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Roche & Cie

American citizen relocating to France: what taxes will you pay?

06 Oct 2020

Your decision is made, … In a few months, you will settle in our beautiful country!

You still have many things to foresee, and uncertainties to dispel… Among them: taxation. You will find below some answers about the taxes you will have to pay when you reside in France.

Income tax

Is there a risk of double taxation?

Individuals domiciled in France for tax purposes must declare all of their worldwide income; consequently, you will have to declare your income from French sources as well as your income from American sources.

However, there will be no double taxation of American sourced income: the United States and France have signed a bilateral agreement that allows the place of taxation to be determined according to the categories of income and the methods for eliminating double taxation. Depending on the nature of the income received, the convention will determine whether it is taxable in France, your country of residence, or in the United States, the source country of the income.

If the income in question is taxable only in the United States, it will still have to be reported on the French income tax return, but the taxation will be cancelled through to the allocation of a tax credit.

The income tax threshold in France

Once the tax base has been determined, the following tax scale is applied:

Progressive tax scale applied in 2020
SharesTax rate to be applied to the corresponding portion

(marginal tax share)

Up to 10.064 €0 %
From10.065 € to  25.659 €11 %
From  25.660 € to   73.369 €30 %
From 73.370 € to 157.806 €41 %
More than 157.807 €45 %

 

Please note that this scale is applied by “fiscal share“: this means that the scale takes into account the number of persons making up the fiscal household. Thus, a single person accounts for “1 share”, a married couple or a couple bound by a civil partnership accounts for “two shares”, the first two children of the couple each represent “0.5 share”, then each subsequent child represents a full share.

The tax calculation is performed as follows :

– the net taxable income is divided by the number of shares in the tax household (example: a couple with two children has 3 shares in total)

– the progressive scale is applied

– finally, the result obtained is multiplied by the number of shares in the tax household.

You can read more about how your tax is calculated in France here.

Social contributions

Some categories of income, mainly income from assets (rental income, dividends, capital gains, etc.) are subject to social contributions(social tax) at a rate of 17.2%. 

NB: Until 2019, the U.S. tax authorities refused to recognize these contributions as “taxes”: U.S. citizens who were French residents or who received income from French sources could not therefore deduct these contributions from their U.S. taxes. But on June 17, 2019, the U.S. tax authorities finally acknowledged their mistake and these contributions are now fully deductible.

Declarative modalities

L’impôt sur le revenu doit être déclaré en Mai N+1. En France, l’année fiscale court du 1er janvier au 31 décembre. L’avis d’imposition est généralement envoyé fin août / début septembre. 

Wealth tax (impôt sur la fortune immobilière) 

You will be liable for this tax if the net value of your real estate assets, calculated per fiscal household, exceeds the threshold of 1.3 million euros.

Taxable Assets :

For individuals domiciled in France for tax purposes, taxable assets consist of all real estate assets held directly and indirectly, in France, but also in the United States and in any other foreign country: built and unbuilt buildings (land), real estate assets, shares or stocks in real estate companies, real estate assets held through trusts, etc…

Temporary exemption for property located abroad: new impatriates benefit from a temporary exemption on their property owned abroad until the end of the 5th year following their installation in France.

Deductible liabilities :

Debts relating to the acquisition of the property, maintenance and repair expenses, expenses for improvement, construction, reconstruction or extension are deductible for the amount still due on January 1 of the tax year (date for the calculation of the tax on real estate assets).

Examples of deductible debts: tax debts related to the property (property tax), real estate loans, etc…

Wealth tax scale :

French Wealth tax
Net value of taxable wealthApplicable rate
Up to 800.000 €0 %
From 800.001 € to 1.300.000 €0,50 %
From 1.300.001 € to 2.570.000 €0,7 %
From 2.570.001 € to 5.000.000 €1 %
From 5.000.001 € to 10.000.000 €1,25 %
More than 10.000.000 €1,5 %

Declarative modalities

This tax must be declared voluntarily and on your own initiative, as soon as you exceed the tax threshold. It is therefore recommended that you regularly assess your real estate assets.

The wealdeclaration must be filed at the same time as the income tax declaration, i.e. in May.

French local taxes

In France, there exist 2 main local taxes :

Property tax 

You will be liable for this tax if you own property in France (not if you’re a tenant). It is based on the renal value, as well as the tax rate, it is determined by the local authorities. You will receive this tax notice through postmail in September, for a payment due in mid-October.

Housing tax

This tax applies to all housing units located in France, and all occupants (owners or tenants). It is due by the person occupying the dwelling on January 1st of the tax year. Like the property tax, this tax is based on the cadastral rental value of the property. The tax bases and rates are determined by the local authorities.

Request a personalized tax study to estimate your future taxes in France


Cabinet Roche & Cie, English speaking accountant in Lyon, France.
Specialist in Real-Estate and Non-resident taxation.