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

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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 10:44 pm
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)
Ah yes, the PWC link described something about the exit tax:

"Four tax relief periods may apply depending on the date of transfer of the domicile outside France:

8 years for a transfer from 11 March 2011 to 2013.
15 years for a transfer from 2014 to 2018.
2 years from 2019 if the total value of the shares is less than EUR 2.57 million.
5 years from 2019 if the total value of the shares is more than EUR 2.57 million."

The last bucket would apply to me. So you're saying it means, as long as I don't sell any stock (I assume forced capital gains aren't sales?) then I'd be off the hook for these taxes? Understand in the US - mutual funds issue capital gains whether you like it or not. So there would have to be a difference in the eye of the French tax authorities between me actively selling vs a fund issuing CGs. I'd also have to be 100% sure I wouldn't need to sell one share for 5 full years.

Re the IFI, 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. It'd cost me $1,250 per mo on the US home or double if I bought a French home after moving/retiring (as the French home would put me in a higher bracket and my total real estate asset value would also be higher). With 2 homes, likely an add'l $3,000 per mo. Add the health care costs of $1,667 and you're getting close to an add'l $5k p/mo to live in France. That's a heavy load and we haven't even discussed inheritance taxes yet.

I was feeling very hopeful about France, but alas, if I'm unable to lower these costs it just may remain a dream.
BH Contests: 23 #89 of 607 | 22 #512 of 674 | 21 #66 of 636 |20 #253/664 |19 #233/645 |18 #150/493 |17 #516/647 |16 #121/610 |15 #18/552 |14 #225/503 |13 #383/433 |12 #366/410 |11 #113/369 |10 #53/282
Topic Author
assyadh
Posts: 591
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 11:01 pm
assyadh wrote: Mon Aug 07, 2023 10:44 pm
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)
Ah yes, the PWC link described something about the exit tax:

"Four tax relief periods may apply depending on the date of transfer of the domicile outside France:

8 years for a transfer from 11 March 2011 to 2013.
15 years for a transfer from 2014 to 2018.
2 years from 2019 if the total value of the shares is less than EUR 2.57 million.
5 years from 2019 if the total value of the shares is more than EUR 2.57 million."

The last bucket would apply to me. So you're saying it means, as long as I don't sell any stock (I assume forced capital gains aren't sales?) then I'd be off the hook for these taxes? Understand in the US - mutual funds issue capital gains whether you like it or not. So there would have to be a difference in the eye of the French tax authorities between me actively selling vs a fund issuing CGs. I'd also have to be 100% sure I wouldn't need to sell one share for 5 full years.

Re the IFI, 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. It'd cost me $1,250 per mo on the US home or double if I bought a French home after moving/retiring (as the French home would put me in a higher bracket and my total real estate asset value would also be higher). With 2 homes, likely an add'l $3,000 per mo. Add the health care costs of $1,667 and you're getting close to an add'l $5k p/mo to live in France. That's a heavy load and we haven't even discussed inheritance taxes yet.

I was feeling very hopeful about France, but alas, if I'm unable to lower these costs it just may remain a dream.
The real estate wealth tax does not apply of the first euro, it has a floor (800k€)

https://www.economie.gouv.fr/particulie ... iliere-ifi#

For example, for a 1.5M€ real estate portfolio, the yearly tax is 3.9k€
800 000 x 0 % + (1 300 000 – 800 000) x 0,5 % + (1 500 000 – 1 300 000) x 0,7 % = 3 900 €.
Regarding the MF capital gains, I'm not sure how they would be taxed in France. In the US the adjust your cost basis upward right?

For the exit tax there is essentially a look back period:
https://www.impots.gouv.fr/internationa ... y-exit-tax
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sperry8
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Location: Miami FL

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

Post by sperry8 »

assyadh wrote: Mon Aug 07, 2023 11:23 pm
sperry8 wrote: Mon Aug 07, 2023 11:01 pm
assyadh wrote: Mon Aug 07, 2023 10:44 pm
sperry8 wrote: Mon Aug 07, 2023 10:17 pm
ShadowCat wrote: Mon Aug 07, 2023 4:36 pm

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)
Ah yes, the PWC link described something about the exit tax:

"Four tax relief periods may apply depending on the date of transfer of the domicile outside France:

8 years for a transfer from 11 March 2011 to 2013.
15 years for a transfer from 2014 to 2018.
2 years from 2019 if the total value of the shares is less than EUR 2.57 million.
5 years from 2019 if the total value of the shares is more than EUR 2.57 million."

The last bucket would apply to me. So you're saying it means, as long as I don't sell any stock (I assume forced capital gains aren't sales?) then I'd be off the hook for these taxes? Understand in the US - mutual funds issue capital gains whether you like it or not. So there would have to be a difference in the eye of the French tax authorities between me actively selling vs a fund issuing CGs. I'd also have to be 100% sure I wouldn't need to sell one share for 5 full years.

Re the IFI, 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. It'd cost me $1,250 per mo on the US home or double if I bought a French home after moving/retiring (as the French home would put me in a higher bracket and my total real estate asset value would also be higher). With 2 homes, likely an add'l $3,000 per mo. Add the health care costs of $1,667 and you're getting close to an add'l $5k p/mo to live in France. That's a heavy load and we haven't even discussed inheritance taxes yet.

I was feeling very hopeful about France, but alas, if I'm unable to lower these costs it just may remain a dream.
The real estate wealth tax does not apply of the first euro, it has a floor (800k€)

https://www.economie.gouv.fr/particulie ... iliere-ifi#

For example, for a 1.5M€ real estate portfolio, the yearly tax is 3.9k€
800 000 x 0 % + (1 300 000 – 800 000) x 0,5 % + (1 500 000 – 1 300 000) x 0,7 % = 3 900 €.
Regarding the MF capital gains, I'm not sure how they would be taxed in France. In the US the adjust your cost basis upward right?

For the exit tax there is essentially a look back period:
https://www.impots.gouv.fr/internationa ... y-exit-tax
Helpful to know the IFI tax is progressive. I was missing that, so the net tax is lower than I thought. Guessing that would add ~$500 per month in taxes to my US home. Maybe less if I can use the 30% reduction and claim it as my primary home (although that may be hard to do if I'm a resident in France). Either way, better than I previously thought and perhaps making it a pill I can swallow. And to ensure it doesn't climb into higher buckets, I'd have to rent in France (rather than buy) since all real estate is additive (and punitive collectively). I may not want to rent if I chose to raise kids in France.

Re mutual fund cap gains, it appears the forced cap gains won't apply, see Section III.2. and III.3. here: https://www.legifrance.gouv.fr/codes/ar ... 043747606/ "Securities sold as part of their management by mutual funds..." Of course, I may not be translating/understanding this correctly.

I don't know what you mean by "look back" period. I see nothing in your link re that. There is, as I stated, a 5 year tax relief period, which I believe means that if I don't sell anything for 5 years, the tax would be waived. Heck of a hurdle, but could perhaps be done.
BH Contests: 23 #89 of 607 | 22 #512 of 674 | 21 #66 of 636 |20 #253/664 |19 #233/645 |18 #150/493 |17 #516/647 |16 #121/610 |15 #18/552 |14 #225/503 |13 #383/433 |12 #366/410 |11 #113/369 |10 #53/282
Topic Author
assyadh
Posts: 591
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 11:41 pm
assyadh wrote: Mon Aug 07, 2023 11:23 pm
sperry8 wrote: Mon Aug 07, 2023 11:01 pm
assyadh wrote: Mon Aug 07, 2023 10:44 pm
sperry8 wrote: Mon Aug 07, 2023 10:17 pm

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)
Ah yes, the PWC link described something about the exit tax:

"Four tax relief periods may apply depending on the date of transfer of the domicile outside France:

8 years for a transfer from 11 March 2011 to 2013.
15 years for a transfer from 2014 to 2018.
2 years from 2019 if the total value of the shares is less than EUR 2.57 million.
5 years from 2019 if the total value of the shares is more than EUR 2.57 million."

The last bucket would apply to me. So you're saying it means, as long as I don't sell any stock (I assume forced capital gains aren't sales?) then I'd be off the hook for these taxes? Understand in the US - mutual funds issue capital gains whether you like it or not. So there would have to be a difference in the eye of the French tax authorities between me actively selling vs a fund issuing CGs. I'd also have to be 100% sure I wouldn't need to sell one share for 5 full years.

Re the IFI, 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. It'd cost me $1,250 per mo on the US home or double if I bought a French home after moving/retiring (as the French home would put me in a higher bracket and my total real estate asset value would also be higher). With 2 homes, likely an add'l $3,000 per mo. Add the health care costs of $1,667 and you're getting close to an add'l $5k p/mo to live in France. That's a heavy load and we haven't even discussed inheritance taxes yet.

I was feeling very hopeful about France, but alas, if I'm unable to lower these costs it just may remain a dream.
The real estate wealth tax does not apply of the first euro, it has a floor (800k€)

https://www.economie.gouv.fr/particulie ... iliere-ifi#

For example, for a 1.5M€ real estate portfolio, the yearly tax is 3.9k€
800 000 x 0 % + (1 300 000 – 800 000) x 0,5 % + (1 500 000 – 1 300 000) x 0,7 % = 3 900 €.
Regarding the MF capital gains, I'm not sure how they would be taxed in France. In the US the adjust your cost basis upward right?

For the exit tax there is essentially a look back period:
https://www.impots.gouv.fr/internationa ... y-exit-tax
Helpful to know the IFI tax is progressive. I was missing that, so the net tax is lower than I thought. Guessing that would add ~$500 per month in taxes to my US home. Maybe less if I can use the 30% reduction and claim it as my primary home (although that may be hard to do if I'm a resident in France). Either way, better than I previously thought and perhaps making it a pill I can swallow. And to ensure it doesn't climb into higher buckets, I'd have to rent in France (rather than buy) since all real estate is additive (and punitive collectively). I may not want to rent if I chose to raise kids in France.

Re mutual fund cap gains, it appears the forced cap gains won't apply, see Section III.2. and III.3. here: https://www.legifrance.gouv.fr/codes/ar ... 043747606/ "Securities sold as part of their management by mutual funds..." Of course, I may not be translating/understanding this correctly.

I don't know what you mean by "look back" period. I see nothing in your link re that. There is, as I stated, a 5 year tax relief period, which I believe means that if I don't sell anything for 5 years, the tax would be waived. Heck of a hurdle, but could perhaps be done.
Yes that's what I meant by look back period. The deferral is automatic now and iirc you have to file a form if you end up making a sale in any of the subsequent X years. Which means you really just have to gap your cash for X years. It's a pain but not impossible.

Also, if I'm not mistaken, it only applies to folks who transfer their tax residency outside of Europe to a country deemed non cooperative with France. It's a complex topic (hence the muddy waters term I used earlier) but it sounds like the French tax authority may or may not deem the US as cooperative.

https://www.globalcompliancenews.com/20 ... urt-of-ap/
ShadowCat
Posts: 259
Joined: Thu Nov 05, 2015 4:02 pm

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

Post by ShadowCat »

assyadh wrote: Mon Aug 07, 2023 11:47 pm Yes that's what I meant by look back period. The deferral is automatic now and iirc you have to file a form if you end up making a sale in any of the subsequent X years. Which means you really just have to gap your cash for X years. It's a pain but not impossible.

Also, if I'm not mistaken, it only applies to folks who transfer their tax residency outside of Europe to a country deemed non cooperative with France. It's a complex topic (hence the muddy waters term I used earlier) but it sounds like the French tax authority may or may not deem the US as cooperative.

https://www.globalcompliancenews.com/20 ... urt-of-ap/
The article you linked to was a great read and fascinating, thanks for the link. That said, I still am not convinced that the exit tax applies to US citizens holding US situs investments regardless of if the French view the US as a cooperating authority or not.

My French is only intermediary unlike your native fluency, but my reading of both the English and French versions of the US-France tax treaty leads me to believe that US situs capital gains are tax exempt in France (or rather, France must give a credit to offset 100% of the equivalent French tax) without exception. We established that earlier in this topic thread - many thanks again to you for bringing this up to everyone's attention in the first place!

The French exit tax explicitly calls for taxation on capital gains. So, how would the French exit tax not also fall under this tax exemption? The US-France tax treaty supersedes domestic French legislation so I cannot imagine that US situs investments would all of a sudden become taxed in France once one was already back in the US simply because French domestic legislation says so.

Of course, until an actual expert in French tax law comments we can't know this for certain. But as an amateur reader of the tax treaty though, I am skeptical that the French exit tax applies at all in the situation of a US citizen leaving France to return to the US who only holds US situs investments that are covered by the tax treaty.
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 »

I would tend to agree. But the treaty covers income, not pretend income and you never Know with the tax authority :D
User avatar
sperry8
Posts: 3070
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

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

Post by sperry8 »

assyadh wrote: Mon Aug 07, 2023 11:23 pm
sperry8 wrote: Mon Aug 07, 2023 11:01 pm
assyadh wrote: Mon Aug 07, 2023 10:44 pm
sperry8 wrote: Mon Aug 07, 2023 10:17 pm
ShadowCat wrote: Mon Aug 07, 2023 4:36 pm

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)
Ah yes, the PWC link described something about the exit tax:

"Four tax relief periods may apply depending on the date of transfer of the domicile outside France:

8 years for a transfer from 11 March 2011 to 2013.
15 years for a transfer from 2014 to 2018.
2 years from 2019 if the total value of the shares is less than EUR 2.57 million.
5 years from 2019 if the total value of the shares is more than EUR 2.57 million."

The last bucket would apply to me. So you're saying it means, as long as I don't sell any stock (I assume forced capital gains aren't sales?) then I'd be off the hook for these taxes? Understand in the US - mutual funds issue capital gains whether you like it or not. So there would have to be a difference in the eye of the French tax authorities between me actively selling vs a fund issuing CGs. I'd also have to be 100% sure I wouldn't need to sell one share for 5 full years.

Re the IFI, 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. It'd cost me $1,250 per mo on the US home or double if I bought a French home after moving/retiring (as the French home would put me in a higher bracket and my total real estate asset value would also be higher). With 2 homes, likely an add'l $3,000 per mo. Add the health care costs of $1,667 and you're getting close to an add'l $5k p/mo to live in France. That's a heavy load and we haven't even discussed inheritance taxes yet.

I was feeling very hopeful about France, but alas, if I'm unable to lower these costs it just may remain a dream.
The real estate wealth tax does not apply of the first euro, it has a floor (800k€)

https://www.economie.gouv.fr/particulie ... iliere-ifi#

For example, for a 1.5M€ real estate portfolio, the yearly tax is 3.9k€
800 000 x 0 % + (1 300 000 – 800 000) x 0,5 % + (1 500 000 – 1 300 000) x 0,7 % = 3 900 €.
Regarding the MF capital gains, I'm not sure how they would be taxed in France. In the US the adjust your cost basis upward right?

For the exit tax there is essentially a look back period:
https://www.impots.gouv.fr/internationa ... y-exit-tax
Any idea how France values real estate abroad? First, how do they even know about it? Is it incumbent upon the tax resident to tell them about it or do they have an alternative way to identify? Second, there are many valuation methods for unsold homes in the US, all of which come with varying amounts. The lowest (which is likely what the resident would want to report) is via tax assessment rolls (what the local county says you must pay property taxes on). Since it's used in the US for taxes here - would we be able to use it for the Wealth tax in France? Or would they require an annual appraisal (which costs money) or some other form of valuation?
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

Here is the explanation of the tax levy: https://www.service-public.fr/particuli ... roits/F138

Some more explanation on how to get the 'valeur venale': https://www.imogroup-grandgeneve.com/fr ... biliers-17

Essentially it's a rule of thumb ie how much would the property sell for on the open market, minus whatever could lower its value (if there is a tenant, if it's a property shared with other owners etc..)

It's a case by case, there has been cases of audits though. don't be crazy I guess.
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sperry8
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by sperry8 »

ShadowCat wrote: Tue Aug 08, 2023 6:08 am
assyadh wrote: Mon Aug 07, 2023 11:47 pm Yes that's what I meant by look back period. The deferral is automatic now and iirc you have to file a form if you end up making a sale in any of the subsequent X years. Which means you really just have to gap your cash for X years. It's a pain but not impossible.

Also, if I'm not mistaken, it only applies to folks who transfer their tax residency outside of Europe to a country deemed non cooperative with France. It's a complex topic (hence the muddy waters term I used earlier) but it sounds like the French tax authority may or may not deem the US as cooperative.

https://www.globalcompliancenews.com/20 ... urt-of-ap/
The article you linked to was a great read and fascinating, thanks for the link. That said, I still am not convinced that the exit tax applies to US citizens holding US situs investments regardless of if the French view the US as a cooperating authority or not.

My French is only intermediary unlike your native fluency, but my reading of both the English and French versions of the US-France tax treaty leads me to believe that US situs capital gains are tax exempt in France (or rather, France must give a credit to offset 100% of the equivalent French tax) without exception. We established that earlier in this topic thread - many thanks again to you for bringing this up to everyone's attention in the first place!

The French exit tax explicitly calls for taxation on capital gains. So, how would the French exit tax not also fall under this tax exemption? The US-France tax treaty supersedes domestic French legislation so I cannot imagine that US situs investments would all of a sudden become taxed in France once one was already back in the US simply because French domestic legislation says so.

Of course, until an actual expert in French tax law comments we can't know this for certain. But as an amateur reader of the tax treaty though, I am skeptical that the French exit tax applies at all in the situation of a US citizen leaving France to return to the US who only holds US situs investments that are covered by the tax treaty.
The bold above is a really good question, and I'd be interested in an answer if anyone has it (or knows someone who was an ex-pat in France and then moved back to the US).

btw - here is a link to helpful detailed info on the fact that US citizens do not pay any taxes to France on CGs and Divs (basically corroborating this BH thread): https://www.taxconnections.com/taxblog/ ... ns-abroad/
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

sperry8 wrote: Sun Dec 10, 2023 8:45 pm
ShadowCat wrote: Tue Aug 08, 2023 6:08 am
assyadh wrote: Mon Aug 07, 2023 11:47 pm Yes that's what I meant by look back period. The deferral is automatic now and iirc you have to file a form if you end up making a sale in any of the subsequent X years. Which means you really just have to gap your cash for X years. It's a pain but not impossible.

Also, if I'm not mistaken, it only applies to folks who transfer their tax residency outside of Europe to a country deemed non cooperative with France. It's a complex topic (hence the muddy waters term I used earlier) but it sounds like the French tax authority may or may not deem the US as cooperative.

https://www.globalcompliancenews.com/20 ... urt-of-ap/
The article you linked to was a great read and fascinating, thanks for the link. That said, I still am not convinced that the exit tax applies to US citizens holding US situs investments regardless of if the French view the US as a cooperating authority or not.

My French is only intermediary unlike your native fluency, but my reading of both the English and French versions of the US-France tax treaty leads me to believe that US situs capital gains are tax exempt in France (or rather, France must give a credit to offset 100% of the equivalent French tax) without exception. We established that earlier in this topic thread - many thanks again to you for bringing this up to everyone's attention in the first place!

The French exit tax explicitly calls for taxation on capital gains. So, how would the French exit tax not also fall under this tax exemption? The US-France tax treaty supersedes domestic French legislation so I cannot imagine that US situs investments would all of a sudden become taxed in France once one was already back in the US simply because French domestic legislation says so.

Of course, until an actual expert in French tax law comments we can't know this for certain. But as an amateur reader of the tax treaty though, I am skeptical that the French exit tax applies at all in the situation of a US citizen leaving France to return to the US who only holds US situs investments that are covered by the tax treaty.
The bold above is a really good question, and I'd be interested in an answer if anyone has it (or knows someone who was an ex-pat in France and then moved back to the US).

btw - here is a link to helpful detailed info on the fact that US citizens do not pay any taxes to France on CGs and Divs (basically corroborating this BH thread): https://www.taxconnections.com/taxblog/ ... ns-abroad/
Thanks yes I DMed John about the investigation I did :sharebeer
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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
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

assyadh wrote: Fri Mar 22, 2024 3:28 pm See starting 11:00 here https://youtu.be/NZAbYIxgivY?si=8r6bSrWrxwAi2_w9
Thanks! I watched the entire thing. I really enjoy Jonathan Hadida's information on these Dunhill Financial videos. I think you linked to one last year too, it was great.

We should ask him if he knows more about the French exit tax for US citizens tax resident in France who relocate to the US.
crism
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by crism »

Can anyone recommend a French CPA whom they have personally worked with, and applied US/France Treaty Article 24 as described in this discussion?

I am looking for a French tax professional who can help me plan tax strategy before I move from the US to France.

Feel free to DM me.

Thank you!

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

Post by assyadh »

crism wrote: Sun Apr 14, 2024 9:41 am Can anyone recommend a French CPA whom they have personally worked with, and applied US/France Treaty Article 24 as described in this discussion?

I am looking for a French tax professional who can help me plan tax strategy before I move from the US to France.

Feel free to DM me.

Thank you!

Cris
There are a couple firms in the YouTube videos I posted. Explaining the article.
PLEASURE
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by PLEASURE »

Move to France but for goodness sakes, keep your money in the U S. In many western European countries the capital gains tax is double what it is in the U S. and is taken out directly on a quarterly or annual basis, whether you sell/take the money or not. [Inappropriate political comment removed. Moderator Pops1860]
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

PLEASURE wrote: Tue Apr 16, 2024 1:30 pm Move to France but for goodness sakes, keep your money in the U S. In many western European countries the capital gains tax is double what it is in the U S. and is taken out directly on a quarterly or annual basis, whether you sell/take the money or not. [Inappropriate political comment removed. Moderator Pops1860]
Not related to the topic, not factual (see the tax treaty). Please stay on topic, I wouldn't want this thread to be locked. :sharebeer
TimoFrance
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by TimoFrance »

Hi All,

I attended the webinar of Oui Financial. It is a French financial advisor based in San Francisco. He does a webinar called returning to France in the next 3 years and talks about actions you can take.

he talks about the tax treaty, inheritance tax, capital gains taxes as US citizens, etc. The webinar is free and is usually held every other month and I found it really useful:

https://ouifinancial.com/

The webinar is in French though, so if you don't understand French, it might be hard to follow. In the Q&A section; some attendees ask questions in English.

I asked Guillaume from Oui Financial for a recommendation for a notaire that was experienced in drafting a will for a US citizen who is a tax resident of France and he was able to recommend a couple notaries.

Mods: I am simply recommending the free webinar; but it not allowed, please let me know.

Cheers,

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

Post by assyadh »

New webinar explaining the treaty: https://youtu.be/hw-O5ECaSnk?si=BoVMiJu8QQxRZoZr

See starting around 25:00 explaining the tax credit applied by France as we understand it.

Beware, it's in French :mrgreen:
xwolfi
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by xwolfi »

Be careful not to only consider capital gain tax if you seriously consider France. I am French myself, and tax resident in Hong Kong, for context.

The problem with trying a cheaper retirement in France is that while you may not be taxed on one type of income, you'll be taxed on absolutely everything else: the 20% VAT, the gasoline, the cigarets, the real estate taxes (even when you rent), TV tax, etc. [Inappropriate political commentary removed. Moderator Pops1860]

It is not a cheap country: Hong Kong for instance may have high rent, but since there's absolutely no taxes whatsoever except 17% salary tax, not even tax on dividend or capital gain, it's way cheaper overall, if you accept lower living conditions (granted, an ocean house in France is better than a subdivided high density flat at the border with Shenzhen lol).

[Inappropriate political commentary removed. Moderator Pops1860]
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assyadh
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

xwolfi wrote: Thu May 02, 2024 11:05 pm Be careful not to only consider capital gain tax if you seriously consider France. I am French myself, and tax resident in Hong Kong, for context.

The problem with trying a cheaper retirement in France is that while you may not be taxed on one type of income, you'll be taxed on absolutely everything else: the 20% VAT, the gasoline, the cigarets, the real estate taxes (even when you rent), TV tax, etc. [Inappropriate political commentary removed. Moderator Pops1860]

It is not a cheap country: Hong Kong for instance may have high rent, but since there's absolutely no taxes whatsoever except 17% salary tax, not even tax on dividend or capital gain, it's way cheaper overall, if you accept lower living conditions (granted, an ocean house in France is better than a subdivided high density flat at the border with Shenzhen lol).

[Inappropriate political commentary removed. Moderator Pops1860]
We (French) all know too well how taxes are high in France. This post debunks part of it.

Here is a tutorial in French on how to file the form required to get the proper French tax credit

https://youtu.be/CdED1WW18aw?si=668f2Cq5V2IFBJWL
WhiteMaxima
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by WhiteMaxima »

You will need to live in France for five years to get PR card. Then you are free to live in any EU country without visa. If you live less than 183 days in any EU country, you are not tax resident in any of these countries. Of course, you pay US tax no matter where you live. But at least, you are not subject to high EU taxes.
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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 May 06, 2024 7:55 pm
xwolfi wrote: Thu May 02, 2024 11:05 pm Be careful not to only consider capital gain tax if you seriously consider France. I am French myself, and tax resident in Hong Kong, for context.

The problem with trying a cheaper retirement in France is that while you may not be taxed on one type of income, you'll be taxed on absolutely everything else: the 20% VAT, the gasoline, the cigarets, the real estate taxes (even when you rent), TV tax, etc. [Inappropriate political commentary removed. Moderator Pops1860]

It is not a cheap country: Hong Kong for instance may have high rent, but since there's absolutely no taxes whatsoever except 17% salary tax, not even tax on dividend or capital gain, it's way cheaper overall, if you accept lower living conditions (granted, an ocean house in France is better than a subdivided high density flat at the border with Shenzhen lol).

[Inappropriate political commentary removed. Moderator Pops1860]
We (French) all know too well how taxes are high in France. This post debunks part of it.

Here is a tutorial in French on how to file the form required to get the proper French tax credit

https://youtu.be/CdED1WW18aw?si=668f2Cq5V2IFBJWL
In some California cities the combined sales tax rate is as high as 10.750%. So not 20% VAT but still high.
kavm
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by kavm »

Could we please stop commenting on taxes in Hongkong, California and other parts of the world that are not France? They are off topic and irrelevant.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by timcob »

WhiteMaxima wrote: Tue May 07, 2024 12:17 pm You will need to live in France for five years to get PR card. Then you are free to live in any EU country without visa. If you live less than 183 days in any EU country, you are not tax resident in any of these countries. Of course, you pay US tax no matter where you live. But at least, you are not subject to high EU taxes.
Unfortunately this is not true. PR for a non EU citizen in france only gives you residence rights in France. Also some other EU countries such as Ireland have tax residency for less than 183 days (it is 140 days for 2 years) and you thus can be tax resident in Ireland and France at the same time requiring French, Irish and US tax returns to be filed each year.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by ShadowCat »

assyadh wrote: Mon May 06, 2024 7:55 pm
xwolfi wrote: Thu May 02, 2024 11:05 pm Be careful not to only consider capital gain tax if you seriously consider France. I am French myself, and tax resident in Hong Kong, for context.

The problem with trying a cheaper retirement in France is that while you may not be taxed on one type of income, you'll be taxed on absolutely everything else: the 20% VAT, the gasoline, the cigarets, the real estate taxes (even when you rent), TV tax, etc. [Inappropriate political commentary removed. Moderator Pops1860]

It is not a cheap country: Hong Kong for instance may have high rent, but since there's absolutely no taxes whatsoever except 17% salary tax, not even tax on dividend or capital gain, it's way cheaper overall, if you accept lower living conditions (granted, an ocean house in France is better than a subdivided high density flat at the border with Shenzhen lol).

[Inappropriate political commentary removed. Moderator Pops1860]
We (French) all know too well how taxes are high in France. This post debunks part of it.

Here is a tutorial in French on how to file the form required to get the proper French tax credit

https://youtu.be/CdED1WW18aw?si=668f2Cq5V2IFBJWL
Sorry, I'm confused. I thought your general impression was that for US citizens retiring to France that the tax situation was excellent (due to no taxation, save for the 6.5% CSM charge for capital gains/dividends). But this post of yours seems to suggest that you agree with xwolfi that France has high taxes even for the situation this entire topic has been about. Can you clarify your opinion? I hold you as a sort of expert on this topic so if your opinion has changed I'd really like to understand why.
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Re: Are capital gains tax exempt in France for a US Citizen?

Post by assyadh »

ShadowCat wrote: Sun May 12, 2024 6:38 pm
assyadh wrote: Mon May 06, 2024 7:55 pm
xwolfi wrote: Thu May 02, 2024 11:05 pm Be careful not to only consider capital gain tax if you seriously consider France. I am French myself, and tax resident in Hong Kong, for context.

The problem with trying a cheaper retirement in France is that while you may not be taxed on one type of income, you'll be taxed on absolutely everything else: the 20% VAT, the gasoline, the cigarets, the real estate taxes (even when you rent), TV tax, etc. [Inappropriate political commentary removed. Moderator Pops1860]

It is not a cheap country: Hong Kong for instance may have high rent, but since there's absolutely no taxes whatsoever except 17% salary tax, not even tax on dividend or capital gain, it's way cheaper overall, if you accept lower living conditions (granted, an ocean house in France is better than a subdivided high density flat at the border with Shenzhen lol).

[Inappropriate political commentary removed. Moderator Pops1860]
We (French) all know too well how taxes are high in France. This post debunks part of it.

Here is a tutorial in French on how to file the form required to get the proper French tax credit

https://youtu.be/CdED1WW18aw?si=668f2Cq5V2IFBJWL
Sorry, I'm confused. I thought your general impression was that for US citizens retiring to France that the tax situation was excellent (due to no taxation, save for the 6.5% CSM charge for capital gains/dividends). But this post of yours seems to suggest that you agree with xwolfi that France has high taxes even for the situation this entire topic has been about. Can you clarify your opinion? I hold you as a sort of expert on this topic so if your opinion has changed I'd really like to understand why.
Hello, France has high levels of taxation wrt to earned income in general. Lots of social taxes as well.
These do not apply to US citizens with unearned income as we outlined in this thread. xwolfi probably comes from a French background like I do, and I left France because of taxation in a way. I might come back to France because of taxation, but as an American citizen haha
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