AARO held its French tax seminar on May 7. Lawyers and tax specialists, Pierre Taponier and John Fredenberger presented to a full house. The target audience was U.S. French tax residents.
Who is a French tax resident?
The first test for tax residence is physical presence. If you are in France for 183 days or more, you are a tax resident. However, presence is not the only consideration and if you are in France less than half a year, you can still be a tax resident if:
- your main residence is in France.
- your children go to school in France.
- France is the center of your economic interest.
- France is the center of your professional activities.
How do you file French taxes?
If you are filing for the first time you can download the forms from impots.gouv.fr. Just use the search function for the form number you want. You can also go to the local tax office and pick them up. There are tax offices in every arrondissement in Paris and in almost every town in France.
E-filing is mandatory after the first year if your worldwide income is over €15000. Go to impots.gouv.fr, particulier, and select "Déclarer mes revenus".
You do not have to do any calculations; the "fisc" (French tax authority, equivalent to the IRS) takes care of that. Any time from late August to October you will receive your "Avis d'imposition" which tells you what you owe and when payment is due or what will be refunded to you or 0. It is important to file, even if the Avis is going to be 0.
The deadline for paper forms is May 17, 2018. There are no extensions. You can deposit your forms at your tax office or send them in, postmarked May 17, at the latest. The deadline for e-filing depends on which département you live in. Again, the impots.gouv.fr site has that information.
What do you report and on which form?
France has residence-based taxation; report your worldwide income. Because you are a U.S. citizen or greencard holder, you are also subject to U.S. citizenship-based taxation. There is a tax treaty in place to avoid double taxation. Pierre described our tax credit in France as a "super tax credit". Instead of simply getting credit for the tax paid to the United States, France gives us credit for the tax that would have applied to that income in France, including the social contributions!
Form 2042 is the main form with your identity, family situation, and income reporting. If you are filing for the first time, you will not have your fiscal reference number, yet.
- Your salary, pensions, etc, go in Section 1. Your U.S. pension(s) go on line "Pensions perçues par les non-résidents. Pensions de source étrangère avec crédit d’impôt égal à l’impôt français", box 1AL.
- Investment income goes in Section 2. Your U.S. interest and dividend income go into boxes 2TS and 2TR.
Form 2047 is for foreign income. It might be easier to fill this in before you fill in the boxes on form 2042.
- U.S. pension income goes in Section 1, under "PENSIONS, RETRAITES, RENTES" and on the line that corresponds to 1AL, which is indicated on the right. Report that sum in box 1AL on form 2042.
- U.S. dividend income goes in Section 2, under line 218, "DIVIDENDES OUVRANT DROIT À UN CRÉDIT D’IMPÔT ÉGAL À L’IMPÔT FRANÇAIS (MONTANT BRUT)". The total, line 221 is what you report in box 2TS on form 2042.
- U.S. interest income also goes in Section 2, under line 239, "INTÉRÊTS OUVRANT DROIT À UN CRÉDIT D’IMPÔT ÉGAL À L’IMPÔT FRANÇAIS (MONTANT BRUT)". The total on line 242 is what your report in box 2TR on form 2042.
Form 3916 is for foreign bank accounts. Like the United States, France expects you to report your accounts outside France. Unlike the United States, you report the existence of the account, but not the any amount in the account.
If you are filing on paper, you can list the accounts with the required information on a single sheet of paper, but if you are filing online, you fill in one form for each account. You can check a box to have that data saved for next year to save time. If you closed an account, enter the date closed.
There were questions about not having properly declared foreign accounts in the past. The recommendation is to start declaring them, now. Do not worry about leaving the "date opened" box empty. The key is to declare. If you do not and it is a tax agent becomes curious about the foreign income (investment, earned, or pension) that must be going into an account somewhere. You could be subject to €1500 per account per year of non-reporting going back 3 years.
Check box 8UU on form 2042 to indicate you have one or more foreign accounts.
ISF becomes IFI
The "Impôt sur la Fortune" has become the "Impôt sur la Fortune Immobilière", which is a tax on worldwide real property assets. It applies to long-standing (5 years or more) French residents. You can offset some tax with debt that is on the property, only, not any other debt. You can deduct your "taxe foncière" but not your "taxe d'habitation".
There was a question about "usufruit" and the change from the user of the property (the "usufruitier") having to declare the full value of the property for his or her ISF to the new regime of the value being shared between the user and the owner (nu propriétaire). See your tax specialist if this might apply to you.
The video recording of the meeting will be online as soon as possible, available to AARO members.