'm still trying to understand this one in full, but the way I'm reading it is if you move/retire to France for at least 6 of 10 years and then decide to leave (exit) you will pay a 30% capital gains exit tax on unrealized capital gains if your portfolio is worth more than 800,000 Euro. I'm unclear if this applies to worldwide assets or just assets you bought after moving to France and/or held in French/EU accounts. Perhaps someone here has clarity on this one.

While a move to France initially seemed lovely, the 6.5% health care tax, 45% Inheritance tax, the ~1% Worldwide Real Estate tax, and potentially the Exit tax are making France less and less palatable. Nice summary here on all the French taxes: https://taxsummaries.pwc.com/france/ind ... ther-taxes
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Topic Author
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

sperry8 wrote: Mon Aug 07, 2023 10:17 pm
ShadowCat wrote: Mon Aug 07, 2023 4:36 pm
sperry8 wrote: Mon Aug 07, 2023 11:30 am It's a nice "deal" for me for sure... but for my heirs/family, not so much. You have to add the inheritance taxes that are ~45% on my Estate. Of course, back to the health care... at least those payments will only be temporary, ending when I begin receiving SS.
Yeah, the French estate tax is extremely off-putting to say the least; assyadh's solution of making sure your spouse inherits everything (spouses are exempt from estate tax in France) and then relocating to the US is one option. Another option could be to go ahead and give your heirs their inheritance right now before you relocate to France. But I agree with you that it is definitely not ideal.

One of the YouTube videos that assyadh linked to had a tax advisor who put it this way: "For an American, France is a great place to retire and a terrible place to die". I thought that was a funny way of putting it, but seems true if you're concerned about estate tax.
Well, I'll be dead, but wiping away 45% of my heirs inheritance does grate on me.

I also found what appears to be another concerning issue when retiring to France. Tax on Real Estate Properties (IFI tax). If one owns a home in the US and France (or just France, or I believe just the US) and the net worth of those home(s) are over 1,300,000 Euro, taxes are due (with the stipulation that US citizens are exempt from this tax for the first 5 years and a 2nd stipulation that your primary residence is reduced by 30% for valuation purposes). So assuming one retires to France and still owns a US home, after 5 years they can pay anywhere from .5% - 1.5% tax annually on all their properties. So basically your carrying costs for your US property goes up after 5 years (especially harsh since if you've retired/moved to France you aren't living in that home most of the time).

Another concerning item re France is the "exit tax". I'm still trying to understand this one in full, but the way I'm reading it is if you move/retire to France for at least 6 of 10 years and then decide to leave (exit) you will pay a 30% capital gains exit tax on unrealized capital gains if your portfolio is worth more than 800,000 Euro. I'm unclear if this applies to worldwide assets or just assets you bought after moving to France and/or held in French/EU accounts. Perhaps someone here has clarity on this one.

While a move to France initially seemed lovely, the 6.5% health care tax, 45% Inheritance tax, the ~1% Worldwide Real Estate tax, and potentially the Exit tax are making France less and less palatable. Nice summary here on all the French taxes: https://taxsummaries.pwc.com/france/ind ... ther-taxes
You can plan around the exit tax pretty easily. Not a lot of people pay it. You have a "sursis d'imposition" in a lot of cases.

The exit tax has two thresholds and has been revamped by Macron. Without going to deeply, the trick is to get enough cash so that you don't have to sell assets in a few years after leaving France.

Additionally, giving the fact that the stocks gains are not taxable in France it's unclear how the exit tax actually works in the light of the tax treaty.

The real estate wealth tax will still be applicable. If the real. Estate is located in France they are ways around it though (donation temporaire d'usufruit)
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